[2011] UKFTT 152 (TC)

TC01026

Appeal number: TC/2010/07114

Construction Industry Scheme (“CIS”)-appeal against penalty for late submission of CIS monthly return – no reasonable excuse- appeal dismissed

FIRST-TIER TRIBUNAL

TAX 

	JOHN O’BRIEN	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

		TRIBUNAL: 	S.M.G.RADFORD (TRIBUNAL JUDGE)									

The Tribunal determined the appeal on 17 November 2010 without a hearing under the provisions of Rule 26 of the Tribunal Procedure (First-tier Tribunal)(Tax Chamber) Rules 2009 (default paper cases) having first read the Notice of Appeal dated 4 September 2010,  HMRC’s Statement of Case submitted on 19 October 2010[ and the Appellant’s Reply dated 23 October 2010.

© CROWN COPYRIGHT 2011
DECISION

1.	This is an appeal against the penalty of £100 imposed for the late submission of the monthly Construction Industry Scheme (“CIS”) return for the month ending 5 July 2010.
Background and facts
2.	The return was due on 19 July 2010 but was not received by HMRC until 2 August 2010, fourteen days late.
3.	The Appellant stated that he regularly completed his return in the first weekend after the 5th of the month. In this case the 5th was a Monday and so the return was completed over the weekend of 10/11 July and posted on Monday 12 July in a large envelope with the correct large envelope first class stamp. The Appellant offered to provide a witness statement from the person who purchased the stamp and posted the letter but did not do so.
4.	Although HMRC claimed that the return was not received until 2 August 2010 the Appellant stated that the cheque for the tax due was posted six days later from the same mail box and the cheque was logged, banked and deducted from his bank account before the return was apparently received.
5.	This was not the first time that the Appellant’s returns were late and previous appeals were allowed. On 25 June 2009 HMRC wrote to the Appellant and informed him that should further appeals be received in relation to postal delays then proof of posting would be required. Proof of postage is a free service provided by the Royal Mail and this could be done when the stamp was purchased.
Legislation
6.	Regulation 4 of The Income Tax (Construction Industry Scheme) Regulations 2005 states:
Monthly return
(1) A return must be made to the Commissioners for Her Majesty’s Revenue and Customs in a document or format provided or approved by the Commissioners—
(a)not later than 14 days after the end of every tax month, by a contractor making contract payments or payments which would be contract payments but for section 60(4) of the Act (contract payments: exceptions), and
(b)not later than 14 days after the end of the tax month following the appointed day, by a contractor who has made a payment in the 12 months preceding the appointed day which would be a contract payment or a payment which would be a contract payment but for section 60(4) of the Act if made after the appointed day.
(2) The return under paragraph (1) must contain the following information—
(a)the contractor’s name,
(b)the contractor’s unique taxpayer reference (UTR) and Accounts' Office reference,
(c)the tax month to which the return relates, and
(d)in respect of each sub-contractor to whom, or to whose nominee, payments under construction contracts were made by the contractor during that month,—
(i)the sub-contractor’s name;
(ii)the sub-contractor’s national insurance number (NINO) or company registration number (CRN), if known; and
(iii)the information specified in paragraph (3).
(3) The information specified is—
(a)if the sub-contractor is registered for gross payment—
(i)the sub-contractor’s unique taxpayer reference (UTR), and
(ii)the total amount of payments which would be contract payments but for section 60(4) of	the Act (contract payments: exceptions) made by the contractor to the sub-contractor during the tax month;
(b)if the sub-contractor is registered for payment under deduction—
(i)the sub-contractor’s unique taxpayer reference (UTR),
(ii)the total amount of contract payments made by the contractor to the sub-contractor during the tax month,
(iii)the total amount included in those payments which the contractor is satisfied represents the direct cost to any person other than the contractor of materials used or to be used in carrying out the construction contract to which the contract payment relates, and
(iv)the total amount deducted from the payments mentioned in paragraph (3)(b)(ii) under section 61 of the Act (deduction on account of tax from contract payments);
(c)if the sub-contractor is not registered for gross payment or payment under deduction—
(i)the sub-contractor’s unique taxpayer reference (UTR), if known,
(ii)the total amount of contract payments made by the contractor to the sub-contractor during the tax month,
(iii)the total amount included in those payments which the contractor is satisfied represents the direct cost to any person other than the contractor of materials used or to be used in carrying out the construction contract to which the contract payment relates,
(iv)the total amount deducted from the payments mentioned in paragraph (3)(c)(ii) under section 61 of the Act, and
(v)the verification reference for higher rate deduction.
(4) The return may be transmitted electronically to the Commissioners for Her Majesty’s Revenue and Customs.
(5) The return must include a declaration by the person making the return—
(a)that none of the contracts to which the return relates is a contract of employment;
(b)indicating whether he has complied with the requirements of regulation 6 (verification etc of registration status of sub-contractor) in the case of each person to whom a payment to which the return relates is made; and
(c)that the return contains all the information, particulars and supporting information required by this regulation to be included in the return, and such information, particulars and supporting information are complete and accurate to the best of the contractor’s knowledge and belief.
(6) If the return is not transmitted electronically, it must be signed by the contractor or a person duly authorised by the contractor to make the return.
(7) The contractor must make and keep such records as will enable him to comply with this regulation.
(8) The contractor must give the following information in writing to the sub-contractor to whom it relates not later than 14 days after the end of the tax month either in respect of the total payments made in that month or in respect of each payment made in that month—
(a)if the sub-contractor is registered for payment under deduction—
(i)the contractor’s name,
(ii)the contractor’s employer’s reference,

