[2011] UKFTT 131 (TC)

TC001005

Appeal number: 2010/8014

INCOME TAX – SURCHARGE FOR LATE PAYMENT OF TAX – Did the Appellant have a reasonable excuse – Yes – Appeal allowed

FIRST-TIER TRIBUNAL

TAX 

	CHRISTIAN SANDERS	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

		TRIBUNAL: 	MICHAEL TILDESLEY OBE (TRIBUNAL JUDGE)									

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 29 September 2010,  HMRC’s Statement of Case submitted on 30 December 2010 and the Appellant’s Reply dated 25 January 2011.

© CROWN COPYRIGHT 2011
DECISION

1.	The Appellant appealed against the imposition of a surcharge dated 3 April 2010 in the amount of ₤3,017.67 for the late payment of the tax due for the year ending 5 April 2009.
2.	On 6 April 2009 HMRC issued the Appellant with a notice to file his 2008/09 tax return by 31 October 2009 for a paper return, and if online by 31 January 2010. The Appellant filed his return online on 4 January 2010 which contained a self calculation of the tax due.  The Appellant’s tax liability for the year was ₤75,536.44 of which ₤60,353.50 remained outstanding at the surcharge trigger date of 28 February 2010. The Appellant was therefore liable to pay a surcharge for the outstanding tax due as at 28 February 2010, which was fixed at five per cent of ₤60,353.50 which equated to .₤3,017.67.
3.	The Appellant pleaded that he had a reasonable excuse for the late payment of the outstanding tax. The Appellant stated that as at 31 January 2010 he was due to pay the sum of ₤68,513.76 in respect of his outstanding tax liability. The majority of which related to the tax on a capital gain arising from a sale of a partnership and limited liability partnership to a limited company. The Appellant’s income from his estate agency business had reduced as a result of the economic downturn. He decided to discharge his income tax liability straightaway on 31 January 2010 and negotiate a payment plan with HMRC to discharge the capital gains tax by instalments. 
4.	On the 1 February 2011 he agreed a payment plan of ten monthly instalments of ₤6,228.52 to clear the outstanding tax liability. On 3 February 2010 HMRC sent a letter to the Appellant confirming the terms of the payment plan. On or around 21 April 2011 the Appellant’s business accountant informed the Appellant that the instalments under the payment plan were not being collected by HMRC from his bank account. The Appellant then contacted HMRC and advised that the payments were not being collected. The HMRC Officer dealing with the call told the Appellant that he had not supplied HMRC with the details of his bank account which meant that the payment plan had lapsed and that he was liable to a surcharge of ₤3,017.67. The Appellant there and then agreed another payment plan of ₤7,973.41 per month which discharged the outstanding debt including the surcharge by the original date of 28 December 2010. 
5.	The Appellant could not recall why the bank details were not supplied to HMRC. At the time he made the first agreement his father who was also a partner of the firm was in hospital suffering from acute pancreatitus which required the Appellant to take his elderly mother on a regular basis to the hospital. The Appellant also believed that everything was in order with the agreed payments after he received confirmation of the payment plan by HMRC on 3 February 2010 which made no mention of the requirement to provide bank details. 
6.	The Tribunal has limited jurisdiction in penalty Appeals which reflects the purpose of the legislation of ensuring that tax payers pay their tax 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.  If there is a reasonable excuse it must exist throughout the period of default. The Appellant has the obligation of satisfying the Tribunal on a balance of probabilities that he has a reasonable excuse for not paying the tax on time. 
7.	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 having proper regard for his responsibilities under the Tax Acts. 
8.	The Tribunal finds that the Appellant had due regard to his responsibility to pay the outstanding tax. He cleared his income tax by the due date and negotiated a payment plan in good time with HMRC to discharge the outstanding capital gains tax within a period of ten months. The Appellant’s lapse was that he did not provide HMRC with details of his bank account to enable collection of the monthly instalments. His reasons for overlooking the information regarding his bank were that at the time he was caring for his elderly parents with his father being admitted to hospital with a serious illness, and he had assumed that the payment plan was in place after receiving HMRC’s confirmation dated 3 February 2010.  The Appellant contacted HMRC as soon as he discovered that the monthly payments were not being taken out of his account.  When the error was pointed out to him the Appellant immediately put in place another payment plan which ensured that the debt was cleared by the original date. The Tribunal finds the Appellant’s actions taken in the round were those of a prudent tax payer exercising reasonable foresight and due diligence and having proper regard for his responsibilities under the Tax Acts. His one lapse was a result of exceptional circumstances associated with the illness of his father and the unequivocal terms of the HMRC’s confirmation which stated that the payment plan was in place. 
9.	The Tribunal holds that the Appellant had a reasonable excuse for not paying the outstanding tax by the surcharge trigger date of 28 February 2010. The Tribunal, therefore, allows the Appeal and quashes the surcharge in the sum of ₤3,017.67.
10.	The Tribunal has not into account the revised computation of the Appellant’s tax liabilities as set out in the letter of his accountant’s dated 24 January 2011. The Appellant may wish to take this up with HMRC.
11.	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