[2011] UKFTT 283 (TC)

TC01145

	Appeal number: TC/2011/00672

Appeal against penalty imposed as a result of the late submission of a P35 return – reasonable excuse – appeal dismissed

FIRST-TIER TRIBUNAL

TAX 

	PETER DONAGHY	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 14 January 2011 and  HMRC’s Statement of Case submitted on 11 February 2011.

© CROWN COPYRIGHT 2011
DECISION

1.	By Notice of Appeal dated 14 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 11 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 20 October 2010 in respect of the period outstanding from 20 September to 11 October 2010.
5.	By letter dated 13 October 2010, Crystal Business Services Ltd, on behalf of the Appellant, appealed to HMRC against the penalty of £400. The grounds relied upon were that:
(1)	The Appellant ceased trading on 29 June 2009 and paid all PAYE/NIC up to the date of cessation; and
(2)	That the Appellant believed that no return was required having paid the PAYE due and issued the relevant P45s.

6.	HMRC responded by letter dated 8 November 2010 stating that the onus of ensuring all tax obligations are met lies with the Appellant.
7.	The Appellant’s agent formally requested a review of HMRC’s decision to impose penalties on 11 November 2010. The letter stated that the penalties are excessive, unfair and unnecessarily punitive for a taxpayer who ceased trading over a year ago. The last P45 was issued and copied to HMRC when the company ceased trading. No P35s were issued to the Appellant by HMRC and that it was not unreasonable for the Appellant to assume that all PAYE issues had been addressed. The Appellant received no communication from HMRC from September 2009 until the issue of a penalty notice on 27 September 2010. A penalty for the same offence was imposed in the sum of £100 which caused further confusion. There has been no loss to the Revenue, no intention to violate any laws and the Appellant is unsure as to what he could, or should have done.
8.	By letter dated 23 December 2010, HMRC informed the Appellant that following review the penalties would be upheld. HMRC took the view that no reasonable excuse existed on the basis that information is available on the website explaining what action s required when a business ceases trading. This information is also available on documents issued throughout the year. HMRC took the view that a taxpayer, particularly where returns have been filed for several years, is expected to be familiar with the process. The review letter states that it is an employer’s responsibility to ensure that all necessary forms are completed; a P45 only shows tax details and the P35 is required to account for payments made in respect of employees Tax and National Insurance. HMRC records indicate that a paper P35 was issued to the Appellant on 16 October 2009 which was never returned. The letter explains the confusion over penalties; on 27 September 2010 a penalty of £400 was imposed for the period 20 May 2010 to 19 September 2010. The additional £100 was imposed as the P35 remained outstanding until 6 October 2010 and covers the period 20 September to 6 October 2010.
9.	On 14 January 2011 Mr Thomson appealed to the Tribunal. The grounds of appeal relied upon can be summarised as follows:
(1)	That at the time of cessation the last P45s were issued and copies sent to HMRC. All taxes and NIC were also paid;
(2)	There was no further correspondence from HMRC until the penalty notice was issued in September 2010;
(3)	The P35 issued by HMRC in October 2009 was not received or would have been dealt with;
(4)	It was not unreasonable for the Appellant to assume that all PAYE matters had been addressed;
(5)	There was no intention on the part of the Appellant to benefit in any way and the £500 penalty is unnecessarily punitive;
(6)	If HMRC wanted specific details they had plenty of opportunity to submit requests to the Appellant between cessation and issue of the penalty notice.

10.	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. 
11.	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. I do not accept the Appellant’s submission that the amount of the penalties constitutes a reasonable excuse.
12.	The fact that the company ceased to trade did not negate the Appellant’s obligation to submit the necessary forms prior to the filing date. I accept HMRC’s contention that the P36 issued on 16 October 2009 was not returned as undelivered; and there is also no reason to doubt the Appellant’s assertion that the form was not received. Whether received or not, it is a well established principle of case law that the responsibility remains on the taxpayer to ensure that all obligations are met and ignorance cannot amount to a reasonable excuse for failing to comply with such obligations. The fact that the Appellant assumed all PAYE matters were dealt with does not, in my view, amount to a reasonable excuse.
13.	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. There is also no statutory obligation upon HMRC to issue penalty notices closer to the deadline date. It is well publicised on HMRC’s website that penalties can be imposed for the late submission of returns and that a reminder will not necessarily be sent. I do not accept that the lack of communication with HMRC can amount to a reasonable excuse.
14.	I find as a fact that whether or not there has been any loss to the Revenue is not a relevant consideration to the issue of reasonable excuse which must exist in respect of the failure to submit the return on time. 
15.	I accept that the Appellant had no intention to benefit, however this does not constitute a reasonable excuse.
16.	It is submitted that HMRC had the opportunity to submit requests to the Appellant between cessation and issue of the penalty notice had they wanted specific information. The onus of providing the information required by statute rests with the Appellant; there is no obligation upon HMRC to “chase” information from taxpayers in these circumstances. I do not accept that this provides the Appellant with a reasonable excuse.
17.	I find as a fact that the penalties were lawfully imposed and that there is no reasonable excuse.
18.	The appeal is dismissed and penalties upheld.
19.	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: 3 MAY 2011