Spc00590

INCOME TAX – s93 TMA Daily penalty – Was amount appropriate?  Yes – appeal dismissed

THE SPECIAL COMMISSIONERS				                   SC 3183/2006

	PAUL ADKINS	Appellant

	- and -

	      THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

			Special Commissioner: ADRIAN SHIPWRIGHT 

Sitting in public in London on 17 January 2007

Simon Tesler, Chartered Accountant, of Simon Tesler and Associates, for the Appellant

Nicola Parslow assisted by Barry Williams of the Appeals Unit London & Anglia of HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2007

DECISION

Introduction
1.	This is an appeal by Mr Paul Adkins (“the Appellant”) against the imposition by the Respondents (“HMRC”) of daily penalties at the rate of £35 per day under section 93 Taxes Management Act 1970 (“TMA”) for the continued failure to submit Tax Returns in respect of the years 1998-99, 1999-00 and 2000-01. The penalties were imposed on 6 December 2005 and notified to the Appellant by letters dated 6 December 2005. The penalties were imposed for the period 22 November to 5 December 2005 (14 days) in respect of each of the three returns. They amount to £490 (£35 x 14) for each of the outstanding returns.
2.	The Appellant was not present at the hearing and was not called as a witness. The Appellant’s representative was not present at the time notified for the hearing. I was told he was on his way. I waited for him to arrive before starting the hearing of the appeal. He apologised for his late arrival.
The Issue
3.	The issue in essence in this case is whether the amount of the penalty is appropriate.
The Law
4.	The Law is set out in sections 93, 100 and 100B TMA. In so far as is relevant they provide as follows.
5.	Section 93 TMA is headed “Failure to make return for income tax and capital gains tax”. It applies where a person has been required to make a return and has failed to comply with the notice to make the return.  A penalty of £100 then applies.  Subsection (3) provides “If, on an application made to them by an officer of the Board, the General or Special Commissioners so direct, the taxpayer shall be liable to a further penalty or penalties not exceeding £60 for each day on which the failure continues after the day on which he is notified of the direction (but excluding any day for which a penalty under this subsection has already been imposed)”.
6.	Section 100 TMA permits an officer of the Board authorised by the Board to make a determination imposing a penalty under any provision of the Taxes Act and setting it at such amount as, in his opinion, is correct or appropriate.  Subsection (3) requires notice of a determination of a penalty to be served on the person liable to the penalty.  The notice is to state the date on which it is issued and the time within which an appeal against the determination may be made.
7.	Section 100B TMA provides for appeals against penalty determinations under section 100.  Section 1000B (2) , insofar as relevant reads:
“Subject to sections 93 (8) and 93A (7) of this Act on an appeal against the determination of the penalty under section of 100 above section 50 (6) to (8) of this Act shall not apply but –
(b) in the case of any other penalty [i.e. one not required to be of a particular amount], the Commissioners may –
(i)	if it appears to them that no penalty has been incurred, set the determination aside,
(ii)	if the amount determined appears to them to be appropriate, confirm the determination,
(iii)	if the amount determined appears to them to be excessive, reduce it to such other amount (including nil) as they consider appropriate, or
(iv)	if the amount determined appears to them to be insufficient, increase it to such amount not exceeding the permitted maximum as they consider appropriate”.
Authorities
I was referred to no authorities. 
The Evidence
8.	It had been directed in October 2006 that a common bundle of documents should be produced. HMRC helpfully produced a Bundle of Documents in December 2006 as they had not received a response from the Appellant’s representative. No objection was taken to any of the documents and they were all admitted in evidence.   
9.	I heard oral evidence from David John Lord of HMRC’s Watford Recovery Office. A witness statement was provided for him and stood as his evidence in chief. He was cross examined.
10.	There was no agreed statement of facts. However, Mr Tesler, as he had to, accepted that the returns had not been submitted at the due date or by 6 December 2005 when the daily penalties were imposed. I have treated this as common ground.
The Facts
11.	From the evidence I make the following findings of facts:
(1)	The Appellant carried on business as a painter and decorator
(2)	The Appellant was issued with self assessment returns for:
1998-99 on 6 April 1999;
1999-00 on 6 April 2000;
2000-01 on 6 April 2001.
(3)	The filing dates for these returns were 31January 2000, 2001 and 2002 respectively.
(4)	None of these returns had been filed by the due date nor as at 18 December 2006.
(5)	The General Commissioners for the Division of Luton gave a direction under section 93(3) TMA on 14 November 2005 that the Appellant “be liable to a penalty or penalties for each day on which each failure continues after the day on which he is notified of this direction”.
(6)	 HMRC wrote to the Appellant on 14 November 2005 informing him that the General Commissioners at their meeting on 14 November 2005 had “decided that daily penalties of up to £60 a day should be imposed on your for each failure” to make returns for the years in question.
(7)	On or before 6 December 2005 HMRC decided to impose daily penalties for the 14 days 22 November 2005 to 5 December 2005 at the rate of £35 per day.
