St John Patrick Publishers Ltd v Revenue & Customs [2012] UKFTT 20 (TC)
[11](1) the legislation became operative with a commencement date of 6 April 2010, so that the first time penalties could be raised under these rules was after the end of the 2010/11 tax year, given the way that the penalties talk in terms of the number of defaults during the year in question (at [11]);[31](2) except in the case of special circumstances, the scheme laid down by the statute gives no discretion: the rate of penalty is simply driven by the number of PAYE late payments in the tax year by the employer (at [31]);[33](3) the scheme of the PAYE legislation requires taxpayers to pay over PAYE on time; the legislation does not require HMRC to issue warnings to individual employers, though it would be expected that a responsible tax authority would issue general material about the new system (at [33]);[37](4) lack of awareness of the penalty regime is not capable of constituting a special circumstance; in any event, no reasonable employer, aware generally of its responsibilities to make timely payments of PAYE and NICs amounts due, could fail to have seen and taken note of at least some of the information published and provided by HMRC (at [37]);[39](5) any failure on the part of HMRC to issue warnings to defaulting taxpayers, whether in respect of the imposition of penalties or the fact of late payment, is not of itself capable of amounting either to a reasonable excuse or special circumstances (given that there is no separate penalty for each individual default, and the penalty can only be assessed once the aggregate of the late paid tax comprised in the total of the defaults for a particular tax year has been ascertained) (at [38]-[39]); (6) the penalty imposed in that case was not disproportionate (at [40]-[42]). The hearing, evidence and arguments 11. At the hearing, the Appellant was represented by Mr Chauhan, the financial controller of the Appellant. HMRC was represented by Ms Weare. 12. It is not in dispute between the parties that the Appellant was required throughout the relevant year to make monthly payments of PAYE and NICs by the 19 th day of each month. 13. The HMRC bundle produced for the hearing included at page C2 a table showing amounts of PAYE tax and NICs required to be paid by the Appellant in each of the months of the year to which this appeal relates, and the dates on which each of the relevant amounts was actually paid. At the hearing, Mr Chauhan indicated on behalf of the Appellant that he did not dispute these details. According to this table, the payments were made after the 19 th of the month in all of the relevant months. 14. The evidence of Mr Chauhan was as follows. Someone at the Appellant company would always ring HMRC before the due date if the Appellant was not able to pay the PAYE and NICs by the due date, to ask if payment could be deferred. A deferment date would be agreed. At no point was the Appellant company informed that penalties would apply. There were occasions on which the Appellant was informed that penalties “may” apply. The Appellant has no records of these conversations with HMRC, but they would have been on the 18 th or 19 th of each relevant month. 15. The case for HMRC was as follows. 16. The amount of the penalty originally imposed was £9,140. This had been reduced to £8,290.76, as a result of the exclusion from consideration of the late payment in month 12. This is because it was now accepted the due date for payment in respect of month 12 in fact fell outside the relevant tax year. 17. Avoidance of liability to a penalty by an agreement under paragraph 10 of Schedule 56 is only possible if the agreement is entered into before the trigger date for the penalty and if payment is made by the due date pursuant to the agreement. Evidence in the form of HMRC computer records indicates that in each of the relevant months, the Appellant only contacted HMRC after the due date for the payment, with the exception of month 6 (October 2010). However, in month 6, payment was made after the agreed date for payment, so that paragraph 10 also does not apply to that month. 18. HMRC computer records also indicate that on 28 May 2010, a standard penalty default letter was issued to the Appellant, warning the Appellant that it was in default in respect of month 1 and that penalties may apply if payment is made late more than once in a tax year, advising that the Appellant must pay any overdue PAYE immediately and make any future payments on time, and giving internet addresses at which further information could be obtained about the penalty regime and time to pay agreements. HMRC computer records also indicate that the Appellant was advised in a telephone conversation on 26 May 2010 that penalties may apply if payment was late in future. 19. In reply, Mr Chauhan stated that he did not agree with what HMRC said were the dates on which the telephone conversations were held. He said that he knew that each of the conversations was on or before the 19 th of each month. He said that the company was not told in telephone conversations even that it “may” be liable to penalties, because if it had, it would certainly have asked what was meant by penalties “may” apply. He said that it was never explained in telephone conversations how the penalty regime worked or what would happen. Mr Chauhan could not confirm whether the 28 May 2010 warning letter was received, but said that if it was, the Appellant’s director would have called HMRC immediately, as the director preferred direct personal communication. Mr Chauhan did not himself recall receiving such a letter. Mr Chauhan did not seek to dispute the dates that the payments were received by HMRC. He indicated that he would have to look up his cheque book to determine the dates that the cheques were sent. The Tribunal noted that dates recorded in the chequebook would not necessarily be a reliable indication of when the cheques were actually sent or received. Mr Chauhan did not apply for permission to present additional evidence of the dates recorded in his chequebook. The Tribunal’s findings 20. The Tribunal finds, consistently with Dina Foods , that:(1) the scheme laid down by the statute gives no discretion (subject to paragraph 9): the rate of penalty is simply driven by the number of PAYE late payments in the tax year by the employer;(2) the legislation does not require HMRC to issue warnings to individual employers, though it would be expected that a responsible tax authority would issue general material about the new system;(3) lack of awareness of the penalty regime is not capable of constituting a special circumstance; in any event, no reasonable employer, aware generally of its responsibilities to make timely payments of PAYE and NICs amounts due, could fail to have seen and taken note of at least some of the information published and provided by HMRC;(4) any failure on the part of HMRC to issue warnings to defaulting taxpayers, whether in respect of the imposition of penalties or the fact of late payment, is not of itself capable of amounting either to a reasonable excuse or special circumstances. 