Collins wins FTT case over unfair penalty for late PAYE

The First Tier Tribunal (FTT) has allowed a taxpayer’s appeal against PAYE return late filing penalties, finding that reliance on his accountant who was suffering from ill health had amounted to a reasonable excuse for a taxpayer in a similar position and therefore by applying the ordinary principles of proportionality, fairness and transparency should also apply to this taxpayer.

In this case, Collins [2014] UKFTT 479 (TC), the taxpayer (Mr Collins) ran a veterinary practice with one employee and relied on his accountant (and friend), Mr Marley, to deal with his tax affairs. The PAYE return due for 2010–11 should have been submitted by 19 May 2011, but was not filed until 21 October 2011 and therefore HMRC issued Mr Collins with late filing penalties of £600.

Marley had suffered from ill health since 2004 and during 2010–11 his health substantially deteriorated, with him being admitted to hospital in May 2011 and in the opinion of his GP by August/September 2011 he had become unfit to work. He subsequently died.

Collins appealed against the penalty notices and referring to the case of Maxwell [2013] TC 02849 asserted that it was reasonable for him to have relied on Marley as his third party agent, thereby giving him a reasonable excuse. Evidence was also provided to show that another former client of Marley had in similar circumstances put the same argument to HMRC and had succeeded in having his penalties reduced to nil. HMRC argued that it was Collins’ statutory duty to ensure that his PAYE return was submitted on time and given that he was aware of Marley’s failing health he should have taken alternative action to ensure his return was submitted on time.

The FTT accepted that reliance on a third party per se was not sufficient to amount to a reasonable excuse, but it also noted that it was open to it to consider all of the circumstances. On the basis that Marley’s health deteriorated in 2010–11 rendering him incapable of performing the functions for which he was retained and because HMRC had clearly accepted that Marley’s ill health had constituted a ‘reasonable excuse’ in another case, to ensure proportionality, fairness, transparency and consistency the FTT allowed Collins’ appeal.

CCH tax writer Meg Wilson said: ‘This case demonstrates the inconsistent treatment of different taxpayers in similar circumstances. It was lucky for the taxpayer in this case that the accountant acting for him at the appeal was able to provide evidence to prove the inconsistent treatment by reference to another one of his clients.’

This article first appeared in first appeared in CCH Live News on 5 June 2014.

Diane Tan |Content manager - current awareness, CCH

Diane Tan is content manager, current awareness at CCH, Wolters Kluwer UK

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