(8)	On 6 December 2005 HMRC sent three letters to the Appellant at his home address informing him that daily penalties at the rate of £35 per day for the period of 14 days from 22 November 2005 to 5 December 2005 (ie a total of £490 (£35 x 14) had been imposed in respect of each year of assessment for which there was a failure to make the required return. There was a separate letter in respect of each year of assessment where there was a failure to make the return. The letters were dated 6 December 2005 and set out the Appellant’s right of appeal. I find that the letters complied with the requirements of section 100(3) TMA.
(9)	The Appellant’s representative appealed against the penalties by letter dated 13 December 2005 and elected for the appeal to be heard by the Special Commissioners. This is the appeal before me.
(10)	 Mr Lord said in evidence that he considered all the circumstances in deciding that £35 per day was the appropriate level of daily penalty. In particular he considered the amount of tax at stake, the number of returns outstanding, the time from the due date, the number of times the returns had been said to be about to be filed, the correspondence and the whole history. He also took into account that duplicate records were sought and all other relevant factors. I find this as a fact. 
(11)	Mr Lord was already familiar with the case. He reviewed the case again before the application to the General Commissioners.
(12)	He considered £60 per day would be inappropriate. He considered £35 per day in the circumstances was appropriate having considered all the circumstances.
(13)	Mr Lord consulted his Senior Officer as to the imposition and amount of the penalty who considered it appropriate.
(14)	HMRC’s records record a telephone conversation on 10 October 2005 concerning the outstanding returns. The entry reads “… agent phoned back saying that they are waiting for some bank statements , as they have to get information from archive should have by end of this week will need next week to complete o/s itrs. should have in by 21/10/05.will phone if any problems”.
(15)	The same records show a telephone conversation on 10 November 2005.  The record reads “… Mr Tesler rang – he now has all missing info and will bring SA rtns up to date in 14 days”.
(16)	Mr Tesler in the appeal letter said that “further to a telephone conversation with a [sic] officer at your offices it was agreed that we would be given an extension in time to produce these returns before you would invoke the daily penalty”. I am sure Mr Tesler believed it to be the case that he had an unlimited extension of time.  However, there is no evidence before me to corroborate this.  I find that there was no extension of time without limit granted by HMRC.  There was no evidence to this effect and I so find.
(17)	I have assumed for the purposes of this Decision that: 
(a)	The Appellant had moved house three times which had made it  
hard for the representative to obtain the relevant information;
(b)	The Appellant had been involved in a big project at the time 
which had gone “sour”;
(c)	It took a long time to obtain information from the Bank.
There was no evidence before me from which I could find this as fact. However, it is reasonable in the circumstances to assume this to be the case.
The Submissions of the Parties
The Appellant Submissions in outline
12.	In essence, the Appellant submitted that the amount of the penalty at £35 per day was too much to be fair, it was draconian, in all the circumstances including:
(1)	The Appellant had moved house three times which had made it hard for the representative to obtain the relevant information;
(2)	The Appellant had been involved in a big project at the time which had gone “sour”;
(3)	It took a long time to obtain information from the Bank;
(4)	HMRC had told the Appellant’s representative that an unlimited extension of time would be given to produce the returns before daily penalties would be invoked and this had not been honoured.
13.	Mr Tesler told me that he was only concerned with the amount of the penalty. He was not arguing that no penalty should be imposed merely that the amount was unfair. Only a nominal amount should have been imposed by way of penalty he submitted.
HMRC’s Submissions
14.	In essence, HMRC submitted:
(a)	The returns in question had not been submitted by the due date.  They were now outstanding for more than six years.
(b)	The correct procedures to impose the penalties had been followed.
(c)	The explanation by Mr Lord of how he had arrived at the amount of the daily penalty showed careful and reasonable consideration of all the circumstances to reach an appropriate conclusion.  
Accordingly, the amount of the penalty was appropriate and the appeal should be dismissed.
Discussion
15.	The question that arises from the submissions of the parties, given that it was not argued that no penalty should be imposed, was whether the amount of the penalty was appropriate.
16.	I have found that Mr Lord considered all the circumstances in deciding that £35 per day was the appropriate level of daily penalty. In particular he considered the amount of tax at stake, the number of returns outstanding, the time from the due date, the number of times the returns had been said to be about to be filed, the correspondence and the whole history. He also took into account that duplicate records were sought and all the other information available to him. 
17.	These were the right matters to take into account in the circumstances of this case. I agree that a penalty of £60 per day would not be appropriate in the circumstances of this case. I do not consider a nominal penalty would be appropriate in these circumstances. A penalty of £35 per day, some 58.3 % of the maximum, does not seem inappropriate and I find that it is appropriate in all the circumstances of this case.
Conclusion
18.	I have found that the amount of the penalty is appropriate and I confirm the determination.
19.	Accordingly, the appeal is dismissed. I make no order as to costs.

ADRIAN SHIPWRIGHT

SPECIAL COMMISSIONER
RELEASE DATE: 7 February 2007

   SC 3183/2006