[2011] UKFTT 306 (TC)

TC01167

Appeal number TC/2010/07478

Income tax—section 59C Taxes Management Act 1970—surcharge for late payment—reasonable excuse. Held: reasonable excuse did not continue throughout period of default.  Appeal dismissed.

FIRST-TIER TRIBUNAL

TAX 

	MR JEREMY RILEY	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

				TRIBUNAL: RACHEL PEREZ (Judge)

					

Sitting in public in Sutton on 16th December 2010

The appellant appeared in person

Mr Paul Maffia of HMRC appeared for the respondents

© CROWN COPYRIGHT 2011

DECISION

The tribunal decided—
(1)	by consent, that if a second surcharge notice was indeed issued in relation to late payment of tax for the year ended 5th April 2009, to admit, out of time and without notice of appeal, an appeal against that surcharge and to hear it together with today’s appeal against the first surcharge;
(2)	that although the appellant had a reasonable excuse for part of the period of default, it does not appear that, throughout the period of default, the appellant had a reasonable excuse for not paying the tax for the year ended 5th April 2009;
(3)	that the appeal against the first surcharge is therefore dismissed; and
(4)	that the appeal against the second surcharge is dismissed (if that appeal was before the tribunal which it was agreed would not be the case if no surcharge notice was issued in relation to that second surcharge).

I give liberty to apply to the tribunal in the event of disagreement between the parties as to whether a surcharge notice was indeed issued for the second surcharge.
I gave a summary decision.   I now give a full decision at the request of the appellant.

FULL FINDINGS AND REASONS

1.	This started out as an appeal against a surcharge of £3,919 imposed under section 59C(2) of the Taxes Management Act 1970 (“TMA”).  The surcharge was imposed on the ground that the self-assessed tax of £78,380 due by 31st January 2010 for the year ended 5th April 2009 was not received until after the expiry of 28 days from the due date.
2.	The surcharge notice is dated 3rd April 2010.  In their letters dated 7th July 2010, 20th August 2010 and 9th September 2010, HMRC refused to cancel the surcharge.  This was on the ground that there was no reasonable excuse for late payment of the tax.  The appellant appealed to the tribunal by a notice dated 15th September 2010.  
Grounds of appeal
3.	Mr Riley appealed on the following grounds—
(1)	that he had not received confirmation of HMRC’s agreement as to the amount of tax due until he received the surcharge notice dated 3rd April 2010 (he said in particular that he had not received a statement dated 2nd March 2010);
(2)	that he could not submit his tax return any earlier than 28th January 2010 (which is when Price Waterhouse Coopers submitted it online) because he was required to use Price Waterhouse Coopers for preparation of the return, his time was split between the UK and the United States of America and he had to wait for the United States Inland Revenue Service to confirm his United States tax liability for inclusion in his UK tax return;
(3)	that the UK tax office said in correspondence that he had been self-employed, which was not true;
(4)	that the above were unique circumstances for this period and he had never before paid late; and
(5)	finally and most importantly, his father’s terminal illness and his death on 4th February 2010.

4.	I will address those grounds later in this decision.

Amount of tax due and amount unpaid
5.	It was common ground, and I find—
(1)	that £78,380 was the amount of tax due (although the appellant held a mistaken belief that that amount included the £3,919 surcharge, to which I return below);
(2)	that the due date for payment of the £78,380 tax was 31st January 2010 (the tax return having been submitted online);
(3)	that the appellant did not pay anything towards that amount until 10th May 2010, when he paid £74,461;
(4)	that therefore the full amount of tax was outstanding on the day after the expiry of 28 days from 31st January 2010; and
(5)	that the surcharge of £3,919 was (if due at all) correctly calculated under section 59C(2) of the TMA at 5% of the £78,380 tax due.

6.	But it was not initially common ground as to whether the payment on 10th May 2010 was a payment of all of the tax due.  According to Mr Maffia, the payment of £74,461 on 10th May 2010 still left £3,919 tax owing.  Mr Maffia also told me that that amount still had not been paid as at the date of the hearing before me.   
7.	The appellant at first disputed this before me.  He explained that he had thought, before making the payment of £74,461 received by HMRC on 10th May 2010, that the figure of £78,380 included the surcharge of £3,919 (of which he said he had already been notified at that point).  So he had, he explained, deducted the amount of £3,919 from the total figure of £78,380 in the belief that he was paying the tax in full and was merely withholding the surcharge.  
8.	Mr Riley initially maintained this at the hearing before me.  But on reconsideration, including of the surcharge notice dated 3rd April 2010 (page A1), Mr Riley accepted that he was mistaken.  He retracted his statement that he had deducted only the surcharge in making the 10th May payment.  Mr Riley also formally apologised for misunderstanding that the amount of £78,380 did include the £3,919 surcharge.
9.	Mr Riley accepted therefore (and I find) that he had not, after all, paid on 10th May 2010 the full amount of tax due, and that £3,919 of the full amount due was still owing.
10.	Mr Riley accepted too, and I find, that that amount of £3,919 was still owing as at the date of the hearing before me.
11.	I come later in this decision to the question of whether the appellant’s mistaken belief that he was withholding only the surcharge was reasonable.

