[2011] UKFTT 73 (TC)

TC00951

Appeal reference: TC/2010/02964

FIXED PENALTY APPEALS – late filing of partnership returns

FIRST-TIER TRIBUNAL
TAX

   				            T AND S ARNOLD T/A WOLD	Appellant
 CHALET AND CARAVAN PARK

- and -

THE COMMISSIONERS FOR
				HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

Tribunal: 	Fionagh Green (Judge)
		Philip Gillett FCA (Member)

Sitting in public at Ashford on 4 August 2010

Mr. P Hayes for the Appellant

Mr. B Robinson and Mr. Myles Gardener for the Respondents

© CROWN COPYRIGHT 2010
DECISION

1.	This is an appeal dated 9 March 2009 against penalties imposed for the late receipt of the partnership tax return for the year ended 5 April 2008 on the partners Mr. T Arnold (representative partner (£100)) and Mrs. S Arnold (£100).
2.	The issues
Whether – 
(1)	The penalties of £100 imposed on each of the partners for the year ended 5 April 2008 were correctly charged
(2)	The decision by the First Tier Tribunal in the case of Simply Birth (TC/2009/10674) heard in public in Ashford on 22 October 2009 was binding on the tribunal
(3)	There was reasonable excuse for the late submission of the partnership return
The relevant legislation
3.	Taxes Management Act 1970 (“TMA 70”):
		(1) Section 12 AA Partnership return
(1) Section 12 AA (2) An officer of the board may by a notice given to the partners require such person as is identified in accordance with rules given with the notice – 
(a) to make and deliver to the officer in respect of such period as may be specified in the notice, on or before such day as may be so specified, a return containing such information as may reasonably be required in pursuance of the notice, and
(b) to deliver with the return [such accounts, statements and documents, relating to information contained in the return,] as may reasonably be so required.
4.	Section 12 AA (4)
In the case of a partnership which includes one or more individuals, the notice under subsection (2) may specify different days depending on whether a return in respect of a year of assessment is electronic or non-electronic.
5.	Section 12 AA (4A):
The day specified for a non-electronic return must not be earlier than 31 October following the year of assessment.
6.	Section 12 AA (4B):
The day specified for an electronic return must not be earlier than 31 January following the year of assessment.
7.	Section 12 AA (5E) – the Commissioners – 
(a)	shall prescribe what constitutes an electronic return for the purposes of this section, and
(b)	may make different provision for different cases or circumstances
8.	Section 93A TMA 70:
Section 93A(1) – this section applies where, in the case of a trade, profession or business carried on by two or more persons in partnership – 
(a)	a partner (the representative partner) has been required by a notice served under or the purposes of section 12 AA (2) or (3) of this Act to deliver any return, and
(b)	he [or a successor of his] fails to comply with the notice
(2) Each relevant partner shall be liable to a penalty which shall be £100.
9.	Section 93A (7):
On an appeal against a determination under section 100 of this act of a penalty under subsection (2) that is notified to the tribunal… the tribunal may – 
(a)	if it appears that throughout the period of default, the person for the time being required to deliver the return (whether the representative partner or a successor of his) had a reasonable excuse for not delivering it, set the determination aside; or
(b)	if it does not so appear… confirm the determination
10.	Section 93A (7)(a):
For the purposes of this section the filing date for a year of assessment in a case of a partnership which includes one or more individuals is – 
(a)	31 January following the year of assessment, or
(b)	if the notice under section 12 AA was given after 31 October of year two, the last day of the period of three months beginning with the date of the notice.
11.	Section 93A (8):
		In this section – 
“The filing date” means the day specified in the notice under section 12 AA (2) or (3) of this Act;
“The period of default”, in relation to any failure to deliver a return, means the period beginning with a filing date and ending with a day before that on which the return was delivered; 
“Relevant partner” means a person who was a partner at any time during the period in respect of which the return was required.
12.	Section 100 (1) TMA:
Subject to subsection (2)… and except where proceedings for a penalty have been instituted under section 100D below…, an officer of the board authorised by the board for the purposes of this section may make a determination imposing a penalty under any provision of the Taxes Act and setting up such amount as, in his opinion, is correct or appropriate.
13.	Section 100 B TMA applies the provisions of the TMA relating to appeals with some modifications to appeals against penalty determinations.
14.	Section 118 TMA (2):
