Case: accountant’s failures ‘not a reasonable excuse’

A taxpayer who argued it was his accountant’s fault he incurred late filing penalties has lost his appeal at a tribunal, which said it was his responsibility to check the necessary paperwork had been submitted by the deadline

Dainius Bieliauskas appealed against penalties that HMRC imposed under Schedule 55 of the Finance Act 2009 for a failure to submit an annual self-assessment return for the tax year 2016-17 on time. [Dainius Bieliauskas and the Commissioners for Her Majesty’s Revenue and Customs, [2020] UKFTT 346].

The penalties included a £100 late filing penalty imposed on 13 February 2018; a £300 six month penalty imposed on 10 August 2018; and a £300 twelve month penalty imposed on 19 February 2019. There were also daily penalties totalling £900 imposed on 31 July 2018.

At the First Tier Tribunal (FTT) Bieliauskas argued that there was a ‘reasonable excuse’ for any failure to submit the return on time in that he relied on his accountant to submit the return, and the accountant told him this had been done in time when he queried the matter.

He also argued that he did not receive any of the penalty notices, as these were sent to the wrong address.

The FTT heard that Bieliauskas had engaged the Accounting Room to prepare annual financial statements and personal tax returns, starting with the 2015-16 tax year. These were sent in as paper submissions.

Bieliauskas said that he only found out that his 2016-17 return had not been submitted in February 2019 when he telephoned HMRC to check if his 2017-18 return had been submitted.

In his letter of appeal to HMRC dated 18 February 2019 Bieliauskas said that The Accounting Room had assured him ‘a year ago’ that his 2016-17 tax return had been submitted in time.

He enclosed a copy of the return which the accountant had sent to him, as well as extracts from emails and messages between his new accountants, Word Consulting Ltd and The Accounting Room.

An email of 17 December 2018 from Word Consulting to The Accounting Room, requested, among other things, a copy of his latest tax return and the confirmation of submission to HMRC.

The FTT said the correspondence concerned whether or not the return had been filed on time was confusing.   Although it implied that The Accounting Room submitted Bieliauskas’s 2016-17 tax return and he understood this to be what he had been told, there was no evidence to indicate if or when it had been submitted.

The judge concluded on the balance of probabilities, that The Accounting Room did not submit Bieliauskas’s 2016-17 tax return to HMRC on paper or otherwise. The return was submitted via online filing by Word Consulting on 5 February 2019, while Bieliauskas discovered that the return had not been submitted in January 2019.

The FTT said: ‘Mr Bieliauskas considered that it was reasonable for him to expect the accountant to file his return on time. Ultimately however, this is his responsibility.’

According to the tribunal, there was nothing to show that Bieliauskas ‘took reasonable care to avoid the failure’ and therefore he did not have a reasonable excuse. The FTT accordingly dismissed the appeal in relation to the initial late filing, 6-month and 12-month penalties.

On the question of the daily penalties, the FTT found that HMRC had sent the penalty notices to Bieliauskas’s previous address, despite the fact he had registered his changes of address with the tax authority, and so he had not received them.

Given that the penalty notices had been sent to the wrong address, as they had not been sent to Bieliauskas’s ‘usual or last known address’ they could not be deemed to have been properly served.  As a result, Bieliauskas was not liable for the daily penalties.

Meg Wilson, Croner-i tax writer, said: ‘A taxpayer’s reliance on an accountant to submit their tax return can only be a reasonable excuse if the taxpayer takes reasonable care to avoid the failure.

‘Although there was an engagement letter saying that the accountant would prepare personal returns, the tribunal ruled that the taxpayer needed to do more, such as “seeking (and obtaining) confirmation from the accountant around the time of the filing deadline that the return had indeed been submitted”.’

Dainius Bieliauskas and the Commissioners for Her Majesty’s Revenue and Customs, [2020] UKFTT 346

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