Mohammed v Revenue & Customs (INCOME TAX/CORPORATION TAX : Penalty) [2018] UKFTT 375 (TC)
FTT-Tax
Mohammed v Revenue & Customs (INCOME TAX/CORPORATION TAX : Penalty)
[2018] UKFTT 375 (TC) · 2018-06-26
[1]This was an appeal by Miss Farhath Mohammed (“the appellant”) against penalties imposed by the Respondents (“HMRC”) under Schedule 55 FA 2019 for her continued failure to deliver a tax return. Facts[2]The appellant was issued with a notice to file an income tax return for the tax year 2015-16 on 6 April 2016. That notice required her to deliver the return by 31 October 2016 if filed in paper form or by 31 January 2017 if filed electronically (“the due date”).[3]On 7 February 2017 HMRC issued a notice informing the appellant that a penalty of £100 had been assessed for failure to file the return by the due date.[4]On 11 August 2017 HMRC issued a notice informing the appellant that a penalty of £900 had been assessed for failure to file the return by a date 3 months after the due date.[5]In the same notice HMRC informed the appellant that a penalty of £300 had been assessed for failure to file the return by a date 6 months after the due date.[6]The return was filed electronically on 23 November 2017.[7]On 5 December 2017 the appellant, through her accountant, appealed to HMRC against penalties of £1,200.[8]On 15 December 2017 HMRC in the person of Mrs A Dodgson rejected the appeals as they said to the appellant that she had not shown that an unusual or unexpected event prevented “the individual” ( sic ) from filing on time, and that only such an event would amount to a reasonable excuse. They informed her that she could provide further information, request a review or notify her appeal to the Tribunal.[9]On 17 January 2018 the appellant herself gave further information and made a request for HMRC to look at her appeals again.[10]On 13 February 2018 T Turner, a Customer Service Advisor in HMRC, wrote to the appellant saying that she had been sent a form SA633 and SA634 with the letter of 15 December 2017. They added: “As you are still appealing the penalties charged for the 2015-16 tax year you will need to complete the SA634 and return it to the address printed on the top of the form. The form should have been sent to [unit and address in HMRC] by the 14 January 2018. I cannot say whether they will review your case as it is after the time allowed”.[11]On 15 February 2018 the appellant notified her appeals to the Tribunal. The law in brief[12]The law imposing these penalties is in Schedule 55 Finance Act 2009 and in particular paragraph 3 (initial penalty of £100), paragraph 4 (daily penalties) and paragraphs 5 and 6 (fixed or tax geared penalty after 6 and 12 months respectively). The penalties may only be cancelled, assuming they are procedurally correct, if the appellant had a reasonable excuse for the failure to file the return on the due date, or if HMRC’s decision as to whether there are special circumstances was flawed.[13]Certain provisions of Schedule 55 FA 2009 are in the Appendix. The appeals[14]The position is that throughout the correspondence it is clear that the appellant has appealed only against the daily penalty and the 6 month penalty. HMRC have prepared their statement of case to include the initial filing penalty and so I consider that too, and waive any formalities that might be necessary to get an appeal before the Tribunal. Grounds of appeal & HMRC’s response[15]The grounds of appeal are that:(1) The appellant filed her return online but HMRC did not accept it as they said it was not completed, and that although she completed it with the help of HMRC they did not receive it.(2) She could not use an accountant because she could not afford to.[16]HMRC say in response that they did receive supplementary pages for 2015-16 on 14 October and 9 November 2017 but these were returned to her as the full return SA100 had not been submitted. Reasons for my decision Reasonable excuse?[17]In my view there is no reasonable excuse for the failure to file the return by 31 January 2017. It is clear from her own account that the appellant was in touch with HMRC in her attempts to file the return as early as October 2016 but she did not explain why she was unable to file by 31 January 2017. Special circumstances?[18]HMRC have addressed the question whether there were special circumstances, but have found none. The matter they took into account was, they say, her attempts to file on paper and online. They do not say why those circumstances were not special, nor do they mention anything else. In my view the decision is flawed because of its lack of reasoning and because I think that there are a number of matters which HMRC did not taken into account which they should have.[19]One thing Mrs D Waldron, the compiler of the SOC and the only person capable of having considered whether there were special circumstances, did not take into account was the misleading of the appellant by officers of HMRC. Mrs Dodgson incorrectly said that only an unusual or unexpected event could be a reasonable excuse. T Turner said that a review must be requested on a form SA634 and that the appellant was out of time to ask for a review. All of these statements are incorrect. The first error could have prevented the appellant from putting forward a properly formulated reasonable excuse. The second and third errors could have, and probably did, mislead the appellant into thinking she could not have a review, as she notified her appeal to the tribunal immediately.[20]Mrs Waldron’s own sin is that of omission. She did not mention in her statement of case that, according to the SA Notes, on 14 July 2017 the appellant telephoned HMRC and was issued with “SA100”, ie a paper return. This return would have shown a due date for filing it of 3 months after receipt, say 21 October 2017. The return was filed on 23 November, about one month after the due date yet the appellant was assessed to daily penalties and 6 month penalties.[21]What is more the SA Notes also show that the appellant phoned HMRC on 13 September 2017 about the penalties assessed in August and was told that “she needs to fill out 15/16 then appeal penalties” [my emphasis][22]In my view this multiple combination of errors by HMRC was a special circumstance as was the fact that the appellant was issued with a paper return after the filing date for the return for which she was issued with a notice to file and was told that she could not appeal until she had filed the return, something which itself is an error.[23]Misleading conduct by HMRC, even if not accompanied by erroneous and prejudicial statements, was held to amount to a special circumstance in Morgan & another v HMRC [2013] UKFTT 317 (TC) at [109] to [145]. Decision[24]Under paragraph 22(2)(b) Schedule 55 FA 2009 I substitute for HMRC’s decision to assess three penalties totalling £1,300 my decision to specially reduce the daily and 6 month penalties to nil to reflect the special circumstances of this case.[25]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. RICHARD THOMAS TRIBUNAL JUDGE RELEASE DATE: 9 July 2018