[2012] UKFTT 349 (TC)
TC02035
Appeal number: TC/2011/06733
VAT - Default Surcharge
levied pursuant to S.59C(2) TMA 1970 – reasonable excuse advanced in mitigation
– not established – Appeal Dismissed
FIRST-TIER TRIBUNAL
TAX CHAMBER
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PAUL S. GAMBLE
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Appellant
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- and -
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THE
COMMISSIONERS FOR HER MAJESTY’S
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Respondents
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REVENUE &
CUSTOMS
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TRIBUNAL:
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JUDGE IAN WILLIAM HUDDLESTON
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Sitting in public in Belfast on 9 February 2012
The appellant appeared in
person
Mrs. P. O'Reilly, HMRC Officer,
for the Respondents
© CROWN COPYRIGHT
2012
DECISION
Appeal
1. This
appeal is against a default surcharge in the sum of £2,143.81 (to include
interest) notified to Mr. Gamble by HMRC pursuant to the provisions of Section
59C(2) Taxes Management Act 1970.
2. The
surcharge penalty relates to the filing of Mr. Gamble's self assessment tax
return for the year end 5 April 2010. That return was filed online by Mr.
Gamble's accountants on the 14 January 2011 and, according to the information provided
by HMRC, there was an immediate assessment of the tax liable on foot of the
return in the sum of £37,789.03. That amount was due to be paid on the 31
January 2011. In fact it was paid on the 20 April 2011 – some 78 days after
the due date and, as a result, HMRC contend that a default surcharge is
payable.
History of the Appeal
3. The
facts of the Appeal are outlined above. When the default surcharge notice was
raised, Mr. Gamble's accountants immediately wrote to HMRC on 19 April 2011
seeking that it be waived on the ground of reasonable excuse, setting out a
number of grounds, including work related stress.
4. HMRC
considered the position, but in their reply of 16 May 2011 rejected the
application. That letter, as with previous correspondence, was sent to Mr.
Gamble's former address of Lisreagh, Lisbellaw, Enniskillen, BT94 5BX.
5. A
review was requested by Mr. Gamble's accountants on the 13 June 2011, pointing
out that the earlier letter did not deal with Mr. Gamble's application for
reasonable excuse on the grounds of ill health. A review was subsequently
carried out by HMRC, but the original decision was upheld. That letter was
sent to Mr. Gamble's new address, Le Touessrok, Lislea, Maguiresbridge, Enniskillen, BT94 4PY.
6. The
conclusion of the review was that the grounds for reasonable excuse had not
been established. It is essentially against that decision which Mr. Gamble now
appeals.
Grounds of Appeal
7. The
grounds of appeal were outlined by Mr. Gamble both in his Notice of Appeal and
his oral evidence to the Tribunal. They can be shortly summarised:
(1)
Mr. Gamble pointed out that he had an exemplary tax record over the
immediately preceding 24 year period during which he had been self employed;
(2)
Mr. Gamble indicated that he had advised HMRC of his change of address,
but that correspondence from HMRC, including reminders regarding the unpaid
tax, had consistently been sent to his former address.
8. During
his evidence Mr. Gamble indicated that he had changed his address in December
2009 and that HMRC had been notified of that on the next subsequent tax return
submitted after that date.
9. In
relation to the grounds of ill health which had been cited previously by his
accountants, these were expanded in the Notice of Appeal and through his oral
evidence.
10. Mr. Gamble
indicated that he had been suffering from diverticulitus – an inherited
condition related to irritable bowel syndrome and brought on by stress.
11. In his evidence
to the Tribunal Mr. Gamble pointed out that he had been off work intermittently
during November / December 2010 but then, on the advice of his consultant, had
been off work continuously from December 2010 to April 2011. His position was
that during that period he had not been able to deal with his business affairs
as he would normally. It is on that basis that he advances the defence of
reasonable excuse to the default surcharge that has been levied.
12. In essence, Mr.
Gamble's case is, firstly, that he had not been made aware of either the
liability to tax because of HMRC's failure to correspond to his updated address
and, therefore, nor was he aware of the need for it to be paid by the 31
January. On the same basis, he claims not to have received any of the
reminders. Secondly, he claims his illness as a contributory factor. Both
factors Mr. Gamble invites the Tribunal to conclude led to a "reasonable
excuse". It was clear that that immediately upon becoming aware of the
liability to tax it was paid.
HMRC's Case
13. HMRC indicated
that they had not been aware of Mr. Gamble's change of address and produced to
the Tribunal a copy of Mr. Gamble's tax return which did not include any
notification of his alteration of address. That may well have been because if
one follows Mr. Gamble's evidence, the change of address would have been
included on the 2008/9 Tax Return of which the Tribunal did not have a copy.