21. The Appellant did not seek to argue that the penalty regime under Schedule 56 was disproportionate, either for purposes of the European Convention on Human Rights or for other purposes. For completeness, the Tribunal would note that it would in any event consider the findings in paragraphs 40-42 of Dina Foods to be relevantly applicable to the circumstances of the present case. 22. The Tribunal must make its findings of fact on the basis of the evidence before it. Where evidence conflicts, the Tribunal must decide which evidence to prefer, weighing such matters as the relative reliability of competing items of evidence, in order to make findings of fact on the balance of probability. 23. In relation to the dates on which the Appellant company made contact with HMRC, and the deferred dates for payment agreed in those telephone calls, the evidence of Mr Chauhan conflicts with the HMRC evidence. The Tribunal takes into account that Mr Chauahan did not claim to have made all of the telephone calls personally, and the HMRC records suggest that he was not a party to most of the telephone calls. Mr Chauhan said that he was sure that each phone call was made before the 19 th of the month, but he had no contemporaneous notes or other written evidence of the telephone calls, and could only give very general details about them. On the other hand, the HMRC computer records were contemporaneous records of the conversations. They give precise details of dates and times of phone calls. While the details they give of the content of the telephone calls are brief, and often contain abbreviations that are difficult to understand, the Tribunal finds that they are more reliable evidence than that of Mr Chauhan in relation to dates and times of calls, and at least the essentials of what was said in the calls. 24. On the basis of the HMRC evidence, the Tribunal is satisfied that the dates of the telephone calls, and the agreed deferred dates for payment, are as set out on page 6 of Ms Weare’s speaking notes that were provided at the hearing to the Tribunal. The Tribunal finds that no telephone call was made in respect of month 3 (July 2010). In all other relevant months other than month 6 (October 2010), the telephone call was made after the due date for payment. In month 6, although the telephone call was made before the due date (on 15 October 2010), the agreed deferred date was 11 November 2010. The Appellant has not sought to dispute that payment that month was not received by HMRC until 17 November 2010. The Tribunal therefore finds that paragraph 10 of Schedule 56 is not applicable in this case. 25. The Tribunal finds that the fact that an appellant contacted HMRC after the due date in order to request time to pay cannot of itself amount to a reasonable excuse for purposes of paragraph 16 of Schedule 56. The effect of paragraph 16, like paragraph 10, is to remove all liability to a penalty in the circumstances to which it applies. If contacting HMRC after the due date to request time to pay could of itself be a reasonable excuse, the practical effect would be to remove an express requirement of paragraph 10 (the requirement that a request for time to pay must be made before the due date). For similar reasons, where a time to pay agreement is entered into before the due date, but payment is made only after the agreed deferred deadline, the Tribunal does not consider that the fact of the time to pay agreement can of itself amount to a reasonable excuse. This would similarly have the practical effect of removing an express requirement of paragraph 10 (the requirement that payment must be made within the agreed deferred deadline). 26. The Tribunal has considered whether the fact that an appellant has entered into a time to pay agreement with HMRC, and has ultimately paid the relevant amount, could of itself amount to a special circumstance for purposes of paragraph 9 of Schedule 56, even if the agreement was not requested until after the statutory deadline for payment, or even if the payment was not made until several days after the agreed deferred deadline. While such circumstances may not be sufficient to remove all liability to a penalty under paragraphs 10 or 16, it could be argued that such circumstances might justify at least a reduction in the penalty under paragraph 9, on the basis that the appellant has in good faith made an effort to engage with HMRC in relation to the payment of the tax. 27. Having given careful consideration to the matter, the Tribunal has ultimately concluded that where a time to pay agreement is not sought until after the relevant deadline, or where payment is ultimately not made until after the agreed deferred deadline, the mere fact that the appellant has sought to engage with HMRC at all cannot, of itself , be said to be a “special circumstance”. The legislation expressly expects that any time to pay agreement must be requested before the deadline, and payment made within any agreed deferred deadline. Where an appellant fails to comply with either of these requirements, the Tribunal does not consider that the mere fact that the appellant has sought to engage with HMRC at all can of itself be considered a “special” circumstance. 28. That does not exclude the possibility that the fact that an appellant has sought to engage in good faith with HMRC, together with other relevant circumstances, might in combination amount to a reasonable excuse or special circumstances. The Tribunal has therefore considered the circumstances of this case as a whole. The legislation expressly provides that inability to pay cannot be a reasonable excuse or a special circumstance. We have found above that lack of awareness of the penalty regime is not capable of constituting a special circumstance. The Tribunal concludes that all of the circumstances of this case, considered as a whole, fail to establish either a reasonable excuse or special circumstances. 29. Where the Tribunal finds that there are special circumstances for purposes of paragraph 9, the Tribunal has a discretion to reduce the penalty. However, unless the Tribunal first finds that there are special circumstances for purposes of paragraph 9, the Tribunal has no general discretion to reduce the penalties (see paragraph 10(2) above). Conclusion 30. For the reasons above, the Tribunal dismisses the appeal. 31. 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. Christopher Staker TRIBUNAL JUDGE RELEASE DATE: 5 January 2012
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