Income tax – Penalties for failure to make return – Date return was received – HMRC’s burden of proof when daily penalties charged – Appeal against daily penalties allowed – Lack of evidence – Appeal against six-month penalty dismissed – No reasonable excuse – HMRC’s ‘special circumstances’ decision not proved as flawed – FA 2009, Sch. 55
In Sudall  TC 05868, the First-tier Tribunal (FTT) allowed a taxpayer’s appeal against daily late filing penalties because of a lack of evidence that HMRC had given notice specifying the date from which the penalties would be payable.Summary
The evidence for when the return was submitted was not conclusive. The FTT found that Mr Sudall’s evidence of submission date left more questions unanswered than HMRC’s and accordingly it concluded that the return was submitted when HMRC said; more than six months late. Mr Sudall did not put forward any reasons why he did not file the return on time. By not challenging the initial penalty, the FTT found that Mr Sudall evidently accepted that there was no reasonable excuse for failure to file on time. As the FTT found that for there to be a reasonable excuse for the six month penalties there had to be a reasonable excuse for the initial failure to file on time the FTT did not consider that the defence of reasonable excuse applied to the six month penalty. The FTT also found that even though it could perhaps be argued that, because Mr Sudall had a genuine belief that he had submitted his return within three months of the deadline, there were special circumstances, it concluded that Mr Sudall had not met the high threshold of determining that HMRC’s decision (concluding that there were no special circumstances) was flawed. The six month penalty was accordingly upheld.
The FTT found that HMRC had not provided any evidence to prove that they had given notice to Mr Sudall specifying the date from which daily penalties would become payable, as required by FA 2009, Sch. 55, para. 4(1)(c) . HMRC submitted that they had met the requirement, but without proof of such a notice (e.g. an SA Reminder or an SA 326D notice, as was provided in the case of Donaldson v R & C Commrs  BTC 28 ) the FTT was not satisfied that the requirement had been met. Although Mr Sudall had not argued that the requirement in FA 2009, Sch. 55, para. 4(1)(c) had not been met, the FTT noted that HMRC had the burden of proving the daily penalties were chargeable as was found in Burgess and Brimheath Developments Ltd v R & C Commrs  BTC 533, and this had not been done.
The FTT accordingly upheld the six month late filing penalty and cancelled the daily penalties.Comment
For commentary on late filing penalties, see the CCH Tax Reporter at ¶ 181–500.