For the purposes of this act, the person shall be deemed not to have failed to do anything required to be done within a limited time if he did it within such further time, if any, as the board or the tribunal or officer concerned may have allowed; and 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 unless the excuse ceased and, after the excuse ceased, he shall be deemed not to have failed to do it if he did it without unreasonable delay after the excuse had ceased…
15.	Finance Act 1999 (“FA 1999”)
16.	Section 132(1):
Regulations made be made, in accordance with this section, for facilitating the use of electronic communications for – 
(a)	the delivery of information the delivery of which is authorised or required by or under any legislation relating to a taxation matter;
(b)	the making of payments under any such legislation,
17.	Section 132(2):
		The power to make regulations under this section is conferred – 
(a)	on the Commissioners of Inland Revenue in relation to matters which are under their care and management; and
(b)	on the Commissioners of Customs and Excise in relation to matters which are under their care and management.
18.	Section 132(8)
References in this section to the delivery of information include references to any of the following (however referred to) – 
			…
			(d) the making of any return, claim, election or application;
19.	Income and Corporate Taxes (Electronic Communications) Regulations 2003, SI 2003 / 282
20.	Regulation 1(1):
These regulations may be cited as the Income and Corporation Taxes (Electronic Communications) Regulations 2003 and shall come into force on 5 March 2003.
21.	Regulation 2(1)(a)(1):
The regulations apply to the delivery of information required by section 12 AA Taxes Management Act 1970, the partnership return.
22.	Regulation 3
(1) The board may only use electronic communications in connection with the matters referred to in regulation 2(1) if – 
(a)	the recipient has indicated that he consents to the board using electronic communications in connection with those matters; and
(b)	the board have not been informed that that consent has been withdrawn.
(2) A person other than the board may only use electronic communications in connection with the matters referred to in regulation 2(1) if the condition specified in paragraphs (3) to (6) are satisfied.
(3) The first condition is that the person is for the time being permitted to use electronic communications for the purpose in question by an authorisation given by means of a direction of the board.
(4) The second condition is that the person uses – 
(a) an approved method for authenticating the identity of the sender of the communication;
(b) an approved method of electronic communication; and
(c) an approved method for authenticating any information delivered by means of electronic communications.
(5) The third condition is that any information or payment sent by means of electronic communications is in a form approved for the purpose of these regulations.
23.	Directions under Regulation 3 the Income and Corporate Taxes (Electronic Communications) Regulations 2003, SI 2003 / 282 and prescribing of electronic returns under sections 8(1)(H), 8A(1F) and 12AA(5E) of the Taxes Management Act 1970 - 
The Commissioners for Her Majesty’s Revenue and Customs hereby direct that a person or trustee who is required to deliver information in response to a notice under sections 8, 8A or 12AA of the Taxes Management Act 1970 (“the relevant information”) is authorised to do so over the internet using the self-assessment online service.
The Commissioners further direct that – 
(a)	the methods approved by them for – 
(1)	authenticating the identity of the person sending the relevant information, and
(2)	the delivery of the relevant information; and
(b)	the form approved by them in which the relevant information is to be delivered;
are the methods and forms set out, at the time of, and for the purposes of, the delivery of the relevant information, in the terms and conditions for use of the self-assessment online service, on the HMRC website (www.hmrc.gov.uk).
The Commissioners further direct that the method approved by them for authenticating the relevant information is completion of the declaration contained in the electronic return to confirm that the information is correct and complete to the best of the knowledge and belief of the person delivering the information.
The Commissioners for Her Majesty’s Revenue and Customs hereby direct that an agent who delivers the information on behalf of a person or trustee who is required to deliver information in response to a notice under sections 8, 8A or 12AA of the Taxes Management Act 1970 (“the relevant information”) is authorised to do so over the internet using the self-assessment online service.
The Commissioners further direct that – 
(a)	the methods approved by them for - 
1.	authenticating the identity of the person sending the relevant information, and
2.	the delivery of the relevant information; and