Second surcharge
12.	Reference was made, in the papers before me, to a second surcharge (of £195.95) having been imposed, under section 59C(3) TMA.  This was said to have been imposed on the ground that £3,919 of the total tax due at 31st January 2010 remained unpaid on the day following the expiry of 6 months from 31st January 2010.  
13.	It was not disputed that £195.95 is 5% of £3,919.  So it was not disputed that, if the second surcharge was due at all, it was correctly calculated under section 59C(3) TMA.
14.	Mr Riley did not however recall having received a surcharge notice in relation to the outstanding tax of £3,919 (which he now accepted was indeed outstanding, as set out above).  Mr Maffia said that that surcharge notice had been sent on 15th September 2010 (as recorded on page D34).
15.	Mr Riley asked me to hear an appeal against the second surcharge as part of the present appeal, if it transpired that the second surcharge notice had indeed been sent to him.  Mr Maffia agreed to this, on the ground that the arguments were the same for both surcharges.  And Mr Maffia agreed to my accepting an appeal out of time and without an appeal notice, against the second surcharge, if a surcharge notice for that second surcharge had indeed been issued (which he was going to check).
16.	I explained to Mr Riley that to include the second surcharge in the present appeal could be either advantageous or disadvantageous to him.  It could be advantageous if I allowed the appeal, because it could mean that I allowed the appeal against both the first and the second surcharge.  But it would be disadvantageous if I dismissed the appeal, because it would mean that I dismissed the appeal against both surcharges; and Mr Riley would not be able, at that point, to change his mind about having included the second surcharge in the present appeal.
17.	Mr Riley said he nevertheless wanted to appeal the second surcharge, if it had been issued at all, as part of the present hearing.
18.	I decided therefore to waive under rule 7 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (S.I. 2009/273) the requirements for service of a notice of appeal, and as to the time in which an appeal should be made, against the second surcharge, if that surcharge had been imposed at all.  I agreed to consider at the hearing before me an appeal against that second surcharge.  
19.	This was however subject to a surcharge notice having indeed been issued for the second surcharge.  Both parties were going to check this.
20.	I give liberty to apply to the tribunal in the event of disagreement between the parties as to whether a surcharge notice for a surcharge of £195.95 had indeed been issued before the hearing.
21.	Given that it was common ground that the tax was paid late (and that some of it was still outstanding by the time of the hearing), the only issue was whether there appeared to be a reasonable excuse for that. 

Reasonable excuse
22.	Section 59C TMA provides, so far as relevant—
“59C.—(1) This section applies in relation to any income tax or capital gains tax which has become payable by a person (the taxpayer) in accordance with section 55 or 59B of this Act.
(2) Where any of the tax remains unpaid on the day following the expiry of 28 days from the due date, the taxpayer shall be liable to a surcharge equal to 5 per cent of the unpaid tax.
(3) Where any of the tax remains unpaid on the day following the expiry of 6 months from the due date, the taxpayer shall be liable to a further surcharge equal to 5 per cent of the unpaid tax.
[…]
(7) An appeal may be brought against the imposition of a surcharge under subsection (2) or (3) above within the period of 30 days beginning with the date on which the surcharge is imposed.
{…}
(9) On an appeal under subsection (7) above that is notified to the tribunal section 50(6) to (8) of this Act shall not apply but the tribunal may—
(a)  if it appears that, throughout the period of default, the taxpayer had a reasonable excuse for not paying the tax, set aside the imposition of the surcharge; or
(b)  if it does not so appear, confirm the imposition of the surcharge.
[…]
(12) In this section—
“the due date”, in relation to any tax, means the date on which the tax becomes due and payable;
“the period of default”, in relation to any tax which remained unpaid after the due date, means the period beginning with that date and ending with the day before that on which the tax was paid.”.
23.	The precise question under section 59C is: does it appear that, throughout the period of default, Mr Riley had a reasonable excuse for not paying the tax?
24.	There are, in effect, two periods of default to consider.
25.	In relation to the payment of £74,461 received by HMRC on 10th May 2010, the period of default is the period beginning with the due date of 31st January 2010, and ending with 9th May 2010 (the day before the £74,461 was received by HMRC).  This is by virtue of section 59C(12) TMA.
26.	In relation to the outstanding tax of £3,919, the period of default is the period beginning with the due date of 31st January 2010 (section 59C(12)).  For the purposes of this appeal, I shall take the end of the period of default to be the day before the day of the hearing before me, given that the tax still had not been paid by the date of the hearing before me.
27.	It was not suggested that there is any material distinction in treating the day before the hearing as the last day of the period of default, as opposed to treating the day of the hearing as the last day of the period of default. But if there is a material distinction, my choice of the day before the hearing as the last day of the period of default for the £3,919 is to Mr Riley’s benefit.
28.	In light of the above, there are two questions: First, does it appear that, throughout the period 31st January 2010 to 9th May 2010 inclusive, Mr Riley had a reasonable excuse for not paying the tax?  Second, does it appear that, throughout the period 31st January 2010 to 15th December 2010 inclusive, Mr Riley had a reasonable excuse for not paying the tax?
29.	I find for the following reasons that the answer is “no”, for each of those periods.  (Indeed, my finding that it does not appear that Mr Riley had a reasonable excuse throughout the longer period of default (31st January to 15th December 2010) means that the appeal would have to fail even if it appeared that he had a reasonable excuse throughout the shorter period (31st January to 9th May 2010).)