(iii)the tax month to which the payments relate or the date of the payment,
iv)the sub-contractor’s name,
(v)the sub-contractor’s unique taxpayer reference (UTR),
(vi)the total amount of contract payments made by the contractor to the sub-contractor during the tax month,
(vii)the total amount included in those payments which the contractor is satisfied represents the direct cost to any person other than the contractor of materials used or to be used in carrying out the construction contract to which the contract payment relates, and
(viii)the total amount deducted from the payments mentioned in paragraph (vi) under section 61 of the Act;
and
(b)if the sub-contractor is not registered under Chapter 3 of the Act, the verification reference.
(9) The information required under paragraph (8) may be given by means of electronic communications if—
(a)the contractor has indicated to the sub-contractor that he intends to use electronic communications for the purposes of giving this information;
(b)the sub-contractor has consented to information being given by the contractor by means of electronic communications, and that consent has not been withdrawn;
(c)the information is given in an electronic format—
(i)in which the statement may be stored; and
ii)which permits a paper copy of the information contained in the statement to be printed.

(10) If a contractor who has made a return, or should have made a return, under this regulation makes no payments under construction contracts in the tax month following that return, the contractor must make a nil return not later than 14 days after the end of that tax month.This is subject to paragraph (11).
(11) Paragraph (10) does not apply if the contractor has notified the Commissioners for Her Majesty’s Revenue and Customs that the contractor will make no further payments under construction contracts within the following six months.
(12) Subject to paragraph (13), section 98A of TMA(1) (special penalties in the case of certain returns) applies to the requirements in—
(a)paragraph (1),
(b)paragraph (3)(b),
(c)paragraph (3)(c),
(d)paragraph (10).
(13) A penalty under section 98A of TMA in relation to a failure to make a return in accordance with paragraphs (1) or (10) arises for each month (or part of a month) during which the failure continues after the 19th day of the sixth month following the appointed day.
7.	Section 98A (2)(a) of the Taxes Management Act 1970 (“TMA”) provides for penalties to be charged where a contractor fails to submit a return by the due date.
8.	Section 118(2) TMA states that where a person had a reasonable excuse for not doing anything which was required to be done, he shall be deemed not to have failed to do it if he did it without reasonable delay after the excuse ceased.
9.	Section 100 TMA permits an authorised officer of HMRC to determine penalties under the Taxes Acts.
Appellant’s Submissions
10.	The Appellant submitted that he religiously completed the returns on the first weekend after the 6th of each month and the return was always posted on the Monday after that weekend. He runs a small business with no clerical staff and due to his working throughout the week could only complete the return during his leisure time at the weekend.
11.	His only evidence was a statement from the person who purchased the large envelope stamp and posted the letter. He found it hard to believe that the return had not reached HMRC in time. He thought that the date his return was franked by the Post Office ought to be taken into account.
12.	He acknowledged that he had received several of these penalties over the years. He submitted that the returns should be sent to him to be received earlier than the 5th of each month.
13.	He stated that he regularly received his first class mail late because it had been delivered to 7 Meadow Close Nailsea instead of 7 Meadow Close Backwell although the post had the correct post code attached. He firmly believed therefore that the fault for the late receipt of his return lay with the Post Office. He submitted that in order to provide proof of postage he would need to register the letter at his own expense.
HMRC’s Submissions
14.	HMRC submitted that the fixed penalty had been charged in accordance with the legislation. The penalty could only be set aside if the Appellant had a reasonable excuse for the late submission of the return.
15.	The Appellant had been warned by letter dated 25 June 2009 that if further appeals were received in relation to postal delays then proof of postage would be required. This should have put a reasonable taxpayer on particular notice that to ensure postal delays were minimised proof of postage should routinely be obtained.
16.	HMRC emphasised that although the Appellant had stated that in order for him to ensure that he had proof of postage he would need to register the return envelope this was not in fact necessary as proof of postage was a free service provided by the Post Office.
Findings
17.	The Tribunal found that the Appellant had no reasonable excuse for the late receipt of his return. He had previously been warned that any further appeals against penalties received for late returns would not be set aside on the grounds of postal delays.
18.	Although he stated that he could provide a witness statement in respect of the postage date this was not produced to HMRC or the Tribunal.
19.	The Appellant could have sought proof of date of postage at the Post Office free of charge but neither he nor the person who posted the return did so.
Decision
20.	The Appeal is dismissed.
21.	This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.   The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

TRIBUNAL JUDGE
RELEASE DATE: 2 MARCH 2011