< Go Back Tribunal blocks HMRC's usual stance on Penalties for late filing when tax due is nil Posted: Dec 3, 2018
From 2009 a penalty has
been payable by taxpayers for the late submission of a tax return, even if no
tax was payable. This practice was examined First Tier Tax Tribunal (FTT) in
Scott Jagger (TC06774) resulting in an unexpected finding.
Jagger, a self-employed taxi driver, was late filing his tax returns for
2010/11 and 2012/13, by more than a year, and he was charged penalties under FA
2009, Schedule 55 for each year as follows:
A fixed penalty of £100 (paragraph
3); A three-month penalty of
£900 (paragraph 4); A six-month penalty of £300 (paragraph
5); and A twelve-month penalty of
£300 (paragraph 6).
claimed he had submitted his returns on time by first class post, but he couldn’t
prove this. The FTT, in the absence of proof of postage or any other evidence, could
not accept he had filed on time. The £100 fixed penalties would therefore stand.
moved home on numerous times and he suggested HMRC did not keep up with his
location, the inference being he had not received various notifications from
HMRC. The FTT found HMRC’s awareness of
his current address was only behind his moves by a few months each time. The FTT did not consider it likely that all the notices issued to Jagger
could have been lost in the post. HMRC
was only required to issue notices to the most recent known address, which they
had done. No notices were returned as undelivered, the FTT concluded that
Jagger’s frequent relocations did not invalidate HMRC’s actions nor provide him
with a reasonable excuse for late filing.
17 (3) of Schedule 55, FA 2009 says: “where a person is liable for a penalty
under more than one paragraph of this Schedule which is determined by reference
to a liability to tax, the aggregate of the amounts of those penalties must not
exceed 100% of the liability to tax”.
It is therefore
clear that the £100 fixed penalty is not “determined by reference to a
liability to tax”, so it won’t be affected. Similarly, the three-month penalty
in Schedule 55, para 4 is calculated by reference to days (£10 a day up to a
maximum of 90 days), so it is similarly unaffected by the tax liability.
come to the six-month and twelve-month penalties (FA 2009, Schedule 55, paras 5
and 6)? The formula in both cases is the greater of; 5% of any liability to tax
which would have been shown in the return in question, and £300”. HMRC would say both the six-month and the twelve-month
penalties must still apply and that “by creating two possibilities of a
penalty”, parliament clearly intended there should be a minimum penalty under
each of the two paragraphs regardless of the tax at stake, in order to
was not convinced; the idea that it comes down to an
issuing a penalty under FA 2009 Schedule 55, para 5(2)(a) or issuing one under
FA 2009 Schedule 55, para 5(2)(b) made no sense. The penalty is issued under
Schedule 55 para 5(1), and sub-paras (2)(a) and (2)(b) are merely the mechanism
for computing that penalty; as it is for Schedule 55, para 6.
the process of arriving at a £300 penalty is the act of calculating whether 5%
of the tax is greater or less than that amount. This being the case, the penalty
has been determined by
reference to tax, so it cannot be possible to impose a £300 penalty without
first having referred to the liability to tax.
As the six-monthly
and twelve-monthly penalties are calculated in this manner, Schedule 55
must apply. The
aggregate penalties under paragraphs 5 and 6 must be limited to the tax at
stake, which, in this case, was nil.
initial £100 and three-month £900 penalties were upheld since Jagger had demonstrated
no reasonable excuse for filing late however, the six-month and twelve-month
penalties were reduced to nil as no tax was due for either year.
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