The taxpayer failed to file his paper tax return for 2010/11 by the final date of 31 October 2011. On 18 December he was sent a computer generated reminder stating that it was too late to file a paper return without incurring a £100 late filing penalty. If he failed to file his return within three months, by 31 January 2012, a £10 daily penalty would be charged every day it remained outstanding for a maximum of 90 days from 1 February. On 6 January 2012 a second computer generated reminder was sent stating that he was liable for a penalty of £100 and if the return was more than three months late a daily penalty would be imposed. The taxpayer filed his paper return six months late. He was sent a notice of penalty assessment, the total penalty of £1,200 consisting of £900 in daily penalties under paragraph 4 of Schedule 55 to the Finance Act 2009 and £300 for filing the return more than six months late under paragraph 5 of Schedule 55. The taxpayer appealed on the ground that he was not liable to pay the daily penalty. The First-tier Tribunal allowed the appeal on the basis that the revenue had “decided” that a daily penalty should be payable within paragraph 4(1)(b) of Schedule 55 but since notice had not been given to the taxpayer specifying the date from which the penalty was payable, the condition in paragraph 4(1)(c) had not been not satisfied. The Upper Tribunal allowed the revenue’s appeal on the ground that the condition in paragraph 4(1)(c) had been met.
On the taxpayer’s appeal—
Held, appeal dismissed. The requirement in paragraph 4(1)(b) of Schedule 55, for the revenue to decide that a penalty was payable, did not have to be satisfied by exercising a discretion on an individual taxpayer-by-taxpayer basis. That would be impractical. Separate provision for individual circumstances was made in paragraph 23. Paragraph 4(1)(b) contemplated that the revenue would decide in advance that all taxpayers who defaulted for more than three months would have daily penalties imposed, so that a generic policy decision taken by the revenue satisfied the requirement of paragraph 4(1)(b). Paragraph 4(1)(c) required the revenue to inform the taxpayer that it had decided that, if he continued to fail to file his tax return after the end of the three-month period, he would be liable for a daily penalty of £10 for each day on which the failure continued during the following 90-day period. The revenue’s notice in advance satisfied the requirement in paragraph 4(1)(c) for notice to be given specifying the date from which the penalty was payable. Although the notice of assessment failed to meet the requirement in paragraph 18(1)(c) to state the start and end dates of the three-month period of the daily penalty, the period could be worked out without difficulty from the information given. Since the notice in substance and effect conformed to paragraph 18, it accorded to the intent and meaning of paragraph 18 within section 114(1) of the Taxes Management Act 1970 therefore the omission did not affect the validity of the notice (post, paras 15–18, 19–22, 26–30, 31, 32).
Pipe v Revenue and Customs Comrs [2008] STC 1911 approved.
Quaere. Whether automatically issuing a notice generated by a computer, programmed in accordance with the revenue’s policy decision that all taxpayers who were at least three months late in filing their tax returns would be liable to a daily penalty, satisfied the requirement in paragraph 4(1)(b) of Schedule 55 for the revenue to “decide” that such a penalty should be payable (post, para 18).
Rebecca Murray (instructed by the Bar Pro Bono Unit) for the taxpayer.
Richard Vallat (instructed by General Counsel and Solicitor to HM Revenue and Customs) for the revenue.