(b)	the form approved by them in which the relevant information is to be delivered;
are the methods and for set out, at the time, and for the purposes of, the delivery of the relevant information, in the terms and conditions for use of the self-assessment online service, on the HMRC website (www.hmrc.gov.uk)...
The Commissioners further direct that the electronic return prescribed for the purposes of each of sections 8, 8A and 12AA of the Taxes Management Act 1970 is an electronic return delivered using the self-assessment online service.
The background and findings of fact
24.	Partnership returns since the year ended 5 April 2005 have stated on the first page that, if filing online, third party software needs to be used.  The electronic return for the purposes of section 12 AA TMA is an electronic return delivered using the self-assessment online service.  Information sent by means of electronic communications must be in a form approved for the purpose of the regulations.  The terms and conditions for use of the self-assessment online service do not require HMRC to provide software.  The HMRC website advises that commercial software is needed to file partnership returns online.  The date when the website contained this advice during the relevant period in 2008 – 2009 is unclear.  Since the year ended 5 April 2004 taxpayers have been able to file online in the manner approved by HMRC and for individuals HMRC provide the software to file online, but it does not do this for partnerships.  The requirement for third party software was publicised in the “working together” site for agents under the links “agents’ guide to changes to the paper self-assessment main return” and “latest news for agents and advisors”.  This advice would only have been apparent to an advisor after searching for it on HMRC’s website.
25.	The paper return for the year ended 5 April 2008 signed by the representative partner was received on 30 January 2009.
26.	The filing date for a paper return was 31 October 2008.
27.	The filing date for an online return was 31 January 2009.
28.	The paper return was received late.
29.	The parties agreed that the tribunal was not bound by the decision in Simply Birth (TC/2009/10674) and further evidence was before the tribunal in this case which was not before the tribunal hearing the case of Simply Birth.  The tribunal is also not bound by the First-Tier Tribunal decisions of Susan M Fleming (representative partner of Paul Kingston Furniture) and Commissioners for Her Majesty’s Revenue and Customs (TC/00405) [2010] UKFTT 94 (TC) or the case of Express Agency and Commissioners for Her Majesty’s Revenue and Customs (TC/00368) [2010] UKFTT 55 (TC).
30.	In mid-to-late December 2008 Mr. Hayes made further enquiries with HMRC by ringing the online helpline who informed him that he would need third party software.  Mr. Hayes, accountant for the Appellant, made enquiries with software organisations but as he wanted to pay by cheque was told that the software would not be sent out to him before Christmas.  Mr. Hayes considered it likely that the software would not be received until early in the new year and that he would not be able to file online by 31 January 2009 and he made the decision not to proceed online but to file a paper return.
The submissions of the parties
31.	The Appellant contends that:-
(a)	The paper return was delivered to Maidstone tax office by 31 January 2009.
(b)	The partnership return referred to third party software but did not state that it was required in order to deliver the return.
(c)	The HMRC website did not provide for partnership returns to be submitted online.
(d)	No tax has been lost as a consequence of filing a paper return.
(e)	That the Appellant has a reasonable excuse for the late filing of the paper return.
32.	The Respondents, HMRC contend that:-
(a)	It is the representative partner’s responsibility to ensure that the return for the partnership is filed on time.  The filing date for a paper return was 31 October 2008.  The filing date for an online return was 31 January 2009.  The completed paper return, signed by the representative partner was received on 30 January 2009 and the return was received late and the penalties were correctly charged.
(b)	Section 12 AA TMA 70 requires a partnership return to be submitted if a notice to make a return is issued and there is no qualification to this requirement regarding tax due or paid.
(c)	Partnership returns since 5 April 2005 have stated on the first page that, if filing online, third party software needs to be used.
(d)	The requirement to use commercial software has been widely publicised.
(e)	HMRC publishes regularly-updated lists of approved software providers.
(f)	HMRC maintained that the statement on the first page of the return means that third party software is required to deliver a partnership return online and that the requirement has been widely publicised by HMRC.
