Spc00627

Stamp Duty – S 15B SA – Late stamping – Whether 100% penalty excessive for stamping six years late? Whether insufficiency of funds reasonable excuse?  Not in circumstances – Appeal dismissed 

THE SPECIAL COMMISSIONERS

I K DE NEMETHY AND L DE NEMETHY	Appellants

- and -

THE COMMISSIONERS FOR HER MAJESTY’S
REVENUE AND CUSTOMS	Respondents

Special Commissioner:   ADRIAN SHIPWRIGHT (Chairman)

Sitting in public in London on 19 July 2007

I K de Némethy, in person for the Appellants

Akash Nawbatt, Counsel, instructed by the Acting Solicitor for HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2007

DECISION
Introduction
1.	This is an appeal against the imposition of a penalty for the late stamping of a deed of transfer. There is no appeal against the liability to the imposition of Stamp Duty or its amount. It is an appeal solely against the penalty. Accordingly, it falls within section 13(4) Stamp Act 1891 (“SA”) and section 13A SA is engaged. The appeal thus lies to the Special Commissioners rather than the High Court. 
2.	The Stamp Office issued a formal Notice of Adjudication under section 12 SA on 8 March 2007 which indicated that (inter alia) there was a liability to a penalty of £12,600. The Appellants appealed against the penalty by notice on 13 March 2007.
3.	The Stamp Duty, interest and penalty has been paid so that section 13(3) SA is fulfilled. The Appellants’ solicitor’s letter enclosing a cheque for this was received by the Stamp Office in Edinburgh on 22 January 2007. 
The Issue 
4.	In essence, the issue in this case is whether the Appellants had a reasonable excuse for stamping the transfer of land (“TR1”) almost six years late and if not was the amount excessive.. the onus of proof was on the Appellants.
The Law 
5.	This appeal is concerned with Stamp Duty in relation to documents concerning land transactions which were executed before the introduction of Stamp Duty Land Tax (“SDLT”) by FA 2003. The SDLT provisions do not apply but the old Stamp Duty provisions as modified by FA 1999 are applicable.
6.	Stamp Duty was a charge on documents. There was no requirement to stamp documents but an unstamped document could not be used for certain purposes and in particular could not be used to record a land transfer at the Land Registry without a penalty falling on the Registrar.
7.	Section 12 SA provides that the Stamp Office may adjudicate upon certain matters relating to the liability to Stamp Duty, interest and penalties of a document. By section 12(1) SA it is provided:
 “Subject to such regulations as the Commissioners may think fit to make, the Commissioners may be required by any person to adjudicate with reference to any executed instrument upon the questions—
(a) whether it is chargeable with duty;
(b) with what amount of duty it is chargeable;
(c) whether any penalty is payable under section 15B (penalty on late stamping);
(d) what penalty is in their opinion correct and appropriate”.

