In K O’Donnell v HMRC [2016] UKFTT 743 (4 November 2016), the FTT found that penalties issued for the late payment of partner payment notices (PPN) were valid, in the absence of a reasonable excuse.
Mr O’Donnell was a member of both Ingenious Film Partners LLP and Ingenious Film Partners 2 LLP. HMRC had issued him with two PPNs. He had then written to HMRC to make representations in relation to both of them.
Mr O’Donnell was seeking to ‘carry back’ losses that he said had arisen from his participation in the two LLPs against taxable income in the 2001/02 and 2002/03 tax years. He contended (along the lines of De Silva [2016] EWCA Civ 40) that, because HMRC only had an enquiry open in relation to Mr Donnell’s tax returns for 2004/05 and 2005/06 (and had not opened an enquiry under TMA 1970 Sch 1A into the claim to carry back the losses), it was out of time to assess him in relation to the 2001/02 and 2002/03 tax years.
In June 2015, HMRC confirmed the two PPNs by letter. Mr O’Donnell replied to HMRC in July 2015 but his letter did not reach them; and, in September 2015, HMRC issued him with penalties for the non-payment of the PPNs within the deadline.
The issue was whether Mr O’Donnell had a reasonable excuse for the late payment of the PPNs; and therefore the validity of the penalties issued by HMRC. The FTT accepted that the De Silva case, which the Supreme Court was scheduled to hear, was relevant to the ‘underlying assessment’. However, parliament had given HMRC power to issue PPNs precisely in ‘cases such as this’.
Furthermore, parliament had also made it clear that a challenge to a PPN should be made by way of judicial review. Mr O’Donnell, having chosen not to make such a challenge, could therefore not argue his belief that the underlying assessment was invalid was a reasonable excuse not to pay the PPNs.
The FTT also accepted that Mr O’Donnell has experienced financial difficulties in making the accelerated partner payments. However, he had not suggested that the insufficiency of funds was attributable to events beyond his control. Therefore, the FTT was not satisfied that his financial difficulties amounted to a reasonable excuse.
Why it matters: The FTT wished to ‘make it clear’ that, while it had not accepted the taxpayer’s submission that he had a reasonable excuse, it was not casting any doubt on his integrity. The FTT noted in particular that he had dealt fairly and promptly with HMRC. This case is yet another example of an unsuccessful challenge in relation to advance payment notices.
In K O’Donnell v HMRC [2016] UKFTT 743 (4 November 2016), the FTT found that penalties issued for the late payment of partner payment notices (PPN) were valid, in the absence of a reasonable excuse.
Mr O’Donnell was a member of both Ingenious Film Partners LLP and Ingenious Film Partners 2 LLP. HMRC had issued him with two PPNs. He had then written to HMRC to make representations in relation to both of them.
Mr O’Donnell was seeking to ‘carry back’ losses that he said had arisen from his participation in the two LLPs against taxable income in the 2001/02 and 2002/03 tax years. He contended (along the lines of De Silva [2016] EWCA Civ 40) that, because HMRC only had an enquiry open in relation to Mr Donnell’s tax returns for 2004/05 and 2005/06 (and had not opened an enquiry under TMA 1970 Sch 1A into the claim to carry back the losses), it was out of time to assess him in relation to the 2001/02 and 2002/03 tax years.
In June 2015, HMRC confirmed the two PPNs by letter. Mr O’Donnell replied to HMRC in July 2015 but his letter did not reach them; and, in September 2015, HMRC issued him with penalties for the non-payment of the PPNs within the deadline.
The issue was whether Mr O’Donnell had a reasonable excuse for the late payment of the PPNs; and therefore the validity of the penalties issued by HMRC. The FTT accepted that the De Silva case, which the Supreme Court was scheduled to hear, was relevant to the ‘underlying assessment’. However, parliament had given HMRC power to issue PPNs precisely in ‘cases such as this’.
Furthermore, parliament had also made it clear that a challenge to a PPN should be made by way of judicial review. Mr O’Donnell, having chosen not to make such a challenge, could therefore not argue his belief that the underlying assessment was invalid was a reasonable excuse not to pay the PPNs.
The FTT also accepted that Mr O’Donnell has experienced financial difficulties in making the accelerated partner payments. However, he had not suggested that the insufficiency of funds was attributable to events beyond his control. Therefore, the FTT was not satisfied that his financial difficulties amounted to a reasonable excuse.
Why it matters: The FTT wished to ‘make it clear’ that, while it had not accepted the taxpayer’s submission that he had a reasonable excuse, it was not casting any doubt on his integrity. The FTT noted in particular that he had dealt fairly and promptly with HMRC. This case is yet another example of an unsuccessful challenge in relation to advance payment notices.