(g)	Section 12AA TMA 70 is an electronic return delivered using the self-assessment online service and that the terms and conditions for use of the self-assessment online service is on the HMRC website and that the terms and conditions for the use of the self-assessment online service do not require HMRC to provide software.
(h)	The Appellant does not have a reasonable excuse for the late submission of the paper return.
(i)	The Appellant’s return was prepared by a professional accountant who prepares and files tax returns for a number of other taxpayers and that he should have been aware that commercial software is required to file partnership returns electronically.
(j)	The representative partner has been sent returns since the year ended 5 April 2005 stating the online filing requirements.
(k)	The partnership’s agent should have been aware of the requirements in order to meet the 31 January 2009 deadline.
(l)	The decision in Simply Birth does not bind the tribunal.
Conclusions
33.	The tribunal found that the penalty of £100 for each partner for the year ended 5 April 2008 was correctly charged.  
34.	The tribunal accepted that there is an apparent contradiction between section 12AA Taxes Management Act 1970 and section 93A(7)(A) Taxes Management Act 1970, however our conclusion is that section 93(7)(A) TMA applies for the purpose of section 93 TMA only and not in relation to the primary filing date which was stated in the return and applies pursuant to section 12AA Taxes Management Act 1970.  
35.	It is the representative partner’s responsibility to ensure that the return for the partnership is filed on time.  The filing date for a paper return was 31 October 2008.  The filing date for an online return was 31 January 2009.  The completed paper return signed by the representative partner was received on 30 January 2009.  The return was received late and the penalty was correctly charged.  Mr. Hayes on behalf of the Appellant accepted that the partnership tax return had been received and the tax return clearly refers to using third party commercial software for the internet if a paper return is not made by 31 October.  It was not until mid-to-late December that Mr. Hayes made further enquiries, and Mr. Hayes then made a decision that he would not be able to comply with online filing by 31 January 2009 with third party software and chose to file a paper return, which he did by 31 January 2009.
36.	The terms and conditions for use of the self-assessment online service do not require HMRC to provide software.  The requirement to use commercial software has been fairly widely publicised and HMRC publishes regularly-updated lists of approved software providers.  The tribunal fully accepted that Mr. Hayes had not previously filed a partnership return electronically.  However, on his own evidence Mr. Hayes accepted that he knew that third party commercial software was required for the online filing by mid-to-late December but that he made the decision that he would not be able to comply.  The software would cost in the region of £200 - £400 and he wanted to pay by cheque and not credit card, which would take time.  Mr. Hayes took a conscious decision to file a late return in paper form.  Mr. Hayes could have avoided that choice by informing himself about the process involved in online filing before the paper filing deadline.  The publicity given to the new system by HMRC was clearly not as extensive as it might have been, but given the general obligation of professionals in the field of taxation and the information which was contained on the tax return itself and on HMRC’s website and having carefully considered all of the evidence, we decided that Mr. Hayes’ decision could not constitute a reasonable excuse for the Appellant.
37.	It was accepted by the parties that the tribunal is not bound by the case of Simply Birth, which is a decision of the First-Tier Tribunal and is an unpublished decision.  The tribunal was aware of a number of other cases decided by the First-Tier Tribunal and where a penalty is imposed for late submission of a return and there is a reasonable excuse for the late submission the penalty may be set aside so long as the return is made without unreasonable delay once the excuse ceased.  Whether it amounts to reasonable excuse must depend on the individual facts of each case.  The Appellant’s return was prepared by Mr. Hayes of Hayes & Co., a professional accounting service, and he should have been aware that commercial software is required to file partnership returns electronically.
38.	The tribunal decided that the penalties of £100 imposed on each of the partners for the year ended 5 April 2008 were correctly charged and that there was no reasonable excuse for the late submission.  The appeal therefore fails and the penalties are confirmed.
39.	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.

FIONAGH GREEN
TRIBUNAL JUDGE

Release Date: 20 JANUARY 2011