8.	Section 15B SA covers penalties for late stamping. It provides: 
“(1) A penalty is payable on the stamping of an instrument which is not presented for stamping within 30 days after—
(a) if the instrument is executed in the United Kingdom or relates to land in the United Kingdom, the day on which it is so executed;
(b) if the instrument is executed outside the United Kingdom and does not relate to land in the United Kingdom, the day on which it is first received in the United Kingdom.
(1A) For the purposes of subsection (1) every instrument that (whether or not it also relates to any other transaction) relates to a transaction which to any extent involves land in the United Kingdom is an instrument relating to land in the United Kingdom.
(2) If the instrument is presented for stamping within one year after the end of the 30-day period mentioned in subsection (1), the maximum penalty is £300 or the amount of the unpaid duty, whichever is less.
(3) If the instrument is not presented for stamping until after the end of the one-year period mentioned in subsection (2), the maximum penalty is £300 or the amount of the unpaid duty, whichever is greater.
(4) The Commissioners may, if they think fit, mitigate or remit any penalty payable on stamping.
(5) No penalty is payable if there is a reasonable excuse for the delay in presenting the instrument for stamping”.
9.	Section 13A(5) SA provides: 
“On the appeal the Special Commissioners may—
(a) if it appears to them that no penalty should be paid, set the decision aside;
(b) if the amount determined appears to them to be appropriate, confirm the decision;
(c) if the amount determined appears to them to be excessive, reduce it to such other amount (including nil) as they consider appropriate;
(d) if the amount determined appears to them to be insufficient, increase it to such amount as they consider appropriate.”
The Evidence
10.	 A file of documents was which contained separately the documents each party wished to rely on. Unfortunately, no agreed bundle was produced. However, no objection was taken to any of the documents and they were all admitted in evidence.
11.	No oral evidence was given.
12.	There was no agreed statement of facts. 
Findings of Fact 
13.	From the evidence I make the following findings of facts:
(a)	The Appellant agreed to buy a house in London E5 in 2000;
(b)	Completion of the purchase took place on 12 September 2000. A transfer, TR1, was executed and dated 12 September 2000;
(c)	The Appellant asked how much Stamp Duty would be due in respect of the TR1 on 17 August 2006 as they wished to register the title so that an equity release scheme could be entered into.
(d)	A Notice of Decision on Adjudication was issued on 8 March 2007 which indicated (inter alia) that a penalty of £12,600 would be imposed ie an amount equal to the duty.  
(e)	The Appellants appealed in time against the penalty.
(f)	On 19 January 2007 the Appellants asked for the TR1 to be stamped and paid an amount equal to the Stamp Duty due, the interest and the penalty.
(g)	The Appellants have suffered financial difficulties from at least 2000 to the present day. They said themselves “… we have been unable to manage our affairs … and the Stamp Duty is by no means the only financial affairs we have defaulted on …”
(h)	The Stamp Duty was due on 12 October 2000. It was not paid by that date. 
(i)	A cheque for the Stamp Duty, interest and penalty was sent with a letter dated 19 January 2007 by the Appellants’ solicitors. It is date stamped “IR Stamp Taxes Edin 22 January 2007”.
Submissions of the Parties	
The Appellant’s Submissions in outline
13.	In essence, the Appellant submitted that:
(a)	the penalty was disproportionate and unfair as they did not have the financial resources to pay the Stamp Duty at the requisite time;
(b)	The interest is commercial restitution to the Respondents and a penalty was unnecessary to recompense  the Respondents for late payment;
(c)	The Appellants did not have the resources to pay the Stamp Duty at the requisite time but did pay it when they could and so had a reasonable excuse;
(d)	Accordingly, no penalty should be imposed and certainly not at the maximum amount. The appeal should therefore be allowed.
14.	The Appellants accepted in the course of the hearing that it was appropriate that a penalty should be imposed but considered that it should be in the range of 25% to 50%. He said this was his feeling of what was appropriate.
HMRC’s Submissions in outline
15.	In essence, HMRC submitted that:
(a)	Stamp duty was due 30 days after the execution of the TR1;
(b)	Section 15B SA allowed a penalty of up to 100% of the duty to be imposed for late stamping;
(c)	Here the stamping was some six years late and it was right that a penalty should be imposed;
(d)	It was reasonable to impose the full amount of the penalty in the circumstances. The Appellants chose to buy that house at that price.
(e)	Accordingly the appeal should be dismissed.  
Discussion
Introduction
16.	The arguments of the parties raise a number of questions including the following.
(a)	Was the document presented late for stamping?
(b)	Did section 15B SA allow a penalty to be imposed? 
(c)	Was there a reasonable excuse?
(d)	Was the amount of the penalty excessive?
Was the document presented late for stamping?
17.	The document should have been stamped by 12 October 2000. It was agreed by the parties that it had not been stamped by then and that the Stamp Duty was due. I find it was presented late for stamping.
Did section 15B SA allow a penalty to be imposed?
18.	By section 15B“(1) A penalty is payable on the stamping of an instrument which is not presented for stamping within 30 days after…” its execution. Accordingly, section 15B prima facie does allow a penalty to be imposed.  
Was there a reasonable excuse?
19.	By section 15B(5) “No penalty is payable if there is a reasonable excuse for the delay in presenting the instrument for stamping.” Reasonable excuse is not defined for these purposes. There is no provision equivalent to section 71(1) VATA that insufficiency of funds is not a reasonable excuse. However, this does not mean that an insufficiency of funds is a reasonable excuse. It all depends on the circumstances of the particular case. The Appellants chose to buy this house at that particular price. They could have bought a cheaper house. I was told in answer to my question that the Appellants had not considered renting. This was another option open to them. However, they chose to buy the particular house notwithstanding their admitted financial difficulties. It was a deliberate choice on their part to complete the purchase of the house. It was not an external circumstance not under their control. They controlled the decision to buy that house or not. The consequence of completing such a purchase was that a Stamp Duty liability arose. It arose because of the decision to purchase. If they went ahead regardless of whether they had the funds to pay the Stamp Duty then that cannot constitute a reasonable excuse. I find that on the particular facts of this case there was not a reasonable excuse for failing to pay the Stamp Duty on time. Accordingly, as there is no reasonable excuse a penalty is payable. 
Was the amount of the penalty excessive
20.	By section 13A(5)(c) SA the Special Commissioners may “…if the amount determined appears to them to be excessive, reduce it to such other amount (including nil) as they consider appropriate…”.
21.	The maximum penalty is 100% of the duty. This is what was imposed. The section  provides for a cap if the document is presented within a year. These restrictions do not apply in the present circumstances. HMRC may mitigate a penalty if they think fit.
22.	Whether the amount is excessive must be determined on an objective basis. There must be a range of possible amounts of penalty which objectively are not excessive (nor insufficient) where reasonable minds can differ.
23.	No authority was cited to me as to how the question whether the penalty was excessive should be approached. 
24.	I approach this question by asking whether a reasonable ordinary person would consider the proposed amount of the penalty to be significantly outside the range of what is required to signal the need for compliance with the provisions requiring stamping within the prescribed period. As the appeal is the Appellants’ appeal I consider that the onus is the Appellants to show that the penalty is excessive in the sense of the legislation.
25.	The only basis put forward by the Appellants for a lower penalty was that they felt that a lower penalty was more reasonable. But in the words of the old aphorism “They would say that would not they?”. There was nothing put forward which objectively showed that the penalty was excessive. 
26.	I find the penalty was not excessive. I find this on objective basis. I record for the sake of completeness that on a subjective basis I find the penalty was not excessive.
27.	I consider that given the period in excess of six years from the due date of stamping I consider that an ordinary reasonable person would think the penalty was within the range of penalty amounts that were not excessive. I find that the penalty taking into account all the circumstances of the case was not excessive.
28.	Section13A(5)(b) SA provides that “if the amount determined appears to them [ie the Special Commissioners] to be appropriate, [they may] confirm the decision…”.  I consider that the amount of the penalty as determined is appropriate and accordingly I confirm the decision.
29.	Accordingly, the appeal is dismissed.
30.	I make no order as to costs.

SPECIAL COMMISSIONER
RELEASE DATE: 14 August 2007

SC/3093/2007