Introduction

The case of Stewarton Polo Club Ltd v Revenue & Customs ([2011] UKFTT 668 (TC)) addresses the critical issue of employer liability concerning the timely filing of the P35 employer's annual return. The appellant, Stewarton Polo Club Ltd, challenged penalties amounting to £800 imposed for the late submission of its P35 return for the tax year 2008/09. The central question revolved around whether reliance on an accountant could constitute a reasonable excuse for the delayed filing, thereby absolving the employer of personal responsibility.

Summary of the Judgment

The First-tier Tribunal (Tax Chamber), presided over by Dr. Christopher Staker, dismissed the appellant's appeal against the penalties for late filing of the P35 return. The Tribunal concluded that Stewarton Polo Club Ltd could not rely on the death of its accountant as a reasonable excuse for the delay. The reliance on a third party, such as an accountant, does not relieve the employer of the obligation to ensure timely filing. Consequently, the penalties imposed under Section 98A of the Taxes Management Act 1970 were upheld.

Analysis

Precedents Cited

The judgment references several key precedents that influenced the Tribunal's decision:

• RW Westworth Ltd v HMRC [2010] UKFTT 477 (TC): Established that reliance on a consultant, due to lack of expertise, can constitute a reasonable excuse.
• Devon & Cornwall Surfacing Limited v HMRC [2010] UKFTT 199: Affirmed that reliance on a company secretary for tax compliance can be a reasonable excuse in certain contexts.
• Rowland v HMRC [2006] STC (SCD) 536: Determined that reliance on specialist accountants could be a reasonable excuse when the taxpayer lacks the necessary expertise.
• Schola UK Ltd v HMRC [2011] UKFTT 130 (TC): Clarified that errors by an agent do not amount to a reasonable excuse if proper care was not exercised.

These cases collectively explored the boundaries of what constitutes a reasonable excuse, especially in contexts where employers rely on third parties for tax compliance.

Legal Reasoning

The Tribunal's legal reasoning hinged on the interpretation of Section 118(2) of the Taxes Management Act 1970, which outlines the conditions under which a failure to comply with tax obligations may be excused. The key points in the Tribunal's reasoning include:

• Personal Responsibility: Regardless of reliance on an accountant, the ultimate responsibility for filing rests with the employer.
• Nature of P35 Filings: The Tribunal opined that preparing and filing P35 returns do not typically require specialized tax knowledge and can be managed by any lay employer.
• Reasonableness of Excuse: The death of the accountant did not precede the filing deadline, undermining the appellant's claim that this event caused the delay.
• Lack of Specialist Requirement: Since P35 filings are not particularly complex, the Tribunal deemed that reliance on a specialist accountant did not constitute a justifiable excuse.

By these arguments, the Tribunal concluded that Stewarton Polo Club Ltd failed to demonstrate a reasonable excuse under the relevant provisions of the TMA.

Impact

This judgment reinforces the principle that employers cannot evade their tax compliance responsibilities by delegating them to third parties. It underscores the necessity for employers to maintain oversight and ensure that critical filings, such as the P35 return, are completed punctually. Future cases will likely reference this decision to affirm the non-transferability of tax filing obligations and the limited scope of reasonable excuses based on third-party failures.

Complex Concepts Simplified

Reasonable Excuse

A "reasonable excuse" is a legal standard that excuses a taxpayer from penalties for failing to meet tax obligations if certain conditions are met. It requires that the taxpayer had a valid, unforeseen reason beyond their control that prevented compliance.

Section 98A of the Taxes Management Act 1970 (TMA)

This section imposes penalties on individuals or entities that fail to file required tax returns on time. The penalties accrue monthly and are subject to limits as prescribed by the TMA.

P35 Employer's Annual Return

The P35 return is a form used by employers in the UK to report their obligations under the Pay As You Earn (PAYE) system. It includes details about employees' income tax and National Insurance contributions.

Conclusion

The Tribunal's decision in Stewarton Polo Club Ltd v Revenue & Customs serves as a pivotal reference in delineating the boundaries of employer obligations concerning tax filings. It clarifies that while reliance on third parties for tax compliance is permissible, it does not absolve employers of their fundamental responsibilities. Employers must ensure that critical filings are completed timely, irrespective of any delegated tasks. This judgment thus reinforces the accountability of employers in maintaining their tax obligations and limits the acceptance of third-party failures as reasonable excuses for non-compliance.