[2011] UKFTT 194 (TC)

TC01063

Appeal number: TC/2010/09275

INCOME TAX – Surcharge on unpaid income tax (Taxes Management Act 1970 s.59C) – Whether a reasonable excuse for late payment – Appeal dismissed

FIRST-TIER TRIBUNAL

TAX 

	MS LAOISE DAVIDSON	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

		TRIBUNAL: 	DR CHRISTOPHER STAKER (TRIBUNAL JUDGE)					DR MICHAEL JAMES (TRIBUNAL MEMBER)				

The Tribunal determined the appeal on 10 March 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 2 December 2010, and HMRC’s Statement of Case submitted on 14 January 2011.

© CROWN COPYRIGHT 2011
DECISION

Introduction
1.	This is an appeal against a default surcharge imposed pursuant to s.59C of the Taxes Management Act 1970 (the “TMA”) in respect of the late payment by the Appellant of tax due on 31 January 2010 in respect of the 2008/09 tax year. 
The relevant legislation
2.	Section 59C of the TMA states in relevant part as follows:
(1)	This section applies in relation to any income tax or capital gains tax which has become payable by a person (the taxpayer) in accordance with section 55 or 59B of this Act.
(2)	Where any of the tax remains unpaid on the day following the expiry of 28 days from the due date, the taxpayer shall be liable to a surcharge equal to 5 per cent of the unpaid tax.
(3)	Where any of the tax remains unpaid on the day following the expiry of 6 months from the due date, the taxpayer shall be liable to a further surcharge equal to 5 per cent of the unpaid tax.
...
(5)	An officer of the Board may impose a surcharge under subsection (2) or (3) above; and notice of the imposition of such a surcharge—
(a)	shall be served on the taxpayer, and
(b)	shall state the day on which it is issued and the time within which an appeal against the imposition of the surcharge may be brought.
...
(7)	An appeal may be brought against the imposition of a surcharge under subsection (2) or (3) above within the period of 30 days beginning with the date on which the surcharge is imposed.
...
(9)	On an appeal under subsection (7) above that is notified to the tribunal section 50(6) to (8) of this Act shall not apply but the tribunal may—
(a)	if it appears that, throughout the period of default, the taxpayer had a reasonable excuse for not paying the tax, set aside the imposition of the surcharge; or
(b)	if it does not so appear, confirm the imposition of the surcharge.
(10)	Inability to pay the tax shall not be regarded as a reasonable excuse for the purposes of subsection (9) above.
...
(12)	In this section—
“the due date”, in relation to any tax, means the date on which the tax becomes due and payable; 
“the period of default”, in relation to any tax which remained unpaid after the due date, means the period beginning with that date and ending with the day before that on which the tax was paid. 
The evidence
3.	The Appellant has not disputed that her tax liability for the 2008/09 tax year, due to be paid by 31 January 2010, was £2,761.36, and that this amount was not finally paid in full until 16 November 2010.  The Appellant paid this tax liability in five separate payments between 6 February 2009 and 16 November 2010.  About 1 April 2010, HMRC issued a surcharge notice in the amount of £75.56.  By that time, the Appellant had made one payment of £1250, on 6 February 2010.  The amount of the surcharge notice was 5% of the outstanding balance.
4.	The Appellant has not disputed the amount of the tax liability or the due date or the liability to the surcharge in the event that she has no reasonable excuse for the late payment.  The issue in this appeal is whether she had a reasonable excuse throughout the period of default, for purposes of s.59C(9) of the TMA.
5.	In her grounds of appeal, the Appellant says that she tried on several occasions to enter into an arrangement with HMRC to pay the tax liability by monthly instalments, but was refused on the ground that her proposed monthly instalments were too low.  She says that she was promised that an HMRC official would look at her income and expenditure in order to work out a viable repayment scheme, but that this never occurred, and that instead she was subjected to a surcharge.  She considers that this was harsh.  She said that the recession hit her hard, that for a period she was on jobseekers’ allowance, and that when she finally found work, it was barely sufficient for her accommodation and living.  She says that HMRC said that she would have to repay at least £350 per month, which she could not have afforded and would have resulted in her homelessness.  She says that she made repayments when she could, has now settled the liability, and that it would be unfair and unreasonable to impose an additional surcharge.
6.	Also in the papers were letters from the Appellant to HMRC dated 14 April 2010 and 2 July 2010.  These further indicate that the Appellant sought to make a payment to HMRC in March 2010, but that on the day of the payment her debit card was stolen, and that the payment was not processed because her card was blocked.  The Tribunal notes that the next payment made by the Appellant was on 15 April 2010, in the sum of £100.  If this payment had been processed in March 2010, prior to the surcharge notice being issued, the amount of the surcharge would have been £5 less.
7.	The Tribunal is satisfied from the manner in which the tax liability was paid that the Appellant, as she says, was facing genuine financial difficulties, that she did make efforts to make payments towards the tax liability as and when she could, and that she ultimately paid the liability in full within 10 months of the deadline.  The Tribunal is therefore sympathetic to her circumstances.
8.	However, s.59C(10) of the TMA states expressly that “Inability to pay the tax shall not be regarded as a reasonable excuse” for the purposes of s.59C(9).
9.	The Appellant says that she tried to reach agreement with HMRC about a plan to pay by instalment and that HMRC did not act fairly in failing to agree.  HMRC disputes this, stating that the Appellant did not complete an income and expenditure form as requested by HMRC.  The Tribunal finds that it is unnecessary to resolve this disagreement as to the facts.  HMRC were not obliged to agree to an instalment plan, and did not do so.
10.	If the Appellant’s account of her debit card being stolen was accepted, this would mean that the surcharge would have been £5 lower than it was.  However, under s.59C(9)(a) of the TMA, the Tribunal can only set aside the surcharge “if it appears that, throughout the period of default, the taxpayer had a reasonable excuse for not paying the tax”.  The Tribunal cannot reduce the surcharge on the ground that unforeseeable circumstances prevented a portion of the tax liability being paid before the date that the surcharge liability notice was issued.
11.	It follows that while the Tribunal has sympathy for the Appellant, it finds that the Appellant does not have a reasonable excuse for not paying the tax throughout the period of default. 
12.	The Tribunal therefore dismisses the appeal and confirms the imposition of the surcharges.
13.	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.

DR CHRISTOPHER STAKER

TRIBUNAL JUDGE
RELEASE DATE: 21 MARCH 2011