[2012] UKFTT 323 (TC)
TC02009
Appeal number: TC/2010/02168
Income tax – failure to submit a partnership return –
whether the return posted in time – timely submission of duplicate return when
supplied – appeal allowed
FIRST-TIER TRIBUNAL
TAX CHAMBER
EAMAS
CONSULTING LLP Appellant
-
and -
THE
COMMISSIONERS FOR HER MAJESTY’S
REVENUE
AND CUSTOMS Respondents
TRIBUNAL:
JUDGE MALCOLM GAMMIE CBE QC
The Tribunal determined the
appeal on 3 February 2012 without a hearing under the provisions of Rule 26 of
the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (default
paper cases) having first read the Notice of Appeal dated 3 March 2010, HMRC’s
Statement of Case submitted on 7 April 2010, the Appellant’s Reply dated 15
April 2010 and the further correspondence stemming from the Appellant’s appeal
to the Upper Tribunal.
© CROWN COPYRIGHT
2012
1.
2.
DECISION
3.
4. This
is an appeal by Eamas Consulting LLP (“Eamas”) against the first and second
fixed penalties imposed for the late filing of the partnership tax return for
the year ending 5 April 2008.
5. In
a decision released on 6 July 2010, the First-tier Tribunal (Tax Chamber) dismissed
Eamas’ appeal on the grounds that Eamas had no reasonable excuse for its
default (see [2010] UKFTT 308 (TC)). Eamas appealed to the Upper Tribunal (Tax
and Chancery) and, by consent on 26 May 2011, the Upper Tribunal remitted the
appeal to the First-tier Tribunal to be decided afresh, as a default paper
case, by a differently constituted tribunal panel. The parties were at liberty
to serve further written submissions if they wished by 30 June 2011.
6. Having
considered the papers, the Tribunal allows the appeal for the reasons set out
below.
The Facts
7. Eamas
is a partnership, the representative being Mr Robert Nigel Eames and the other
partner being his son, Mr Robert Andrew Eames. The correspondence has been
conducted by Mr R N Eames (“Mr Eames”) on behalf of Eamas.
8. HMRC
say that a short form partnership return was issued to Eamas on 6 April 2008. Mr
Eames admits that Eamas received the return.
9. The
filing date for that return was 31 October 2008 for a paper return, or 31 January
2009 if the return was to be filed on-line. Eamas does not claim that it filed
its return on line and the due date for filing the return was therefore 31
October 2008.
10. HMRC say that
they have no record of receiving any partnership return before 28 August 2009
(see paragraph 12 below). Mr Eames says that the partnership return was
returned “as soon as” it was received in 2008.
11. Having no record
of its receipt, HMRC issued penalty notices to the partners in February 2009. The
penalty notice addressed to Mr Eames was apparently issued by an HMRC office in
Leicester. On its receipt Mr Eames telephoned what he thought was the Leicester office but the number turned out to be a general HMRC enquiry line. He explained
that the return had been returned and he was told that HMRC would look into the
matter. The penalty notice addressed to Mr R A Eames was dated 17 February 2009
and was issued from an HMRC office in Maidstone. On 23 March 2009, Mr Eames
wrote to HMRC at Maidstone stating that he was the lead partner for Eamas and that
he had completed the partnership return "last year showing NIL income for
the tax year to the 5 April 2008 and returned it to HM Revenue & Customs
Suffolk N Essex Area, St Clare House, Princes Street, Ipswich, Suffolk IP1
1LW". He wrote in this instance (rather than called) because he
anticipated that HMRC would not accept a call from him on behalf of his son.
12. HMRC (Maidstone) acknowledged Mr Eames’ letter of 23 March 2009 on 3 July 2009, noting that the
return had not been received. HMRC’s letter asked Mr Eames to forward a copy of
the return or to request a duplicate for completion.
13. Mr Eames apparently
telephoned HMRC (Maidstone) on 17 July 2009 and again on 11 August 2009 to
request a duplicate return. HMRC (Maidstone) sent this to Mr Eames under cover
of a letter of 11 August 2009.
14. Meanwhile, a
second penalty notice was issued on 4 August 2009.
15. Mr Eames returned
the duplicate return on 26 August 2009 and HMRC (Maidstone) received it on 28
August 2009. In its letter of 26 August 2009 Mr Eames noted that he had been
unable to find a copy of the original return that Eamas had submitted to HMRC (Ipswich). He also noted that he had contacted HMRC (Leicester) “some weeks ago” in an
endeavour to sort out the problem. HMRC (Leicester) had apparently contacted Mr
Eames sometime before 23 March 2009 to notify him that he should deal with
them. Mr Eames says that HMRC (Leicester) had told him that they would sort
matters out but his next contact appears to have been with HMRC (Maidstone). (It is unclear whether this was a result of any action by HMRC (Leicester).)
16. On 13 January
2010 HMRC rejected Eamas’ appeal against the penalties on the ground that it had
no reasonable excuse for failing to submit its return on time. This conclusion
was upheld on review on 11 February 2010.