Mr Riley’s evidence
30.	Mr Riley’s letters and oral evidence set out the following history to the matter.  I found him to be a truthful witness.  I accepted his evidence set out below and (subject to paragraphs 41, 44, 47 and 49 below) I find as facts the facts which he recounted to me.  I address separately, under my consideration of ground (4), Mr Riley’s evidence that this was a unique situation for him.
31.	Mr Riley was working for RSA Group plc in the United States.  He believed he was resident in the USA for tax purposes until his return to the UK (HMRC take no point as to this).  It was a requirement of his secondment by his employer to the USA role that Price Waterhouse Coopers prepare both his United States and his United Kingdom tax returns; this was to ensure that all the requirements of the US IRS and of HMRC were met.  Mr Riley’s secondment to the role in the USA was planned to last for three years.   This meant he had been expecting to be out of the UK for the whole of the tax year ended 5th April 2009, and so had not been expecting to have to submit a UK tax return at all for that year.
32.	However, Mr Riley returned to the UK in June 2008, which was earlier than planned.
33.	He went on compassionate leave in July 2008 because of his father’s illness.  His father lived 250 miles away, in Cheshire.  This compassionate leave lasted around a month, before Mr Riley resigned due to his father’s illness (he had, he said, been in that job for 27 years).
34.	A reason Mr Riley had what was for him an unusually high tax bill was because he was deemed to be a “good leaver” on resigning from his job, and so was awarded shares in the company.  He then sold those shares and had to pay tax on the resulting gain.  (The tax return at page D27 shows however that the £78,380 tax due was considered to be income tax by HMRC.  But it does not matter whether it was income tax or capital gains tax; section 59C TMA applies to both.)
35.	Mr Riley told me that he then started a new job, in management consultancy. He started it around three months before he brought his father to live with him (so he started it on his account around the beginning of August 2009).  He brought his father to live with him in around November 2009, because of his father’s illness.  Mr Riley said that, at that time, “we knew he had cancer, but thought he had a few years left”.  When his father came to live with him, Mr Riley took about two weeks’ compassionate leave from the new job.  This was, he said, to settle his father in, deal with social services and make house adjustments.  After those two weeks off, Mr Riley returned to work at his new job in mid-November 2009.  He worked from that point in mid-November up until the day his father sadly died (which was on 4th February 2010).
36.	During that period, Mr Riley’s tax return and payment became due, on 31st January 2010.
37.	Mr Riley said that the US tax period runs from January to December.  He said Price Waterhouse Coopers UK were waiting for Price Waterhouse Coopers US to confirm his US tax liability before they could complete his UK tax return; this was in view of part of the year relating to residency in the US and part relating to residency in the UK.  By the time the required information was confirmed by the US IRS, this did not, he said, leave Price Waterhouse Coopers a lot of time to file the UK tax return on his behalf.
38.	Price Waterhouse Coopers submitted the tax return online on Thursday 28th January 2010 (Mr Maffia accepts this and no point is taken as to date of submission of the return itself).  Mr Riley told me that Price Waterhouse Coopers telephoned him during that Thursday afternoon, while he was at work, and told him “we have done it online and we’ll send you the documents.  You’ll have to pay by electronic transfer to HMRC”.  Mr Riley said he understood this to mean that he would have to “wire it” to get it to HMRC on time for 31st January 2010.  He told me that Price Waterhouse Coopers told him that, if he wanted time to consider it, he could alternatively wait for the pack they were sending him (containing all the figures for the tax return) and he would have to pay by 28th February 2010 and have a small amount of interest.
39.	Mr Riley told me that the surcharge notice dated 3rd April 2010 (page A1) was the first time he knew the amount of tax due, “apart from PWC submitting the return on 28th January 2010”.  But the surcharge notice was the first time, he said, that he received notice that the amount due was agreed by HMRC.  
40.	I asked Mr Riley did he think that HMRC needed to agree the amount due?  He said he thought it was needed because the amount was so high and was an ad-hoc amount.  He said that it was in any event HMRC’s normal procedure to advise the taxpayer of the amount.
41.	I do not accept that it was HMRC’s normal procedure to advise the taxpayer of the amount in advance of the due date (if this is what Mr Riley was saying). But I do find that Mr Riley had become used to receiving statements from HMRC which set out what was due.
42.	I asked Mr Riley did PWC tell him what amount was due by 31st January 2010?  Mr Riley replied that he was not very contactable around that time, so PWC said they would do it by internet.  But they did, he said, tell him (by telephone) that he did have to pay by 31st January 2010, but that he had a period of grace.  
43.	Mr Riley said that PWC told him he would be charged interest on the tax due, but that he was not aware of how long the period of grace was.  He also said he was not aware that a 5% surcharge was payable if he paid late.
44.	Mr Riley’s evidence that he was not aware of how long the period of grace was may appear inconsistent with his evidence mentioned at paragraph 38 above that “he would have to pay by 28th February 2010 and have a small amount of interest”.  However, I find that any inconsistency does not indicate a lack of veracity on Mr Riley’s part.  I find that he simply had not realised that the 28 days referred to were the same as the “period of grace” he was told about.  (The fact that he did not realise this does not however give him a reasonable excuse, as I explain later in this decision.)
45.	Mr Riley told me that the pack that Price Waterhouse Coopers sent him arrived by courier while he was at work on Friday 29th January 2010, and that his wife signed for it. 
46.	 I asked him was there anything stopping him making a CHAPS transfer on Thursday 28th or Friday 29th January 2010?  Mr Riley replied “only that I wanted to wait for the pack from PWC.  It was nothing to do with my father.  I was just very nervous with the amount.  Getting it wrong by 10% was a lot.”. 
