[2012] UKFTT 467 (TC)
TC02144
Appeal
number:TC/2011/6762
PAYE – regulation 80
determination – application to appeal out of time.
FIRST-TIER TRIBUNAL
TAX CHAMBER
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UNIVERSAL
(Commercial) LTD
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Appellant
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- and -
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THE
COMMISSIONERS FOR HER MAJESTY’S
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Respondents
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REVENUE &
CUSTOMS
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TRIBUNAL:
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JUDGE CHARLES HELLIER
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SONIA GABLE
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Sitting in public in Ashford
on 5 May 2012
Mr Hamilton, a director of the
Appellant, for the Appellant
Karen Weare, of HM Revenue and
Customs, for the Respondents
© CROWN COPYRIGHT
2012
DECISION
1.
This is an application to make appeals out of time under section 49 TMA
70 against PAYE determinations under regulation 80 of the PAYE Regulations 2003
for the years 2006/07, 2007/08 and 2008/09. The determinations were made on 12
May 2010 and the appellant wrote to HMRC seeking to appeal on 26 July 2011.
2.
In the case of an appeal against a regulation 80 assessment the relevant
time limit is 30 days after the regulation 80 determination is issued (see
Regulation 80(5) and section 31A TMA 1970). The appellant was therefore out
time in making its appeals by over a year.
3.
Section 49 TMA 1970 provides that notice to appeal may be given after
the relevant time limit if either HMRC agree, or, where HMRC do not agree, the
tribunal gives permission. Subsection (3) of section 49 provides that if three
conditions are met HMRC must agree to permit the late appeal. One of those
conditions is that there was a reasonable excuse for not giving notice to
appeal before the relevant time limit.
4.
It is plain that HMRC may agree to an appeal being given out time even
if the relevant conditions are not satisfied. If they are satisfied however
they are required to give permission. The tribunal on the other hand is given a
discretion by section 49 which is not limited in any way by that section.
5.
In considering whether to permit an extension of time the tribunal must
seek to act justly and fairly and to consider all the relevant circumstances.
Among those circumstances are the following:
(1)
there is a public interest in finality: that interest is indicated by
Parliament in the setting of time limits. That suggests that if a time limit
set by Parliament is to be extended there must be some reason for so doing.
(2)
the length of and reasons for any delay
(3)
the steps taken after any reason for the delay has ceased;
(4)
any prejudice which may be suffered by a party as a result of not
extending, or of extending the time limit: the amount of money involved and the
financial circumstances of the claimant may be relevant to this;
(5)
the apparent strength of the appellant's case;
(6)
any relevant behaviour of the parties; and
(7)
whether the evidence, in a case where evidence is an important factor,
has gone stale.
The evidence and facts.
6.
We had before us a bundle of copy correspondence and notes of telephone
calls and meetings. We heard oral evidence from Mr. Hamilton.
7.
Mr. Hamilton's recall of dates and details was not as precise as it
might have been and was in some cases contradictory. However the overall picture
in our view was as follows.
8.
Mr. Hamilton started the business of the company in 2006. The initial
business was repairing vans. The work of the company was initially done by him
with the help from time to time of his sons and occasionally on a short-term
basis of other persons. The business went well but the paperwork built up, and
he found he was not good at keeping on top of it.
9.
Mr. Hamilton owned Preston Mill. This was the site of an old windmill
and also of a number of barns. The business was started in one of the barns. Mr
Hamilton had a mobile home at Preston Mill where he stayed from time to time.
10.
In 2007 he moved the operations of the business to Canterbury industrial
Park (also described as Hersden). It returned to Preston Mill between March 2008
and May 2009 and then moved to Wingfield Industrial Estate, and in April 2011
returned to Preston Mill.
11.
In 2008 Mr Hamilton secured a bank loan which enabled the company to
develop units at the industrial estate. The business of the company expanded
and after 2009 was divided between three subsidiaries: services, parts, and
MOT. These subsidiaries now operate from separate units on the industrial
estate.
12.
In May 2008 Mr. Hamilton had a car accident. He spent a month in
hospital and thereafter had sight problems and a stutter. His recovery
continued over a number of months and is not complete.
13.
In 2007 the company appointed Mr Croney of Croney & Co to act as its
accountants. Croney & Co advertised themselves as chartered certified
accountants and, Mr Hamilton told us, were given responsibility for VAT, PAYE,
corporation tax and accounts preparation and filing.
