Introduction

The case of Bright Matter Ltd v. Revenue & Customs ([2012] UKFTT 572 (TC)) presents a pivotal examination of the imposition of penalties under Schedule 56 of the Finance Act 2009 for late payments of PAYE and National Insurance Contributions (NICs). The appellant, Bright Matter Ltd, a small company with three PAYE employees, appealed against a penalty of £1,357.93 levied for late payments made in nine months of the tax year ending April 5, 2011. The key issues revolved around whether Bright Matter Ltd had a reasonable excuse for the late payments and if there were special circumstances justifying a reduction of the penalty.

Summary of the Judgment

The First-tier Tribunal (Tax Chamber) dismissed Bright Matter Ltd's appeal, upholding the penalty imposed for late PAYE and NICs payments. The Tribunal found that the appellant did not provide a reasonable excuse for the delayed payments nor were there special circumstances that warranted a reduction of the penalty. Additionally, the Tribunal concluded that HMRC had adequately informed the appellant about the new penalty regime, negating any claims of unreasonable conduct or lack of communication from HMRC's side.

Analysis

Precedents Cited

Although Bright Matter Ltd did not reference specific case law, the Tribunal referenced several prior decisions to reinforce its findings:

• Dina Foods Ltd v Revenue & Customs [2011] UKFTT 709 (TC)
• Meteor Capital Group Ltd v Revenue & Customs [2012] UKFTT 101 (TC)
• St John Patrick Publishers Ltd v Revenue & Customs [2012] UKFTT 20 (TC)

These cases similarly dealt with the application and fairness of penalties under Schedule 56, establishing consistency in the Tribunal's approach to assessing penalties for late tax payments.

Legal Reasoning

The Tribunal meticulously analyzed the provisions of Schedule 56 of the Finance Act 2009, focusing on:

• The definition and calculation of penalties based on the number of defaults.
• The absence of requirement for HMRC to issue individual warnings to employers.
• The inadequacy of lack of awareness as a reasonable excuse.

The Tribunal emphasized that the legislative scheme provided a clear structure for penalties, driven by the number of late payments, and that HMRC had fulfilled its duty by disseminating general information about the penalty regime. The appellant's reliance on a lack of specific warnings was insufficient to constitute a reasonable excuse or special circumstances.

Impact

This judgment reinforces the stringent approach HMRC takes towards late PAYE and NICs payments. It underscores the expectation that businesses, regardless of size, maintain diligent compliance with tax obligations. The decision serves as a precedent affirming that ignorance of the law or reliance on past interactions without current awareness does not exempt entities from penalties. Future cases will likely reference this judgment when assessing the fairness and application of penalties under similar circumstances.

Complex Concepts Simplified

Conclusion

The Tribunal's decision in Bright Matter Ltd v. Revenue & Customs underscores the uncompromising stance of HMRC regarding timely tax payments. By dismissing the appeal, the Tribunal affirmed that the legislative framework governing tax penalties is both clear and fairly applied. The judgment highlights the importance for businesses to stay informed about tax obligations and the consequences of non-compliance. Additionally, it clarifies that lack of specific communication from HMRC does not negate the responsibility of taxpayers to adhere to payment deadlines. This case will serve as a critical reference for future disputes involving penalties for late tax payments.