47.	I find that Price Waterhouse Coopers told Mr Riley, before the tax was due, how much he needed to pay.  First, I find that PWC told him this on Thursday 28th January 2010, after submitting the return.  I so find in light of Mr Riley’s evidence of the telephone call at paragraph 38 above, his evidence at paragraph 42 above and his evidence at paragraph 46 above (where he does not say that what stopped him from paying was that he did not know the amount), together with his use of the word “apart” at paragraph 39 above.  Second, I find in any event that PWC told him the amount due again in the pack which his wife signed for on Friday 29th January 2010.  Mr Riley told me nothing to suggest that he was prevented from looking at that pack on the evening of Friday 29th January when he got home from work.
48.	Mr Riley told me that, when he received the “book” that Price Waterhouse Coopers had prepared for him (by which he meant the pack they had couriered to him), it was the first time he was receiving his affairs to read through.  He said that Price Waterhouse Coopers told him he had to read these documents through himself. 
49.	He said they also advised him “to receive written confirmation from HMRC” that they agreed with the return in view of the amount due.  He said he did not, over the weekend of 30th and 31st January 2010, read the documents Price Waterhouse Coopers had sent him.  He said that he “was still waiting for a notice from HMRC” agreeing the amount that Price Waterhouse Coopers had assessed he owed.  He told me that he never received the statement which HMRC say they sent on 2nd March 2010.  I make no finding as to whether Mr Riley actually received that statement.  But whether he did or not, I accept that he did not recall having received it.
50.	Mr Riley told me that, on Friday 29th January 2010, his father was “all right” and that Mr Riley was at work on that day.  He told me that his father was taken into hospital the following evening, Saturday 30th January 2010, at 8 or 9 pm.
51.	Mr Riley’s father sadly died on Thursday 4th February 2010.
52.	Mr Riley told me that, after his father died on 4th February 2010, he took the rest of that week off work to pull himself together and sort out practicalities.  But then he went back to work because it was a new job and Mr Riley knew he would have to take more time off for his father’s cremation.  He told me that he then took time off as a result of his father’s death as follows:  two days off for the cremation, one day off for probate, two days off for the memorial, and two days off to clear his father’s property.  But Mr Riley told me that, apart from those days, he took no block of time off.  He told me he was setting up a subsidiary company for the business he worked for.
53.	Mr Riley told me that there had to be an autopsy as his father had died at home (he also told me that his son was at home when his father died).  He said his father was cremated on around 2nd March 2010 (on a Thursday).  Then, “a couple of weeks later we made arrangements for him to be interred with my mother in Cheshire”.  
54.	Then, Mr Riley told me, he had to file for probate and sell his father’s house, but that he had to wait to exchange contracts until he had probate.  He said probate was not granted until March or April 2010, and that his power of attorney had not extended as far as selling the house.  After exchanging contracts on the sale of his father’s house, Mr Riley had to go up to Cheshire to clear the house; it had not been emptied, he said, when his father had come to live with them the previous November. He told me he went up to clear the house at the beginning of April 2010, and that he completed the sale on around 7th or 10th April 2010.
55.	I asked Mr Riley what happened after 10th April 2010 until he made the payment of £74,461 which HMRC received on 10th May 2010?
56.	Mr Riley told me that when he “came back up for air” after his father’s death, he telephoned HMRC to say he had received a surcharge (the surcharge notice dated 3rd April 2010) and to ask could he not pay it because of extenuating circumstances.
57.	He said HMRC told him he could not do this by telephone, and that he must do it in writing.  Having completed the sale of his father’s property on around 7th or 10th April 2010, Mr Riley appealed to HMRC against the surcharge of £3,919 by a letter dated 11th April 2009 (it appears this should have read “2010”, pages B1 and B2).
58.	Mr Riley told me that the period between receiving the surcharge notice dated 3rd April 2010 and sending the cheque to HMRC was “because I was engaging in debate about the amount of tax (given that it was computed by me and not HMRC) and about the surcharge”.  And he told me that, during the month before making the payment received by HMRC on 10th May 2010, he was dealing with the questions of whether it was the right amount of tax, and whether the surcharge was properly payable.  He told me he was trying to deal with the whole issue rather than just pay a cheque.
59.	He told me “I suppose I should have paid the tax and then queried the surcharge, but it was a large tax bill”.
60.	I asked Mr Riley what prompted him to make the 10th May 2010 payment?  He told me that it was, he thought, the Glasgow office which told him “pay the bill and then appeal”.  He said he thought they told him this in the second call he made to HMRC (he had made a previous call to Liverpool he said).  He made that second call, he thought, on or around Friday 30th April 2010.  
61.	Mr Riley told me that his wife would have sent the cheque for £74,461 on Thursday 6th May or Friday 7th May 2010.  He told me he could not say why she had not sent the cheque until the Thursday or Friday a week after the telephone call of Friday 30th April with Glasgow which had prompted him to decide to pay.  He told me that his wife does not do paid work; but that she does voluntary work at his son’s school and for Macmillan and the hospice.  He told me also that she was on crutches in that first week of May, having had a skiing accident in mid-February;  they had had a skiing holiday booked and decided that his wife should still go on it, with their son, to take him out of the environment in which Mr Riley’s father had died.  His wife could however, he said, drive after the first six weeks after the accident; so she could drive by the beginning of May 2010.