14.
In 2010 a creditor took action to have the company wound up. HMRC (in
relation to one of the taxes under its care other than PAYE) supported the
winding up petition. The company engaged advisers but because of a
communication error the company was struck off. It was reinstated in March
2012.
15.
In late 2010 after the winding up petition appeared in the Gazette the
company was “inundated with offers of help”, Mr Hamilton said. A man telephoned
him who said he could introduce Mr Hamilton to an ex-HMRC officer who could
help. This was Mr. Langley who confirmed that he was ex-revenue. Mr. Hamilton
viewed Mr. Langley as a friend who would help him in his hour of need. Mr.
Langley told Mr. Hamilton to leave matters with him and that he thought steps
should be taken to refer all the tax issues facing the company to special
compliance office ("SCO). The company was in difficulties in relation to
VAT and corporation tax.
16.
Mr. Langley told Mr. Hamilton that Mr. Croney had not done a good job
and was not a chartered certified accountant as he purported to be.
17.
Mr. Langley took various actions in behalf of the company but in
February or early March 2011 he sent the company a bill for £5000, which Mr.
Hamilton thought excessive. The company therefore ceased using Mr. Langley's
services after that time.
The PAYE Investigation
18.
In August 2009 Mr. Small of HMRC wrote to the company indicating that he
would make a compliance check of their PAYE records on 2 September 2009. On
that day Mr. Small called at Preston Mill and saw Mr. Hamilton who said he had
not received the letter of 12 August. The meeting was postponed. On 23
September 2009 Mr. Hamilton telephoned Mr. Small saying that he would ask his
agent (Mr. Croney) to ring. On 22 October 2009 Mr Small wrote to the company at
Preston Mill saying that he would be calling for an inspection. It appears that
in response to this letter Mr. Croney telephoned Mr. Small saying that the company
had moved to Hersden and that the records of the company had been stolen.
19.
Mr. Hamilton told us that the company's records were kept in his
brother's van which had been stolen from Hersden on or around 29 October 2009.
He said that all the records were kept in the van so that Mr. Croney could work
on them when he needed to.
20.
Further attempts to arrange meetings and discussions between Mr. Small
and Mr. Hamilton took place between November 2009 and March 2010 and on 23
March 2010 Mr. Small wrote to the company at Preston Mill enclosing a PAYE
computation based on the information he held. In the absence of a reply Mr.
Small issued the determinations against which the company wishes to appeal on
12 May 2010.
21.
On 9 November 2010 Mr Hamilton spoke to Mr. Green of HMRC. Mr. Small was
away. HMRC’s note of the telephone call records that Mr. Hamilton asked Mr.
Green to give him time and that a late appeal was discussed. Mr. Hamilton
confirmed that the discussion was about appeals against the PAYE
determinations. Mr. Green gave Mr. Hamilton seven days to provide late appeals
and reasons for them and said that otherwise the determinations would remain in
place. Mr. Hamilton said that Mr. Langley would be contacting Mr. Green. Seven
days later on 16 November 2010 Mr. Hamilton spoke to Mr. Small. Mr. Small told
him that the appeal period was closed and the tax was due. Mr. Hamilton said
that Mr. Green had told him that he needed to contact HMRC by 16 November. He
said he had engaged Mr. Langley who would be writing to Mr. Green about the
PAYE determinations. Mr. Small said that the letter needed to say why the
appeals were late.
22.
The next communication was on 6 December 2010 when Mr. Hamilton called
Mr. Green. Mr. Green said he had heard nothing from Mr. Langley. Mr. Hamilton
said he was seeing Mr. Langley on the next day and would get Mr. Langley to
call him.
23.
Mr. Hamilton duly called Mr. Langley and on the following day Mr.
Langley called Mr. Green. The conversation between Mr. Langley and Mr. Green
encompassed corporation tax matters as well as PAYE matters. Mr. Langley
indicated his intention to get the matters dealt with by special compliance
office.
24.
There was a further telephone call on 13 December 2010 between Mr.
Langley and Mr. Green in which Mr. Langley indicated that the regulation 80 position
might be slightly wrong but that the corporation tax position was more serious.
25.
Mr. Hamilton told us that after Mr. Langley had ceased to work for the
company in February or March 2010 there was a period when he gave up hope. But
he then did some research on the Internet and spoke to other people and
realised that he might appeal against the regulation 80 determinations. So, in
July 2011 he wrote to Mr. Small seeking to make the company’s appeals.
