The taxpayer appealed against notices of surcharge linked to closure notices issued by the revenue under section 59C of the Taxes Management Act 1970, as in force at the time, contending that (i) his application for judicial review gave him a reasonable excuse for non-payment for as long as it remained extant pursuant to section 118(2) of the 1970 Act. The First-tier Tribunal dismissed the claim. The Upper Tribunal held that the First-tier Tribunal’s reasoning was wrong and remade the decision against the appellant, on the basis that the taxpayer was required to provide witness evidence of his subjective belief as to the strength of his judicial review claim to support his claim for a reasonable excuse for non-payment.
On the taxpayer’s appeal—
Held, appeal dismissed. (1) The general approach to questions of reasonable excuse was well established. The tribunal’s task was to determine whether there were objective facts which amounted to a reasonable excuse. The tribunal should take account of “all relevant circumstances” to the extent that an excuse relied on included assertions as to a taxpayer’s state of mind. The tribunal would have then had to decide whether that state of mind actually existed, as part of the facts to be determined just like any other facts. Once the First-tier Tribunal had found the facts it then needed to assess whether those facts were sufficient to amount to a reasonable excuse, judged objectively (para 66, 98, 99).
(2) The taxpayer was not required to file witness evidence to support his case. A taxpayer might have wanted to put evidence in the form of a witness statement before the tribunal to explain the reason for non-payment. That was particularly so where the reason was personal. But it was up to the taxpayer to decide how they wished to present their case on reasonable excuse and what evidence they wished to rely on in support of it. Further, there was no requirement that a taxpayer had to give evidence to the tribunal to establish that the reason they put forward for non-payment was the real reason. It was open to the taxpayer to invite the tribunal to draw an inference that the reason advanced, whether or not that was evidenced by a witness statement, was the real reason for non-payment. In the present case by the time the reasonable excuse appeal was adjudicated, the judicial review proceedings had concluded. It was on the “external evidence” about the judicial review that the appellant relied, which he was entitled to do (paras 68, 69–70, 71, 98, 99).
(3) On the facts of the case, however, the appellant did not have a reasonable excuse throughout the period of default. His delay in paying the tax was unreasonable once the reasonable excuse had come to an end. Thus, the outcome of the appeal was no different from that arrived at by both tribunals below, although the approach adopted and reasons for getting there are were some respects different (para 96, 97, 98, 99).
Amanda Brown KC and Conrad McDonnell (instructed by KPMG llp) for the taxpayer.
Julian Ghosh KC and Michael Ripley (instructed by Solicitor, Revenue and Customs) for the revenue.