Grounds of appeal
62.	In light of Mr Riley’s evidence, and of my findings, I must dismiss his grounds of appeal.  I shall explain my reasons for this in relation to each ground in turn.
Ground (1) – non-receipt of HMRC’s confirmation or of HMRC statement dated 2nd March 2010
63.	Mr Riley’s case on ground (1) was that he always received confirmation of the amount due before paying it.  He said that he had not received confirmation of HMRC’s agreement as to the amount of tax due until he received the surcharge notice dated 3rd April 2010, and that in particular that he had not received a statement dated 2nd March 2010 (I found above that he did not recall receiving it).   Mr Riley told me that he had for previous tax years completed the self-assessment form and left it to HMRC to calculate the amount.  He also said that Price Waterhouse Coopers had told him “to receive written confirmation from HMRC” that they agreed with the return in view of the amount due.  
64.	This ground does not help Mr Riley in my judgement, for the following reasons.
65.	First, Mr Riley pointed me to no evidence to suggest that HMRC had induced in him a belief that he must wait for their confirmation of the amount due before he paid it.
66.	Second, although I have accepted that Mr Riley had for previous tax years completed the self-assessment form and left it to HMRC to calculate the amount, that does not help him either.  I say this because in the present case he did not leave it to HMRC to calculate the amount.
67.	Third, in any event, as Mr Maffia pointed out, even if Mr Riley had received the HMRC statement dated 2nd March 2010, he would have received it after the due date of 31st January, and after the 28-day period of grace.  So non-receipt of that particular statement cannot in my judgment avail the appellant.
68.	Fourth, nor in my judgment can it help the appellant that he waited for confirmation at all from HMRC of the amount due, whether the 2nd March statement or any other statement.  
69.	I say this for the following reasons.
70.	It was not disputed, and I find, that HMRC’s online system showed the amount due immediately the return was submitted online.  As it was shown to Mr Riley’s agents, PWC, it was in effect shown to Mr Riley.  If PWC had failed to pass that information on to Mr Riley, that would not in my judgment confer a reasonable excuse on Mr Riley.  It would be for him to seek redress against PWC. 
71.	However, I found at paragraphs 42 and 47 above that Price Waterhouse Coopers had indeed told Mr Riley of the amount due, and that it was due by 31st January 2010.   I find that he had even understood them to mean that he would have to “wire” it to HMRC to pay it in time.  I find that he knew also, from what Price Waterhouse Coopers had told him, that he had a further 28 days to pay after 31st January.
72.	The fact that, as I found above, he had not realised that those 28 days were the limit of his period of grace does not help him in my judgment.  He should reasonably have realised this from the fact that Price Waterhouse Coopers told him that he had to pay by 28th February.
73.	But even had they not told him that he had these further 28 days to pay, Mr Riley knew from what they had told him that the actual due date for payment was 31st January 2010.  And he should in any event have known this from previous tax years, given my finding at paragraph 98 below that he had completed tax returns in respect of more than one of the previous tax years.
74.	Although I accept that Price Waterhouse Coopers told Mr Riley “to receive written confirmation from HMRC” that they agreed with the return in view of the amount due, that is not evidence that they told him to delay payment beyond 28th February.  
75.	But in any event, on Mr Riley’s evidence, he would have waited for HMRC’s confirmation anyway, because he had done so in previous years. I do not find therefore that Price Waterhouse Coopers caused Mr Riley to delay payment.  
76.	But even if they did cause Mr Riley to delay payment, in my judgment they caused him to delay only up until 28th February, that being the date they told him he had to pay by if he did not pay by 31st January.  Whereas the period of default I am looking at for the payment made on 10th May 2010 ends with 9th May 2010 and so goes beyond 28th February 2010.  So any delay caused by Price Waterhouse Coopers did not continue throughout the period of default.
77.	For the reasons at paragraphs 65 to 76 above, ground (1) must fail.

