[2011] UKFTT 714 (TC)
TC01551
Appeal number: TC/2011/04475
Penalty
for late submission of P35 –previous accountants ceased business –penalty
notices not sent to new accountants – Appellant’s failure to notify change of address
on a timely basis – whether reasonable excuse – no -appeal dismissed and
penalty confirmed
FIRST-TIER TRIBUNAL
TAX
AJDS
PULMONARY FUNCTION SERVICES LIMITED Appellant
-
and -
THE
COMMISSIONERS FOR HER MAJESTY’S
REVENUE
AND CUSTOMS Respondents
TRIBUNAL: ANNE REDSTON (PRESIDING MEMBER)
The Tribunal determined the
appeal on 21 October 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 13 June 2011 and
HMRC’s Statement of Case submitted on 12 August 2011.
© CROWN COPYRIGHT
2011
DECISION
1. This is
the appeal by AJDS Pulmonary Function Services Limited (“the company”) against two
penalties totalling £794 imposed for late filing of the 2009-10 end of year
return of payments under PAYE (“P35”).
2. The
company’s current accountants, Champion Consulting Limited (“Champion
Consulting”), appealed the penalties on the company’s behalf.
3. The
Tribunal dismissed the appeal and confirmed the penalties.
The
law
4. Regulation
73 of the Income Tax (PAYE) Regulations (SI 2003/2682) requires employers to file
their P35s before 20 May following the end of each tax year.
5. Taxes
Management Act 1970 (“TMA”) s 98A(2)(a) sets out the liability to fixed
penalties for non-compliance, which are £100 per month or part month during
which the failure continues.
6. The
taxpayer can appeal a penalty on the grounds of reasonable excuse. The relevant
provisions are set out at TMA s 118(2).
7. The
legislation does not define a reasonable excuse. It has recently been held by
this Tribunal that “an excuse is likely to be reasonable where the taxpayer
acts in the same way someone who seriously intends to honour their tax
liabilities and obligations would act”, see B&J Shopfitting Services v
R&C Commrs [2010] UKFTT 78 (TC) at [14]. It has also been held to be “a
matter to be considered in the light of all the circumstances of the particular
case”, see Rowland v HMRC [2006] STC (SCD) 536 at [18].
8. TMA
s 115 states that notices or forms which are to be delivered or served to a
person under the Taxes Acts can be so delivered or served by being addressed to
him at his usual or last known place of residence.
The
issue in the case and the evidentiary burden of proof
9. The
company did not file its P35 by the due date.
10. The issue in
this case is whether it had a reasonable excuse. The burden of proof is on the
company to establish such an excuse, and the standard of proof is the balance
of probabilities.
11. The company’s evidence on
this issue consisted of a single letter from Champion Consulting. HMRC have
supplied screen prints showing the company’s two change of address
notifications, and a copy of form AD01“Change of registered office address” sent
to Companies House.
12. On the basis of the evidence
provided, I find the following facts.
The facts
13. The deadline for filing the
2009-10 P35 was 19 May 2010. It was not filed. At the time the company’s
accountant was Costelloe Business Services (“Costelloe”).
14. On some unspecified date, Costelloe
ceased to trade.
15. On 2 June 2010 the company informed
Companies House that it had changed its registered office address to Worsely
Court, Worsely, Manchester. This is the address of Champion Consulting.
16. By letter dated 27 September
2010, HMRC issued a penalty notification for not filing the 2009-10 P35. It
charged the company £100 per calendar month for the period from 20 May 2010 to
19 September 2010, a period of four months. The penalty for this period was
therefore £400. The notification was sent to Costelloe’s address.
17. On 12 November 2010, HMRC
were informed that the employer’s address had changed, also to Worsely Court,
Worsely, Manchester.
18. On 24 January 2011, HMRC
issued a second penalty notice for £400 for the four months from 20 September
through to 19 January. Neither party has informed the Tribunal of the address
to which this was sent.
19. On 21 February 2011, HMRC
were notified that the correspondence address for payroll matters should be
changed to Worsely Court, Worsely, Manchester.
