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Reasonable excuse round-up: Key decisions of 2015

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16th Jul 2015
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A taxpayer had a reasonable excuse for late payment of capital gains tax because she relied on her accountant and gave the business the necessary information to ensure she paid all taxes owed, a tribunal has ruled.

In Sudar Shini Mahendran v HMRC [2015]  UKFTT 278 (TC), the tribunal found that the taxpayer had a reasonable excuse for the late payment of capital gains tax (CGT).

Mrs Mahendran had sold a property and the money to pay the CGT were held by her solicitor. She submitted an unsolicited return with a liability of £12,544; all for CGT. Payment was due by 31 January 2014 but it was not made until the following September.

HMRC charged penalties under the 2009 Finance Act, schedule 56. The case was about whether Mahendran had a reasonable excuse.

The tribunal said  it was "sensible and reasonable" for Mahendran to rely "upon persons whom she reasonably believed to have the relevant specialist knowledge and expertise."

But had she taken "reasonable care to avoid the failure?"

The tribunal noted that she had provided her accountants,  Rajendra Mugunthan of Arran James Consulting, with any information requested and had chased them on several occasions.

In making its decision, the tribunal cited another tribunal decision (Rowland [2006] STC (SCD) 536).

Tribunal judge Peter Sheppard, said that the taxpayer took reasonable care to avoid the late payment but was "badly let down by those whose expertise she was relying on."

Tolley said that the tribunal decision highlighted how taxpayers wishing to rely on FA 2009 Sch 56 para 16(1)(b) operates should ensure that they keep records of communications with their tax agents.

The case was one of several reasonable excuse decisions, summarised for AccountingWEB by Tolley in a summary of important tax cases so far in 2015. Four other cases in the round-up concerned the ever-popular subject of litigation, with two going in favour of the taxpayer:

  • Perfect Permit v HMRC [2015] UKFTT 171 - agent’s late registration by HMRC
  • Joanna L Porter t/a Crafty Creations v HMRC [2015] UKFTT 0170 - IT problems

In the case of Jaswinder Dhariwal v HMRC [2015] UKFTT 0041, however, the usual excuse of reliance on an accountant was found not to be a reasonable excuse for a dentist whose accountant had taken more than two years to submit his return. The filing of a tax return an ‘administrative task’ which did not fall into the category of technical advice under which reliance on an advice is usually based, but the tribunal did take into account the accountant’s false assurances and orderd that the penalties be reduced.

Other cases analysed by Tolley include the Eclipse film tax scheme (the Court of Appeal ruled that it was a tax avoidance scheme) and a  Supreme Court ruling that that a scheme designed by KPMG to avoid VAT on the resale of demonstrator cars was abusive (Pendragon and others v HMRC, UKSC 37).

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