Ground (2) – that Mr Riley could not submit his tax return earlier than 28th January 2010
78.	Mr Riley said that he could not submit his tax return earlier than 28th January 2010 (which is when Price Waterhouse Coopers submitted it online). He said this was because he was required to use Price Waterhouse Coopers for preparation of the return, his time was split between the UK and the United States of America and he had to wait for the United States Inland Revenue Service to confirm his United States tax liability for inclusion in his UK tax return.
79.	This ground does not in my judgment help Mr Riley.  I find that Price Waterhouse Coopers did submit the return in time for Mr Riley to pay the tax due.  I have accepted his evidence (paragraph 46 above) that the “only” thing stopping him paying by CHAPS on Thursday 28th or Friday 29th January was “that I wanted to wait for the pack from PWC.  It was nothing to do with my father.  I was just very nervous with the amount.  Getting it wrong by 10% was a lot.”. 
80.	As shown by Mr Riley’s use of the phrase “I wanted to wait”, waiting was I find a choice he made.
81.	I do accept that if the return had been submitted months earlier, Mr Riley would have had the pack from PWC months earlier and so would have had more time in advance of the due date in which to consider the pack.   But that would be material, if at all, only if he was required to consider the pack before making payment, which he accepts he was not.
82.	For the reasons at paragraphs 79 to 81 above, ground (2) must fail.
Ground (3) - that the UK tax office said in correspondence that he had been self-employed, which was not true
83.	I accept that the UK tax office said in their letter of 20th August 2010 that Mr Riley had been self-employed.  And I accept (as did Mr Maffia) that it was not true.
84.	That does not however assist the appeal.  There is no suggestion that the statement misled Mr Riley into doing something he would not otherwise have done; nor that it led him to fail to pay his tax on time.  Indeed it could not have led him to fail to pay on time; it came some months after the due date, and some months after the expiry of the 28-day period of grace.  In addition, Mr Riley part-paid on 10th May 2010.  He did not assert that his mistaken belief that he was withholding only the surcharge in making that payment arose from HMRC’s statement that he had been self-employed.  And, in any event, the letter of 20th August 2010 could not have caused that belief, because it came after that belief arose.
85.	Nor has HMRC’s erroneous statement harmed Mr Riley’s ability to make his appeal in my judgment.  I say that for the following reasons.
86.	HMRC’s statement in their letter dated 20th August 2010 came after Mr Riley had appealed to HMRC against the surcharge, by his letter dated 11th April 2009 (which should have read “2010”).  So HMRC’s letter of 20th August cannot have caused Mr Riley to frame his appeal differently in the 11th April letter from how he would otherwise have framed it.
87.	HMRC’s letter dated 7th July 2010 (page B3) communicated to Mr Riley HMRC’s view of the appeal and offered a review.   That letter did not assert that he was self-employed.  So it cannot have caused Mr Riley to frame his request for review dated 9th July 2010 differently from how he would otherwise have framed it.  
88.	HMRC’s letter of 20th August 2010 stating that Mr Riley was self-employed was a response to his request for review.  It did lead Mr Riley to address, in his letter to HMRC dated 26th August 2010, HMRC’s assertion that he had been self-employed.  However, Mr Riley did not confine himself to that in his letter of 26th August.  He went on in that letter to set out his other grounds of appeal too.
89.	HMRC then corrected their statement that Mr Riley had been self-employed, in their letter dated 9th September 2010: “I apologise for the typing error in my letter dated 20 August 2010 stating that you have been self employed for a number of years.  What I should have said was that you have been set up on the Self Assessment system for a number of years due to your rental income.”.  
90.	Mr Riley did not suggest that he had not received that letter of 9th September before making his appeal dated 15th September 2010.  The 9th September was a Thursday.  Even if the letter did not go out until the following day, Friday 10th September, it would normally be expected to reach Mr Riley in the normal course of post by Tuesday 14th September.
91.	I received no submissions on this point however.  So I make no finding as to whether Mr Riley received HMRC’s letter dated 9th September 2010 before drafting his grounds of appeal dated 15th September 2010.  
92.	But whether or not Mr Riley received the letter dated 9th September in time for making his appeal is immaterial in my judgment.  His notice of appeal was not confined to addressing HMRC’s assertion that Mr Riley had been self-employed; it set out his other grounds of appeal too. Those grounds were similar to those in his request for review (made before HMRC had sent their letter of 20th August 2010 in which they erroneously asserted that he had been self-employed).
93.	HMRC’s statement of case again corrected their error, and apologised for it.   Mr Riley received that prior to the hearing before me.
