[2010] UKFTT 522 (TC)

TC00777

	Appeal number: TC/2010/06114

INCOME TAX – SURCHARGE FOR LATE PAYMENT OF TAX – Whether Appellant had reasonable excuse for default – No – Appeal dismissed.  

FIRST-TIER TRIBUNAL

TAX 

	JOHN DIGNAM	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

		TRIBUNAL: 	MICHAEL TILDESLEY OBE (TRIBUNAL JUDGE)									

The Tribunal determined the appeal on 21 October 2010 without a hearing under the provisions of Rule 26 of the Tribunal Procedure (First-tier Tribunal)(Tax Chamber) Rules 2009 (default paper cases) having first read the Notice of Appeal dated 21 July 2010 and HMRC’s Statement of Case submitted on 25 August 2010. The Appellant did not submit an additional submission in response to the Statement of Case.	

© CROWN COPYRIGHT 2010

DECISION

1.	The Appellant was appealing against surcharges in the respective sums of ₤4,659.44 and ₤258.99 for the late payment of tax for the year ended 5 April 2008.
2.	The Appellant was seeking a fair-minded review of the facts of his Appeal, and requesting the Tribunal to waive the iniquitous surcharges. According to the Appellant, he missed the deadline for the imposition of the first surcharge by two days due to unforeseen circumstances. The Appellant had every intention of meeting his tax liability but was unable to draw down funds immediately from his deposit account in Ireland which he was using to pay  the outstanding tax. When the Appellant received the funds he forwarded a cheque for ₤90,000 to his accountant for onward transmission to HMRC in settlement of his tax liability. Unfortunately his accountant was due to fly to Malaysia early the following money which meant that the cheque was not sent to HMRC until the accountant’s return on 2 March 2009 giving rise to the first surcharge. The ₤90,000 payment did not clear altogether the outstanding tax leaving a balance of ₤5,179.89 which was paid on 16 February 2010 generating the second surcharge.
3.	The Tribunal finds the following facts:
(1)	The Appellant’s tax liability for 2007/08 was ₤93,188.94 which was due on 31 January 2010.
(2)	The ₤93,188.94 tax liability remained unpaid at the surcharge trigger date of 28 February 2009 which gave rise to a surcharge in the sum of ₤4,659.44 calculated at five per cent of the total tax due. 
(3)	On 2 March 2009 the Appellant paid ₤90,000 to HMRC of which ₤1,990.05 was applied to earlier unpaid charges with the remaining ₤88,009.05 set off against his tax liability of ₤93,188.94 for 2007/08. This left a balance of ₤5,179.89 which was paid on 16 February 2010 giving rise to a second surcharge in the sum of ₤258.99 (five per cent of ₤5,179.89). The period of default was 382 days (31 January 2009 to 16 February 2010).
(4)	The Appellant’s reasons for not paying the majority of the tax on time were that the funds from his deposit in Ireland could not be accessed immediately and that he forwarded a cheque for ₤90,000 to his accountant which was not sent to  HMRC until  16 days later due to the accountant being on holiday. The Appellant  supplied no information about the business terms of the deposit arrangements in Ireland and about whether he knew that he could not access the funds immediately. Further he did not explain why he sent the cheque to his accountant and his state of knowledge of the accountant’s whereabouts when the cheque was posted. 
(5)	The Appellant supplied no reason for the late payment of the outstanding balance of   ₤5,179.89.
4.	The Tribunal has limited jurisdiction in penalty Appeals. It has no power to mitigate the penalty. The Tribunal can either confirm the penalty or quash it if satisfied the Appellant has a reasonable excuse for his default. The Appellant can avoid the penalty if he satisfies the Tribunal on a balance of probabilities that he has a reasonable excuse for not paying the outstanding tax on time. If the tax payer cannot establish a reasonable excuse, the legislation takes no account of the difference between a taxpayer who has made a genuine effort to comply albeit without success and a taxpayer who has made very little effort. Either the taxpayer is on time or he is not; either he exercises due diligence or he does not. No account is taken of the degree of culpability.
5.	Section 59(C)(9) of the Taxes Management Act 1970 requires the reasonable excuse to exist throughout the period of default which in the Appellant’s case was from the 31 January 2009 to 16 February 2010.
6.	In considering a reasonable excuse the Tribunal examines the actions of the Appellant from the perspective of a prudent tax payer exercising reasonable foresight and due diligence and giving proper regard to his responsibilities under the Tax Acts. 
7.	The Appellant offered no explanation for the late payment of the balance of ₤5,179.89 to settle his outstanding tax liability for 2007/08. The Appellant’s reason for non-payment of his tax liability did not exist throughout the period of his default ending 16 February 2010. In any event the information provided by the Appellant regarding the cheque for ₤90,000 was sparse and did not justify the Appellant’s description of unforeseen circumstances. The Appellant did not elaborate upon his choice of sending the cheque to his accountant rather than HMRC. If the Appellant was implying that it was the accountant’s fault for the late delivery of the cheque it would not assist his case. Reliance on a third party’s error does not of itself qualify as a reasonable excuse.  The Tribunal finds that the Appellant’s actions were not those of a prudent tax payer who would have checked beforehand with his accountant about the arrangements for paying the tax on time to HMRC and made sure that the cheque for ₤90,000 was not stranded in the accountant’s office.. 
8.	The Tribunal holds that the Appellant did not have a reasonable excuse for the circumstances giving rise to the imposition of the two surcharges. The Tribunal dismisses the Appeal and confirms the surcharges of ₤4,659.44 and ₤258.99 respectively.
9.	This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.   The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

MICHAEL TILDESLEY OBE
TRIBUNAL JUDGE
RELEASE DATE: 28 October 2010