Regardless of that point, and the dispute on evidence surrounding it, it rather
did seem to the Tribunal that most of the material correspondence at the
relevant point in time – namely the submission of tax return and the
immediately subsequent correspondence – occurred between HMRC and Mr. Gamble's
appointed accountants.
14. It was not clear
to the Tribunal as to whether there had been a subsequent breakdown of
correspondence between Mr. Gamble's accountants and himself, or indeed if they
had notified HMRC of Mr. Gamble's change of address.
15. Regardless of
that position, HMRC took the stance that all tax payers knew or at least ought
to know that the operative date for the payment of tax which is due is the 31
January in each year and that, in the present circumstances, with the
tax return having been completed on line, that Mr. Gamble and/or his agents
were aware of the tax liability effectively from the 14 January 2011 (the date
of the online submission) and that they had sufficient time within which to
ensure payment before the relevant due date of the 31 January 2011.
16. On the question
of Mr. Gamble's illness, HMRC accepted that his had been raised in the letter
received from Mr. Gamble's accountant on 19 April 2011 (ie. that in which the
issue of stress had been raised). The information on diverticulitus was
provided in the Notice of Appeal itself.
17. HMRC's position
on that, as led by Mrs. O'Reilly on their behalf, was that there was no
evidence before HMRC that the illness was of sufficient magnitude to prevent
the payment of tax throughout the entire period of 78 days starting with the
due dateof 31 January and ending on the date of actual payment.
Decision
18. The Tribunal
found Mr. Gamble to be an entirely credible witness. It was clear to the
Tribunal that he felt he had been unfairly penalised by the requirement to pay
default surcharge in the circumstances and firmly felt that he had established
"reasonable excuse" for the late payment of tax such that, when taken
together with his previous record, he should be excused.
19. The question of
what constitutes "reasonable excuse" is always difficult. Whilst one
can have sympathy with Mr. Gamble and, indeed, his illness, nonetheless for
reasonable excuse to be sufficient to relieve a tax payer of the fundamental
obligation to ensure the prompt payment of tax (which is the responsibility
which all tax payers face) the standard must, of its nature, be a high one. It
must also be a vitiating circumstance which exists throughout the period of the
delay – in this case a period of 78 days.
20. Mr. Gamble, in
his evidence, indicated that whilst he had moved from his former home in
December 2009, that both he and his wife still continued to own it and
periodically visited it to collect correspondence and maintain it.
21. Equally, he had
employed accountants who were retained to look after his tax returns and make
sure returns were filed and, presumably, that where tax was due it was paid.
22. Taking both
factors into account, the Tribunal finds that in those circumstances it was
more likely than not that some of the reminders would have been brought to Mr.
Gamble's attention, either by the collection of mail at his former home or,
alternatively, by correspondence from his accountants.
23. Mr. Gamble is
obviously a successful businessman running four trading outlets. His evidence
to the Tribunal was that during the period of his illness he employed a part
time manager to deal with the running of those businesses and the payment of
suppliers and staff etc. Again, this is no more than one would expect of a
prudent businessman.
24. In that context
it does seem strange, however, that he did not either on his own behalf of
through his accountants make suitable provision to ensure that his tax liabilities
were discharged. His own evidence to the Tribunal was that the information had
been supplied to his tax advisors promptly. They, in turn, in the normal
course, would have anticipated the tax liability that would fall due and advise
it to their client. At the very least, the accountants would have been aware
of that liability on the 14 January 2011 on the completion of the online filing
and, again, presumably would have communicated that liability to their client.
25. In those
circumstances, the Tribunal concludes that Mr. Gamble or, indeed, his advisors,
must have been aware of the tax liability sufficiently in advance of 31 January
2011 as the due date for payment to allow them time to ensure that it was paid
– in the same way as Mr. Gamble had made provision for the payment to his trade
suppliers and staff.
26. As regards Mr.
Gamble's illness, and given the fact that it was an illness which was prevalent
within his family, the Tribunal can only express its regrets. Nonetheless no
evidence was advanced, either from Mr. Gamble, his GP or his Consultant to the
effect that the symptoms of the disease from which he suffers are so extreme as
to prevent him from carrying out normal business or, at the very least,
arranging for such matters to be dealt with. In the present case there is
evidence that a manager was put in to run the business. There is, however, no
real explanation as to why the same approach was not taken in relation to his
tax affairs.
27. Given that the
period of delay was 78 days, one would have expected that there would have been
sufficient opportunity to allow the Appellant to make suitable alternative
provision. Regrettably that did not occur and, whilst Mr. Gamble obviously
feels aggrieved on the point, nonetheless this Tribunal concludes that
reasonable excuse is not established.
28. For the reasons
given, therefore, the Appeal is dismissed.
29. No order as to
costs.
30.
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.
IAN HUDDLESTONE
TRIBUNAL JUDGE
RELEASE DATE: 17 April 2012
