[2010] UKFTT 79 (TC)

						TC00391

Appeal number TC/2009/12463

CIS PENALTY FOR LATE RETURN – whether reasonable excuse – HMRC decision upheld

FIRST-TIER TRIBUNAL

TAX 

                                                 RICHARD KING                             Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS (Income Tax)	Respondents

TRIBUNAL: Judge WDF Coverdale

The tribunal determined the appeal without a hearing under the provisions of Rule 26 of the Tribunal Procedure (First Tier Tribunal) (Tax Chamber) Rules 2009

© CROWN COPYRIGHT 2010

DECISION

1. This is an appeal against penalties imposed for the late submission of monthly Construction Industry Scheme (CIS) returns for the months ended 5/5/07 to 5/2/09 i.e. 21 returns.

2. Mr King has been registered within the Construction Industry Scheme, and has employed subcontractors, since 6/4/07.

3. The HMRC submission discloses that 21 CIS monthly returns due from Mr King for the period 6/5/07 to 5/1/09 were submitted late: those for the period 6/5/07 to 5/4/08 were not received until 2/9/08; those for the period 5/5/08 to 5/1/09 were received on 10/2/09. Each included details of subcontractors and tax was due. 

4. A full list of the penalties is reproduced in the submission papers. A total of 150 fixed penalties were issued for the late returns and the total is £17,600.

5. The Notice of Appeal discloses that it is not disputed that Mr King was late in submitting his monthly returns (and in paying the tax due). It is emphasised that all the outstanding returns have now been submitted and the tax paid.

6. The legal authority for the imposition of penalties is Regulation 4(13) of the Income Tax (Construction Industry Scheme) Regulations 2005. Section 98A (2)(a) of the Taxes Management Act 1970 provides for penalties to be charged where a contractor fails to submit a return by the due date. Section 100 of the Taxes Management Act allows an authorised officer of HMRC to determine penalties under the Taxes Acts.

7. Section 118(2) of the Taxes Management Act provides that where a person had a reasonable excuse for not doing anything required to be done he shall be deemed not to have failed to do it if he did it without unreasonable delay after the excuse ceased. There is no provision in law for these penalties to be set aside or mitigated on any grounds other than reasonable excuse for each penalty which must have existed for the whole period of each default period.

8. The Grounds of Appeal do not specifically refer to reasonable excuse: it is stated that 
1) The Inland Revenue/Government have not suffered any loss in this case 
2) The penalties of £17,600 are disproportionate to the amount of tax lost i.e. nil
3) No Review of the level of penalties was offered by HMRC.

9. The absence of financial loss by HMRC is not a matter that can be taken into account: it cannot be classified as a reasonable excuse by the taxpayer in this case. 

10. Likewise, proportionality is not an issue that is relevant to the question of reasonable excuse and is not a matter upon which the Tribunal can adjudicate.

11. The Tribunal notes that a review was carried out by HMRC and the result communicated to Mr King’s representative by letter dated 24/6/09. There is no other obligation in law for HMRC to review their Decision any further.

12. Reasonable Excuse is not defined by legislation but it can be considered to be an exceptional event beyond the taxpayer’s control which prevented (in this case) the returns being filed by the due date, for example because of severe illness or bereavement. No such excuse has been provided by Mr King, either in the Notice of appeal or elsewhere in this appeal.

13. Accordingly the fixed penalties amounting to £17,600 have properly been imposed and this appeal is dismissed.

14. The Appellant has a right to apply for permission to appeal against this decision pursuant to Rule 39 of the Rules.   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.

TRIBUNAL JUDGE

RELEASE DATE: 21 January /2010