[2011] UKFTT 244 (TC)

TC01108

Appeal number: TC/2010/06224

DIRECT TAX – penalty for late submission of Corporation tax return by liquidator - no reasonable excuse for late submission  

FIRST-TIER TRIBUNAL

TAX 

	SOMERCOMBE OTS No 39 LIMITED (In liquidation)	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

		TRIBUNAL: 	Joanna Lyons (TRIBUNAL JUDGE)	
                                                David E Williams CTA (MEMBER)								

The Tribunal determined the appeal on 21 January 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 28 July 2010 and  HMRC’s Statement of Case submitted on 8 October 2010.

© CROWN COPYRIGHT 2010

DECISION

1.	On 16 June 2010 a fixed penalty of £100 was imposed on the Appellant company in accordance with Paragraph 17 Schedule 18 Finance Act 1998. The penalty was imposed for the late filing of the Corporation Tax return for the accounting period ending 21 May 2009 which was due on 21 May 2010. HMRC did not receive the return until 6 July 2010.  The period of default was 37 days. 
2.	The liquidator, Mr Eric Brightwell, appealed on behalf of the appellant company on 28 July 2010. He did not accept HMRC’s offer of a review. The factual background to the case is uncontested and is set out below.
The facts
3.	The Appellant company filed a corporation tax return on 1 April 2009. On 21 May 2009 the company went into liquidation and a corporation tax return became due for the accounting period 1 April 2009 to 21 May 2009.
4.	Mr Brightwell was appointed company liquidator on 22 May 2009.  In May 2010 he received copies of the tax returns from the company accountants and became aware that the tax return to 21 May 2009 had not been filed. He does not specify the exact date on which he received this information.
5.	In March 2010 Mr Brightwell was informed that the company had a bank account with HSBC. On 5 May 2010 he received the bank statements from HSBC. Having received the statements he considered it necessary to trace other possible sources of income before submitting the return. Mr Brightwell was eventually satisfied that there were no other sources of income and the return was duly filed on 6 July.
The Appellant’s case
6.	Mr Brightwell  made the following submissions in relation to this appeal :-
(1)	that the penalty charge is excessive as the company had no income and a nil liability to tax. 
(2)	that the company accountants were  responsible for submitting the return by the due date. They did not inform him that this had not taken place until May 2010 by which time it was too late for him to submit the return on time.
(3)	he did not have the information required in order to file the accounts by the due date. 
(4)	he was informed by HMRC that he could file online.  However this was not the case as there is no provision for liquidators to do so. 

The Respondent’s case
7.	HMRC made the following submissions in response:-
(1)	The return is due even if the company has no income.
(2)	It is the responsibility of the company to file the return by the due date. This obligation is not removed by the appointment of the liquidator and cannot be delegated to accountants.
(3)	Mr Brightwell took no steps to inform HMRC of compliance problems before the filing date. If he was unsure of the exact figures he could have filed a return that was complete to the best of his knowledge. 
(4)	Mr Brightwell did not contact HMRC to resolve any problems encountered in online filing. 

The law
8.	Para 17 (2) (a) Schedule 18 Finance Act 1998 imposes a flat rate penalty of  £100 where a return is delivered after the due date but within three months of that  date. 
9.	Section 118 of the Taxes Management Act 1970 provides that “where a person had a reasonable excuse for not doing anything required to be done he shall be deemed not to have failed to do if he did it without unreasonable delay after the excuse had ceased”
10.	Reasonable excuse is not defined in the legislation. However case law has established that a reasonable excuse must arise from an exceptional event outside the taxpayer’s control. The failure of accountants to submit returns has been held not amount to a reasonable excuse unless there are exceptional circumstances. 
11.	In Dunk v General Commissioners of Income Tax for Havant and CIR 51 TC 519 the taxpayer claimed that he could not make a return because he did not possess all the relevant information. The Commissioners decided that the obligation is to make a return that is to the best of the taxpayer's knowledge complete and correct. This decision has been followed in Alexander v General Commissioners for Wallington, CIR 65 TC 777. 
Findings
12.	We accepted that the company had no income and a nil liability to tax. However we did not accept that the penalty was excessive in these circumstances. The penalty imposed is laid down by statute and does not depend upon the income of the company or their liability to tax. 
13.	 We accepted that Mr Brightwell was not made aware that the accountants had failed to file the return until May 2010. However in the circumstances we did not find that this amounted to a reasonable excuse.  It is the obligation of the company to file the return. This responsibility cannot be delegated to accountants nor can it be removed by the appointment of a liquidator.  We note that Mr Brightwell was appointed as liquidator in May 2009 and had the opportunity to make enquiries of the accountants prior to May 2010.
14.	We accepted that Mr Brightwell may not have had sufficient information to enable him to complete a full tax return by the due date. However this did not prevent him from submitting a return with a qualification or seeking advice from HMRC before the due date. He did not take these steps and accordingly this does not amount to a reasonable excuse. 
15.	We accepted Mr Brightwell was unable to file the return online as indicated by HMRC. However we do not find that this amounts to a reasonable excuse in the circumstances as he did not take any steps to resolve the problems. 
16.	The appeal against the penalty of £100 in relation to the default period 21 May 2010 to 6 July 2010 is dismissed 

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.

Joanna Lyons

TRIBUNAL JUDGE
RELEASE DATE: 12 APRIL 2011