17. In a letter of 3
March 2010, Mr Eames acknowledged that a partnership return was required even
if it was a nil return. In that letter he said that he had Post Office special
delivery receipts. These have not, however, been produced but Mr Eames also
said that HMRC (Leicester) had told him that proof of posting was not proof of
content.
18. Eamas then
appealed to the Tribunal (as to which see paragraph 2 above).
The Law
19. Under section
12AA Taxes Management Act 1970 an officer of the Board may give notice
requiring the making and delivery of a partnership return and in the case of a
non-electronic return the filing date shall not be earlier than 31 October
following the end of the relevant year, provided the notice is given before 1
August following the year end.
20. Section 93A(2)
TMA 1970 provides that if the representative partner fails to comply with the
notice all partners are liable to a penalty of £100 each. Section 93A(4)
provides that if a return remains outstanding after a further 6 months, the
partners are liable to a further penalty of £100 each. If the Tribunal is satisfied
that throughout the period of default the person concerned had a reasonable
excuse for the default, the penalty may be set aside.
21. Section 115 TMA
1970 provides that any notice or other document to be given, sent, served or
delivered under the Taxes Acts may be served by post. Section 7 Interpretation
Act 1978 provides that where an Act authorises any document to be served by
post then, unless the contrary intention appears, the service is deemed to be
effected by properly addressing, pre-paying and posting a letter containing the
document and, unless the contrary is proved, to have been effected at the time
at which the letter would have been delivered in the ordinary course of post.
Findings and conclusions
22. The principal question
for this Tribunal’s decision is whether it believes Mr Eames’ statement that he
posted the partnership return “as soon as I received it in 2008”. On the basis
that HMRC say that they sent the partnership return on 6 April 2008 and given
that the filing date was 31 October 2008, the Tribunal considers that the
return would have been posted in time if it accepts Mr Eames’ statement. If
the Tribunal does not accept Mr Eames’ statement of posting, Eamas advances no
reasonable excuse as such for the delay in submitting the return. Its
‘excuse’, however, is that it posted the return on time and that it cannot be
held responsible if the return went undelivered or was mislaid by HMRC once
received. The passage of time from the first penalty notice (which would be
the first point at which Eamas would have known that its return might have gone
astray) to the time when Eamas submitted the duplicate return appears largely
to be accounted for by the time it took HMRC to respond and to supply the
duplicate when requested. Once that has been supplied on 11 August 2009 Mr
Eames returned it without any undue delay.
23. Although Mr
Eames has produced no certificates of posting for the return the Tribunal
accepts his statement that the return was properly posted as he claims. It
does so for the following reasons—
(1)
Mr Eames’s evidence is that the return was a NIL return. This was
reflected in the duplicate return and HMRC has not suggested that the return is
inaccurate. Given that fact, it is reasonable to assume that Mr Eames was able
to deal with it expeditiously as he claims and may well have seen no point in
retaining a copy of the return.
(2)
Mr Eames’ evidence is that the NIL return was reflected in both his and
his son’s personal self-assessment returns that were submitted around the same
time or shortly after the partnership return was posted. HMRC admit that these
returns were received in good time before the deadline for paper returns.
(3)
Mr Eames says, with some force, that it does not make sense that he
would complete and return a complicated personal tax return (well before the
deadline) but would not return an easy nil return. The contrary point might be
made that Mr Eames would understand the absolute need to return his personal
self-assessment return but might think it unnecessary to submit a nil return.
On the other hand, Mr Eames states that he was well aware of the need to send
back a nil return. Furthermore, in 2009 when he evidently did not receive a
partnership return in the ordinary course he requested one even though the 2009
return was also a nil return.
(4)
Contrary to what may appear from the first decision of the First-tier
Tribunal in this matter, Mr Eames disputed the penalty notice from the outset
and the delay (if any) in submitting a duplicate return appears to be due to
some combination of HMRC’s response time and the number of different HMRC
offices dealing with the tax affairs of Eamas and Mr Eames. Apart from
Maidstone, Ipswich and Leicester, Mr Eames also appears to have had some involvement
with HMRC in Bradford, Salford, Londonderry and London NW1. This is not as extraordinary
as at first sight may appear and Mr Eames (while quite reasonably expressing
the hope that his tax affairs might be dealt with by a single HMRC office) fairly
recognised that HMRC is a large organisation and that more than one office might
inevitably have to be involved in these matters. Nevertheless, despite the
plethora of HMRC offices, Mr Eames was able immediately to identify the office
to which he had posted the partnership return. HMRC have not suggested that it
was the wrong office or that the address that Mr Eames supplied was incorrect.
Throughout he recognised and acknowledged the need to comply with his tax obligations
and dealt with this issue diligently and expeditiously. There is no suggestion
in the papers that he might not have dealt with the partnership return
precisely as he says he did.
24. Properly stamped
and addressed the return would be treated as delivered in the ordinary course
of post. Even without that presumption, having accepted that Mr Eames posted
the return as he claimed, the Tribunal considers that he has a reasonable
excuse for any period of default and that the appeal should be allowed.
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.
MALCOLM GAMMIE
TRIBUNAL JUDGE
RELEASE DATE: 4 April 2012
