[2011] UKFTT 280 (TC)

TC01142

Appeal number: TC/2011/00592

Appeal against an employer’s penalty imposed as a result of the late online submission of P35 return – mistaken belief as to whether return submitted – reasonable excuse – appeal dismissed

FIRST-TIER TRIBUNAL

TAX 

	DURNBRAE LIMITED	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

		TRIBUNAL: 	J. Blewitt (TRIBUNAL JUDGE)									

The Tribunal determined the appeal on 18 April 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 19 January 2011,  HMRC’s Statement of Case submitted on 10 February 2011 and the Appellant’s Reply dated 21 February 2011.

© CROWN COPYRIGHT 2011
DECISION

1.	By Notice of Appeal dated 19 January 2011 the Appellant appeals against an employer’s penalty in the sum of £500 imposed as a result of the late submission of a P35 return for the period 2009/2010.
2.	The imposition of such a penalty is set down by statute; section 98A (2) (a) Taxes Management Act 1970 applies in this case which provides that a penalty of £100 can be imposed for each 50 employees for every month (or part thereof) that the return remained outstanding.
3.	The filing date in this case was 19 May 2010. The return was submitted online on 6 October 2010.
4.	On 27 September 2010 a penalty notice in the sum of £400 was issued to the Appellant which was calculated from 20 May 2010 to 19 September 2010. A final penalty notice in the sum of £100 was issued on 13 October 2010 in respect of the period outstanding from 20 September to 6 October 2010.
5.	By letter dated 11 October 2010, Mr Thomson, a Director of the Appellant Company, appealed against the penalty to HMRC. The grounds relied upon were, in summary; that this was the first occasion that he had filed his return online as all previous returns had been submitted in paper form without any difficulty and that Mr Thomson believed that the return had been filed, only becoming aware of his mistake once the penalty notices were received.
6.	In a letter to the Appellant dated 2 November 2010, HMRC set out its considerations of the appeal but rejected the Appellant’s contentions on the basis that there was no reasonable excuse. It was highlighted in the letter that employers submitting returns online are advised to wait for receipt of an automatic email confirming that the return was sent and that in the absence of any exceptional event beyond the Appellant’s control, the penalties would be upheld.
7.	On 24 November 2010 the Appellant formally requested a review of HMRC’s decision.  The Appellant reiterated the fact that he had never experienced any difficulties n submitting paper returns. Mr Thomson stated that he had found the instructions for online filing difficult to follow but believed he had eventually succeeding in submitting his return on 19 April, however it subsequently transpired that he had not pressed the “submit” key. Mr Thomson was unaware that the return had not been submitted until he received the penalty notice on 27 September, after which he successfully managed to submit the return. Mr Thomson contends that HMRC ought to have informed him that the return had not been received and that an HMRC officer informed him that an internet had been sent however this was never received.
8.	In a letter to HMRC dated 9 December 2010, the Appellant gave further information in support of the review. The letter states that the lack of notice by email that the return was outstanding may have been due to internet connection problems which occurred during that period. Mr Thomson states that when he contacted the HMRC helpline, the service was out of action with computer problems. The Appellant contends that there has been no loss to the Revenue as a result of the late return and that the Appellant Company has only one employee; the Appellant’s daughter, and the return solely related to her PAYE.
9.	By letter dated 7 January 2011, HMRC informed the Appellant that following review, the penalties would be upheld. Mrs Ruddy, the HMRC officer who reviewed the case stated in the letter that there is no reasonable excuse for the period of delay from 20 May 2010 to 6 October 2010. It is accepted that the Appellant completed the return online and that this was the first time he had used this method, however it is noted that the HMRC website gives a demonstration as to how to successfully submit a return online and also explains the messages provided to taxpayers to confirm that filing was successful.
10.	On 19 January 2011 Mr Thomson appealed to the Tribunal. I have read all of the correspondence provided between the Appellant and HMRC in addition to the Appellant’s response to HMRC’s Statement of Case in which Mr Thomson reiterates the grounds of appeal as follows:
(1)	That the company has only one employee; the Appellant’s daughter;
(2)	That the Appellant has always made paper returns until HMRC ceased to accept these from 2011;
(3)	That Mr Thomson is not very computer literate but is getting better. This is what led to the mistake in filing the return online and believing it had been completed satisfactorily. The Appellant was not made aware of the fact that the return had not been submitted until 27th September 2010 when the penalty notice was received;
(4)	Following receipt of the penalty notice, the return was submitted online successfully with help from the HMRC help line;
(5)	It should not have taken 4 months to be informed of the fact that the return had not been received;
(6)	As this was the first time the Appellant had submitted a return online, he should have been informed one month after the deadline that the return had not been received.

11.	The obligation to make End of Year Returns prior to the deadline of 20 May following the end of a tax year is set down by statute by virtue of Regulation 73 of the Income Tax (PAYE) Regulations 2003 and paragraph 22 of Schedule 4 of the Social Security (Contributions) Regulations 2001. It is a well established principle of case law that the responsibility to ensure that all obligations are met lies with the taxpayer.
12.	The penalties imposed as a result of failure to meet tax obligations are provided for by statute and this Tribunal has no discretion to mitigate those penalties unless it is considered that there is a reasonable excuse, in which case the penalties can be set aside.
13.	I am sympathetic to the difficulties encountered by the Appellant as a result of his lack of familiarity with filing a return online. That said, it remains the obligations of all taxpayers to ensure that the Regulations are complied with.
14.	It is well publicised on HMRC’s website that messages are issued once a return has been filed online, confirming whether the submission has been successful or not and the status of the online form changes to submitted. In addition, the HMRC help line provides further assistance.
15.	There is no obligation upon HMRC to issue reminders to taxpayers or notify taxpayers that a P35 has not been received prior to the issue of penalty notices. 
16.	In my view, the Appellant had sufficient information available to him to ensure, despite his lack of computer literacy, that he was aware of whether the return had been successfully submitted or not and in the absence of a confirmation email stating that the return had been received or an update to “submitted”, I do not find that the Appellant’s mistaken belief is sufficient to amount to a reasonable excuse.
17.	I also accept HMRC’s submission that the Appellant had an obligation to distribute a P60 to his employee prior to 1st June following the end of the tax year and that he would not have been able to access the P60 form until the return was submitted.
18.	In the circumstances, I find as a fact that there were a number of factors which ought to have alerted the Appellant to the fact that the return had not been submitted.
19.	Accordingly, the appeal is dismissed and penalties upheld.
20.	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.

TRIBUNAL JUDGE
RELEASE DATE: 28 APRIL 2011