Thomas (t/a Apollo Enterprises) v Revenue and Customs (INCOME TAX/CORPORATION TAX : Penalty) [2017] UKFTT 253 (TC)
FTT-Tax
Thomas (t/a Apollo Enterprises) v Revenue and Customs (INCOME TAX/CORPORATION TAX : Penalty)
[2017] UKFTT 253 (TC) · 2017-03-27
[1]The appellant is appealing against penalties that HMRC have imposed under Schedule 55 of the Finance Act 2009 (“Schedule 55”) for a failure to submit an annual self-assessment return for the year ended 5 April 2011 on time.[2]The penalties that have been charged can be summarised as follows:(1) a £100 late filing penalty under paragraph 3 of Schedule 55 imposed on 14 February 2012.(2) a £300“six month” penalty under paragraph 5 of Schedule 55 imposed on 7 August 2012.(3) “Daily” penalties totalling £900 under paragraph 4 of Schedule 55 imposed on 7 August 2012.[3]The appellant’s grounds for appealing against the penalties can be summarised as follows:(1) He argues that there was a “reasonable excuse” for any failure to submit the return on time.(2) He argues that the penalty charged is disproportionate, particularly due to the fact the business was making losses. Findings of fact[4]The return was due on 31 January 2012 and was submitted on 19 November 2012. The Appellant does not dispute this date.[5]On 24 September 2012 an appeal was made against the penalties by the agent for the Appellant.[6]The Appellant has historically submitted his return late. His 2008 return, due 31 January 2009, was submitted on 31 January 2010. His 2009 return, due 31 January 2010, was submitted on 1 December 2010. His 2010 return, due 31 January 2011, was submitted on 25 January 2012.[7]The Appellant ran two public houses and one nightclub during the period, but due to trading losses he sold one of the public houses in July 2010 and the nightclub in September 2011. Discussion[8]Relevant statutory provisions are included as an Appendix to this decision. I have concluded that the tax return for the 2011 tax year was submitted on or around 19 November 2012. It should have been submitted by 31 January 2012. Subject to considerations of “reasonable excuse” and “disproportionality” set out below, the penalties imposed are due and have been calculated correctly. The appellant has argued that the penalties charged are disproportionate. Following HMRC v Anthony Bosher [2013] UKUT 579 (TCC) I do not consider I have power to consider the proportionality of fixed penalties such as those charged in this appeal. Mr Justice Warren made clear ‘it is plain that the First-tier Tribunal has no statutory power to discharge, or adjust, a penalty because of a perception that it is unfair.’[9]Mr Thomas has put forward two matters which, in his view, should amount to reasonable excuse. The first is the fact that he was sustaining extreme cashflow difficulties during the period. This is raised mainly in relation to the disproportionality point which as stated above I do not have the power to consider, but also as he was having problems paying his accountants and therefore completing his tax return.[10]The second point is that his tax affairs are handled by two different accountants, as he needs to use one nominated by the pub company landlords (presumably to prepare the accounts relating to one or more of the public houses). His accountants had trouble dealing with each other and this delayed the completion of the return.[11]For completeness, I also note that Mr Thomas’s agent has stated his mother was ill during the period. This was mentioned by them in passing and has never been stated as a ground of appeal by him. As I have no further information on this point I have not considered it as a ground of appeal.[12]I have considered whether each of these points separately, or both together, constitute a reasonable excuse for the late filing of the tax return.[13]It is clear from the legislation in Schedule 55, para 23 (2) (b) that reliance on any other person (the accountants) is not a reasonable excuse unless Mr Thomas ‘took reasonable care to avoid the failure’. I have no evidence that Mr Thomas took such ‘reasonable care’. Given the late filing of the previous three years tax returns, it appears that the late filing was not an unusual occurrence.[14]It is clear from the legislation in Schedule 55, para 23 (2) (a) that lack of funds is not a reasonable excuse unless attributable to events outside Mr Thomas’s control. He was continuing to trade, and no particular reason other than trading losses was given for his cash flow problems. I note that the business also suffered trading losses in the year to 5 April 2010. I have not been made aware of any unforeseen event that gave rise to this lack of funds.[15]I do not consider either of these situations, separately or together to constitute a reasonable excuse. Conclusion[16]For the reasons set out above, I affirm HMRC’s decision to issue the 3 penalties that are the subject of this appeal. The appeal is dismissed. Application for permission to appeal[17]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. SARAH ALLATT TRIBUNAL JUDGE RELEASE DATE: 30 MARCH 2017