94.	In view of paragraphs 86 to 93 above, I find that Mr Riley knew or should have known, by the time of the hearing before me, that HMRC did not rely on their assertion that he had been self-employed.  But in any event, this was again made clear by Mr Maffia at the hearing; and Mr Riley ventilated fully at the hearing before me his other grounds of appeal.
95.	For the reasons at paragraphs 84 to 94 above, ground (3) must fail.
Ground (4) – that the circumstances mentioned in the first three grounds of appeal were unique circumstances for this period and that Mr Riley had never before paid late
96.	Mr Riley said that this was a unique tax situation for him.  He told me, and I accept, that it was unusual for him not to be completely in control of his tax returns, and to be obliged to get a third party to complete it.  He told me also that it was for him an unusually high amount of tax payable.
97.	Mr Maffia’s statement of case said that Mr Riley had been registered under the self-assessment system since 18th October 1996.   I asked Mr Riley whether that was true.  He replied that he did not know.  He told me “I was on PAYE but had interest on bank accounts etc. and I was sent tax returns each year.  I would have paid with a cheque accordingly, or sometimes my tax code changed to collect it.  Then for a couple of years I received a shorter form tax return, and for a couple of years, nothing appeared at all”.  He told me that he always waited for HMRC to confirm the amount of tax due, which was never higher than £300.  He told me “I’d fill it in and leave to HMRC to calculate”.
98.	In light of Mr Riley’s evidence set out at paragraph 97 above, and given that Mr Maffia himself was not sure, I am unable to find that Mr Riley was indeed registered under the self-assessment system from 18th October 1996.  But I do find that Mr Riley completed a tax return in respect of more than one tax year before the tax year ended 5th April 2009.  So his situation as to the tax return in the present appeal was not, I find, unique in the sense of his being required to complete a tax return (rather than being only on PAYE).  
99.	I accept that Mr Riley always waited for, as he saw it, HMRC to confirm the amount of tax due.  However, I have already found above that this does not assist Mr Riley for the present tax year.
100.	Whether or not Mr Riley is correct in recalling that his tax bill was never previously higher than £300, I do accept that the £78,380 tax bill in the present appeal was exceptionally high for him.  However, that does not in my judgment reasonably excuse his choosing to pay late.  It did not alter the fact that he knew that the due date was 31st January 2010.
101.	I accept that it was unusual for Mr Riley not to be completely in control of his tax returns, and to be obliged to get a third party to complete the tax return for the year ended 5th April 2009.  That does not however assist the appeal in my judgment.  I say this first because of my finding above that Price Waterhouse Coopers submitted the return in time for Mr Riley to pay by the due date of 31st January 2010; and second, because of my finding that it was Mr Riley’s choice to wait until he had read the pack that PWC sent him before paying the tax.
102.	For the above reasons, although there were elements of uniqueness in relation to the tax year ended 5th April 2009 (the amount of tax due and having to use a third party), those elements do not assist the appeal.
103.	Mr Riley also told me that he had never paid late before.
104.	But Mr Maffia said that Mr Riley had paid £14,172.80 tax late, for the year ended 5th April 2007.  Mr Maffia told me that a surcharge was issued for that lateness, as shown on the “View account” document at page D31.  Mr Riley said that he did not recall this, and that it was about the time he was in the United States.  I asked Mr Riley did he not remember paying the tax late and being surcharged?  He replied “No.  I must have been annoyed that I had to pay interest - I don’t remember it being called a “surcharge”.  I suppose I must have paid and not queried it, believing it to be my own fault.”.
105.	In view of this evidence, I find that Mr Riley did pay tax late for the year ended 5th April 2007, and that he paid a surcharge in relation to that lateness.  It is not terribly convincing that he did not remember even paying the tax late, even if he did not remember paying an amount labelled “surcharge” in respect of that lateness.  But I am willing to give him the benefit of the doubt; and so I accept that he did not recall having paid tax late for that year.
106.	That does not however assist Mr Riley in my judgment.  He did not need to have been punished for a previous default in order to know what the due date was for the tax in the present appeal.  And indeed, I have already found that he knew both the due date and the amount due by that date.  Not being aware of a punishment for default does not in my judgement excuse choosing to default.
107.	For the reasons at paragraphs 98 to 106 above, ground (4) must fail.
Ground (5) – Mr Riley’s father’s terminal illness and his death on 4th February  2010
108.	The period of default started with Sunday 31st January 2010.  By that time, Mr Riley’s father had been taken into hospital (at 8 or 9 pm the previous evening).  His father died four days later on 4th February 2010.  Although Mr Riley did return to work in the period following his father’s death, I accept that he had neither the time nor the emotional energy to try to deal with his tax affairs, given all the sorting out that he had to do (paragraphs 52 to 54 above).  I find therefore that Mr Riley’s father’s hospitalisation and death gave Mr Riley a reasonable excuse for not paying the tax from and including Sunday 31st January 2010.