Discussion
26.
It was plain to us that from about 2009 onwards the company had severe
difficulties occasioned in part by its inadequate record-keeping and
compliance. These problems may have been attributable to Mr. Croney, but were
also the responsibility in part of the company's director Mr. Hamilton.
27.
It seemed to us that the appointment of Mr. Langley was a reasonable
attempt to sort out the company's difficulties. However it also appeared that
Mr. Langley saw corporation tax and perhaps VAT as more significant problems
than PAYE and did not focus on the need to make appeals in relation to the
regulation 80 determinations. It may have been reasonable to rely on Mr Langley
to have made the appeals on its behalf in this period, but after Mr Langley no
longer worked for the company such reliance would have been misplaced.
28.
In correspondence Mr Hamilton has said that the company did not receive
many of the letters sent by HMRC to Preston Mill in the period January 2010 to
May 2010. He said that the company's business was not conducted at that address
in that period and told us that his mobile home was not the only place at which
he resided. HMRC say however that no correspondence addressed to Preston Mill
was returned by the Royal Mail.
29.
We did not find it necessary to make a decision as to whether the
letters sent by HMRC in fact arrived: it was clear that by November 2010 the
company had received copies of the determinations; and we found that
consideration of the period after November 2010 enabled us to reach a
conclusion. The remainder of this decision is therefore on the basis that the
company had an excuse or number of excuses – Mr. Hamilton's recovery from his
accident, the company’s problems with record-keeping, possibly reliance on Mr
Langley, and possibly its problems Mr. Croney – which may have made it
reasonable to extend the period of appeal against the May 2010 determinations
to some time in November 2010 or even February 2011.
30.
However in November 2010 the company was on notice of the determinations
and was given extra time to appeal. It may have been Mr. Langley’s fault that
no appeals were made but, even if that did amount to a reasonable excuse, that
could excuse only the period from the first discussion with Mr. Green in
November 2010 to about February 2011. From about February to July 2011 there
seemed no reason for the company’s inaction.
The possibility of an appeal being successful
31.
The determinations are based on estimated payments to employees and
directors in each year of £46,000 (£46,331 for 2007), and an obligation to deduct
tax from payments at the basic rate. If on an appeal the company could show
that either lesser amounts were in fact paid, or that the appropriate deduction
rate was lower (as would be the case if notices of coding had been supplied in
relation to the relevant employees) it is possible that the company could
persuade a tribunal to reduce the assessments.
32.
So far as the amounts were concerned Mr. Hamilton told us that he took
some £250 per week from the company (or £1,000 a month) and made payments to
his sons for their work from time to time. For PAYE purposes these would be
treated as net amounts from which tax had been deducted and therefore the
grossed up amounts would be used for the calculation of the PAYE liability.
Overall this evidence indicated to us that it is likely that the company made
payments of no less than £20,000 per annum to employees and directors.
33.
There was no evidence that any tax code had been notified to the company
in respect of any of the persons to whom it made a payment. The basic rate
deduction on the regulation 80 determinations seemed unlikely to be upset on
appeal.
34.
On this basis the very best the company might expect in any appeal would
be a reduction of the determinations by half for some £5,000 of the PAYE. But
the likelihood of such an outcome seemed remote. Mr. Hamilton told us that the
company had been trying to reconstruct its records for the period of the
assessments. It was using copies of the company's bank statements and Mr.
Hamilton's own banking records. However set against such evidence as those
records might produce are accounts produced by Croney & Co which show for
the years to July 2008 and 2009 labour costs of £72,000 and £61,000, salaries
of £31,000 and £28,000, and net profits of £89,000 and £90,000 respectively.
The evidence obtained by reconstruction from bank statements when taken against
the accounts, which seem to have been prepared from records that had been
stolen with the van, would be unlikely to convince the tribunal that the
emoluments paid in the relevant periods were less than £46,000 a year. We
concluded that the prospect of success before a tribunal was remote.
Conclusion
35.
The remote possibility of any success in an appeal, the likely lack of
evidence or of well-remembered evidence available to a tribunal, and the lack
of reasons for the company’s inaction between March and July 2011, persuade us
that there is no reason why permission should be granted to extend the time
limit for making an appeal against these determinations.
36.
We do not give permission to appeal.
37.
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.
CHARLES HELLIER
TRIBUNAL JUDGE
RELEASE DATE: 11 July 2012