20. In February 2011 Champion
Consulting received the second penalty notice (the Tribunal assumes that this
was a copy of the earlier notice HMRC had sent to out on 21 January 2011, but
neither party provided evidence on this point. In any event, nothing turns on
it). Champion Consulting say that “the first instance that we were aware of any
outstanding PAYE was in February when your records had been updated and a
penalty notice was sent to our address.”
21. On 16 March 2011 Champion
Consulting filed the company’s P35, showing that the total PAYE and NICs for 2009-10
was £795.13
22. On 22 March 2011 HMRC issued
an amended penalty notice for the second period, reducing the penalty from £400
to £394. Together with the first penalty of £400, the total penalty was £794,
slightly less than the total PAYE and NICs for that tax year. HMRC say in their
Statement of Case that this accords with their policy of mitigating penalties
to a maximum of the total PAYE and NICs, subject to a minimum of £100.
23. On 7 April 2011 Champion
Consulting, on behalf of the company, appealed the second, now reduced, penalty
of £394. No appeal was made against the first penalty notice. In their
Statement of Case HMRC have very fairly accepted that this appeal should be
taken as being against both penalty notices.
24. HMRC also allowed the company’s
late appeal (the appeal was made more than 30 days after the issuance of the
original penalty assessments).
Champion
Consulting’s submissions on behalf of the company
25. Champion Consulting say that
the company “was under the impression” that the P35 form had been submitted by
Costelloe.
26. Furthermore, until February
2011 all the HMRC correspondence about the penalty went to Costelloe’s address,
and nothing was forwarded to the company; it “was therefore unaware of anything
being outstanding” until the copy of the penalty notice was sent to Champion
Consulting.
27. Champion Consulting say that
at that point “we gathered all the relevant information from the client and
submitted the P35 as soon as it was possible for us to do so.”
HMRC’s
submissions
28. HMRC say that the company
has no reasonable excuse for late filing.
29. Specifically, the obligation
to submit the P35 rests with the employer and cannot be transferred to an agent
working on his behalf. If the actions of an agent excused the employer from its
statutory obligations, this would be “unreasonable and unfair to employers who
do adhere to this same obligation.”
30. They also point to the fact
that the company changed its registered office to that of Champion Consulting
on 2 June 2010, but that HMRC were not informed of the new correspondence address
until 21 February 2011.
31. Finally, they say that the
penalty has already been mitigated to take account of the company’s low level
of PAYE and NIC.
Discussion
and decision
The first penalty
32. The statutory obligation to
file the P35 lies with the employer. The mere delegation of that duty to an
agent does not absolve the employer from that obligation.
33. There are sometimes
situations where the interaction of the agent and the employer can give rise to
a reasonable excuse. But in this case the Tribunal has not been told when
Costelloe ceased trading, when the company became aware of this fact, what
actions (if any) were then taken by the company, and in particular, what it then
did to ensure that its filing requirements for 2009-10 had been carried out in
accordance with its statutory obligations. The only submission in relation to
the late filing is that the company “was under the impression” that Costelloe
had filed its P35.
34. I thus find that there is
no evidence to support a reasonable excuse defence for the first penalty of
£400.
The second penalty
35. On 2 June 2010 the company changed
its registered office, but failed for a further seven months to inform HMRC of its
new correspondence address. The first notice was nevertheless deemed delivered
to the company as it was sent to its last known address.
36. Had the company told HMRC
about its new address on 2 June 2010, Champion Consulting would have received
the first penalty notice in September 2010. This would have allowed the P35 to
be filed soon afterwards.
37. It was the company’s own
failure to inform HMRC of its correspondence address which prevented the first penalty
notice from being delivered to the new accountants, causing the further delay.
This failure is the very opposite of a reasonable excuse.
Conclusion
38. The Tribunal thus finds that
there is no reasonable excuse for the late filing of the P35 and the penalty is
confirmed in the sum of £794.
39. 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.
Anne Redston
TRIBUNAL PRESIDING MEMBER
RELEASE DATE: 8/11/2011