109.	However, I find that that reasonable excuse had ceased by the time Mr Riley wrote his letter of appeal dated 11th April 2009 (which should have said “2010”).  I say this because I accept Mr Maffia’s submission that, in writing that letter, Mr Riley showed himself capable of turning to his tax affairs.  It was in any event reasonably to be expected that he would be so capable by that point; his father had by then been interred, his house cleared, probate granted and the sale of the house completed.  That is not to say that Mr Riley was not still acutely affected by his father’s death.  But his letter of 11th April shows in my judgment that he was, despite that, able to turn to his tax affairs.
110.	I find therefore that the last day of the period covered by the reasonable excuse of Mr Riley’s father’s illness and death was 10th April 2010.
Was there any other reasonable excuse?
111.	The question then is whether another reasonable excuse took over from and including 11th April 2010.  I find that it does not appear that Mr Riley had a reasonable excuse, from 11th April 2010 onwards, for not paying the tax.
112.	I say that for two reasons.  
113.	First, it was not in my judgment reasonable for Mr Riley to choose, rather than paying the tax, to spend the month from 11th April 2010 until he sent the 10th May payment “engaging in debate” with HMRC about the amount of tax due and whether the surcharge was properly payable.  He was aware that the due date was well past by then.  (He also knew by then that he had been punished with a surcharge for the late payment.)  So I find that his choice to engage in debate does not give him a reasonable excuse for not paying the tax from 11th April 2010 to 9th May 2010 inclusive.
114.	 This means that it does not appear that, throughout the first period of default (31st January 2010 to 9th May 2010 inclusive), Mr Riley had a reasonable excuse for not paying the tax.
115.	Second, Mr Riley withheld £3,919 tax when he made the payment which HMRC received on 10th May 2010.  Mr Riley did this in the belief that he was withholding only the surcharge.  But he accepted before me that that belief was mistaken.  He told me nothing however to suggest that HMRC had, apart from sending the surcharge notice, induced that belief in him.  His belief arose, on his evidence, from his reading of the surcharge notice dated 3rd April 2010.  I accept that he formed that belief after reading the surcharge notice.
116.	But I do not accept that the surcharge notice could reasonably have caused Mr Riley’s mistaken belief.  It said—
“This surcharge is imposed under Section 59C(2) of the Taxes Management Act 1970
Unpaid tax               £78380.00         @ 5%  surcharge of                  £3919.00”.
The words “Unpaid tax £78380.00” clearly set out in my judgment the amount of tax which was due and unpaid.  
117.	In any event, it was in my judgment Mr Riley’s responsibility to know how much tax he owed.  It was especially his responsibility to check that amount before deciding to withhold an amount from his payment.  It was not reasonable in my judgment, regardless of his reading of the surcharge notice, to withhold an amount of £3,919 without checking whether in doing so he was withholding tax due.
118.	So I find that Mr Riley’s mistaken belief that he was withholding only the surcharge from his payment received on 10th May 2010 was not reasonable.  I find therefore that that belief does not confer a reasonable excuse for withholding £3,919 from that payment.  So it does not appear that Mr Riley had a reasonable excuse for not paying the £3,919 from and including 10th May 2010 until the day before the hearing.
119.	This, together with my finding at paragraph 114 above, means that it does not appear that, throughout the second period of default (31st January 2010 to the day before the hearing inclusive), Mr Riley had a reasonable excuse for not paying the tax.
120.	My above findings mean that the first surcharge (£3,919) was properly imposed. This is because the £78,380 tax remained unpaid on the day following the expiry of 28 days from the due date, and it does not appear that, throughout the period of default 31st January 2010 to 9th May 2010 inclusive, Mr Riley had a reasonable excuse for not paying it – section 59C(2) and (9) TMA.
121.	My above findings also mean that the second surcharge (£195.95), if imposed at all, was properly imposed. This is because £3,919 of the tax remained unpaid on the day following the expiry of 6 months from the due date, and it does not appear that, throughout the period of default from 31st January 2010 to 15th December 2010 inclusive, Mr Riley had a reasonable excuse for not paying the tax - section 59C(3) and (9) TMA.
122.	The imposition of the first surcharge is therefore confirmed.  The imposition of the second surcharge, if it was imposed, is also confirmed.
123.	The appeal against the first surcharge is dismissed.  The appeal against the second surcharge is dismissed if that surcharge was imposed at all (which the parties were to check).  If the second surcharge had not been imposed by the time of the hearing before me on 16th December 2010, then it did not form part of the present appeal.
124.	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.

RACHEL PEREZ

TRIBUNAL JUDGE
RELEASE DATE: 9 MAY 2011