[2011] UKFTT 130 (TC)

TC001004

Appeal number TC 2010/8201

INCOME TAX – PENALTY FOR LATE FILING OF END OF YEAR PAYE RETURN – Whether Appellant had reasonable excuse for default – No – Appeal dismissed.  

FIRST-TIER TRIBUNAL

TAX 

	SCHOLA UK LIMITED	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

				TRIBUNAL: MICHAEL TILDESLEY OBE

The Tribunal determined the appeal on 11 February 2011 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 October 2010 and HMRC’s Statement of Case submitted on 17 November 2010. The Appellant did not submit a reply to the statement of case. 

© CROWN COPYRIGHT 2011

DECISION

1.	The Appellant appeals against the imposition of penalties in the total sum of ₤500 for the late submission of the employer’s annual return (P35) for the tax year ending 5 April 2009. 
2.	The Tribunal received the Appellant’s notice of appeal on 26 October 2010 which was more than 30 days from HMRC’s decision on review dated 19 March 2010. The Appellant’s reason for the late submission of its notice of appeal was that it was given incorrect advice by HMRC which led it to believe that the appeal was still pending. The Appellant requested permission to appeal out of time. HMRC did not oppose the request.  In those circumstances the Tribunal grants the request and extends the time for the Appellant’s service of its notice of appeal to 26 October 2010. 
3.	The Appellant was required to file its end of year PAYE return for 2008/09 by 19 May 2009. The Appellant filed a paper return on 8 October 2009 which was 142 days late. Under sections 98A(2) and (3) of the Taxes Management Act 1970, the Appellant was liable to a fixed penalty of ₤100 for each month or part month that it was in default with its return. The Appellant, therefore, received a penalty of ₤400 for the period 20 May 2009 to 19 September 2009, and further penalty of ₤100 for the period 20 September 2009 to 8 October 2009.  
4.	The Appellant entrusted the filing of its 2008/09 return to its accountants. The Appellant authorised the return in good time so that its accountants could file the return by the due date. The accountants believed that they filed the return on 19 April 2009, and only became aware of its non-receipt by HMRC when the first penalty notice was issued. At first the accountants insisted that they had submitted the return. The accountants believed that HMRC had sent them an acknowledgement of receipt of the return. The accountants, however, after further investigation accepted that they made an honest mistake and that the online submission of the P35 had failed. The acknowledgement from HMRC related to a different company, Schola Europe. 
5.	The Tribunal has limited jurisdiction in penalty Appeals which reflects the purpose of the legislation of ensuring that employers file their returns on time. The Tribunal has no power to mitigate the penalty. The Tribunal can either confirm the penalty or quash it if satisfied that the Appellant has a reasonable excuse for his failure. The Appellant has the obligation of satisfying the Tribunal on a balance of probabilities that it has a reasonable excuse for not filing the return on time. 
6.	In considering a reasonable excuse the Tribunal examines the actions of the Appellant from the perspective of a prudent employer exercising reasonable foresight and due diligence and having proper regard for his responsibilities under the Tax Acts. 
7.	The Appellant’s reason for not filing the return on time was essentially its agent made an honest mistake. The Appellant was bound by the actions of its agent and cannot avoid its responsibilities under the Tax Acts by transferring them to its agent  The agent’s mistake was that it did not check that it had received the acknowledgement of receipt of the return which HMRC sends by e mail. The mistake could have been avoided if the agent had exercised proper care. The actions of the agent were not those of a prudent employer exercising reasonable foresight and due diligence with a proper regard for the responsibilities under the Tax Acts. The Tribunal, therefore, finds that the Appellant did not have a reasonable excuse for the late filing of the 2008/09 end of year return.
8.	. The Tribunal dismisses the Appeal and confirms the penalties in the total sum of ₤500.
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: 22 FEBRUARY 2011