Straid Farms Ltd v Revenue Scotland [2017] FTSTC 2, decided on 26 July 2017, was an appeal against a late payment penalty issued by Revenue Scotland to a landfill operator. The penalty was for £7,596, calculated at 1% of the late Scottish landfill tax.
The tax return had been due by no later than 13 August 2016, but was submitted on 5 July because the administrator for Straid Farms wanted everything done before going off on a holiday to celebrate her ruby wedding. By filing the return early, she inadvertently accelerated the due date for payment of the tax. The payment of the tax was made on 29 July.
In this late payment case, the relevant legislation was the Revenue Scotland and Tax Powers Act (RSTPA) 2014 and the Scottish Landfill Tax (Administration) Regulations, SSI 2015/3 (in particular, reg 11). There was no dispute between the parties concerning the factual background to the case, the relevant legislative provisions, or that the penalty was correctly calculated.
The case sets out some clear parameters for the devolved taxes, currently the land and buildings transaction tax (LBTT) and Scottish landfill tax (SLfT).
The tribunal’s jurisdiction was wide: in the case of an appeal of an appealable decision, RSTPA 2014 s 244(2) provides that the tribunal is to determine the matter in question and may conclude that Revenue Scotland’s view of the matter in question is to be upheld, varied or cancelled. Revenue Scotland’s view of the matter incorporates the decisions that there is no reasonable excuse and no special reductions for special circumstances and is therefore within the tribunal’s jurisdiction.
The concepts of reasonable excuse (RSTPA 2014 s 178) and special circumstances (RSTPA 2014 s 177) were the core issues; neither phrase is defined in the legislation but both are widely used in UK legislation. In the decision, it is noted that the explanatory notes to RSTPA 2014 state: ‘The effect of [the legislation] is that the jurisprudence concerning the proper bounds of the tax authority’s role is imported into the devolved tax system. This jurisprudence includes not only case law from the UK jurisdictions but other English-speaking jurisdictions.’
So, UK case law is relevant, not least because the regime in respect of penalties relating to the devolved taxes replicates extensively the penalty regime in respect of most UK taxes in FA 2009 Sch 55. It was also noted, however, that although the penalty regimes have many common features, and the language of the statutory provisions is very similar, they are not identical. More importantly, the powers of the tribunal in relation to consideration of penalties on appeal are significantly different to, and wider than, those of the UK First-tier Tribunal, so the jurisprudence needs to be considered in that context.
Having set out these parameters, the decision discusses reasonable excuse, drawing on the principles in R v G [2009] UKHL 13, and The Clean Car Company Ltd v CEE [1991] VTTR 234, which has recently been approved in the context of social security legislation by Judge Rowland in VT v SSWP [2016] UKUT 178 (AAC). However, there was not a reasonable excuse in this case. The Revenue Scotland guidance notes for making payment were clear about the payment date being the same as the filing date.
The decision also discussed whether a genuine mistake constitutes a reasonable excuse but, as in Garnmoss Ltd t/a Parnham Builders v HMRC [2012] UKFTT 315 (TC), whilst a mistake may not be blameworthy the Act does not provide shelter for mistakes, only reasonable excuses.
The decision then considers ‘special circumstances’ and it was noted that, as in the UK FTT case Collis v HMRC [2011] UKFTT 588 (TC): ‘To be a special circumstance the circumstance in question must operate on the particular individual, and not be a mere general circumstance that applies to many taxpayers by virtue of the schemes or provisions themselves.’
Revenue Scotland’s guidance RSTP3023: Reduction of a penalty for special circumstances reads: ‘We may reduce penalties for special circumstances where imposing the penalties would be contrary to the clear compliance intention of the legislation applying to the penalty in question.’ Accordingly, the case analyses the compliance intention and the proportionality of the penalty.
There was no potential loss in tax revenue, and the tax was paid earlier than was believed, albeit erroneously, to be necessary. In such circumstances was the penalty proportionate? The appeal was upheld in part but with the penalty reduced to £100. The full penalty had not been proportionate.
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Straid Farms: reasonable excuse in Scotland
Straid Farms Ltd v Revenue Scotland [2017] FTSTC 2, decided on 26 July 2017, was an appeal against a late payment penalty issued by Revenue Scotland to a landfill operator. The penalty was for £7,596, calculated at 1% of the late Scottish landfill tax.
The tax return had been due by no later than 13 August 2016, but was submitted on 5 July because the administrator for Straid Farms wanted everything done before going off on a holiday to celebrate her ruby wedding. By filing the return early, she inadvertently accelerated the due date for payment of the tax. The payment of the tax was made on 29 July.
In this late payment case, the relevant legislation was the Revenue Scotland and Tax Powers Act (RSTPA) 2014 and the Scottish Landfill Tax (Administration) Regulations, SSI 2015/3 (in particular, reg 11). There was no dispute between the parties concerning the factual background to the case, the relevant legislative provisions, or that the penalty was correctly calculated.
The case sets out some clear parameters for the devolved taxes, currently the land and buildings transaction tax (LBTT) and Scottish landfill tax (SLfT).
The tribunal’s jurisdiction was wide: in the case of an appeal of an appealable decision, RSTPA 2014 s 244(2) provides that the tribunal is to determine the matter in question and may conclude that Revenue Scotland’s view of the matter in question is to be upheld, varied or cancelled. Revenue Scotland’s view of the matter incorporates the decisions that there is no reasonable excuse and no special reductions for special circumstances and is therefore within the tribunal’s jurisdiction.
The concepts of reasonable excuse (RSTPA 2014 s 178) and special circumstances (RSTPA 2014 s 177) were the core issues; neither phrase is defined in the legislation but both are widely used in UK legislation. In the decision, it is noted that the explanatory notes to RSTPA 2014 state: ‘The effect of [the legislation] is that the jurisprudence concerning the proper bounds of the tax authority’s role is imported into the devolved tax system. This jurisprudence includes not only case law from the UK jurisdictions but other English-speaking jurisdictions.’
So, UK case law is relevant, not least because the regime in respect of penalties relating to the devolved taxes replicates extensively the penalty regime in respect of most UK taxes in FA 2009 Sch 55. It was also noted, however, that although the penalty regimes have many common features, and the language of the statutory provisions is very similar, they are not identical. More importantly, the powers of the tribunal in relation to consideration of penalties on appeal are significantly different to, and wider than, those of the UK First-tier Tribunal, so the jurisprudence needs to be considered in that context.
Having set out these parameters, the decision discusses reasonable excuse, drawing on the principles in R v G [2009] UKHL 13, and The Clean Car Company Ltd v CEE [1991] VTTR 234, which has recently been approved in the context of social security legislation by Judge Rowland in VT v SSWP [2016] UKUT 178 (AAC). However, there was not a reasonable excuse in this case. The Revenue Scotland guidance notes for making payment were clear about the payment date being the same as the filing date.
The decision also discussed whether a genuine mistake constitutes a reasonable excuse but, as in Garnmoss Ltd t/a Parnham Builders v HMRC [2012] UKFTT 315 (TC), whilst a mistake may not be blameworthy the Act does not provide shelter for mistakes, only reasonable excuses.
The decision then considers ‘special circumstances’ and it was noted that, as in the UK FTT case Collis v HMRC [2011] UKFTT 588 (TC): ‘To be a special circumstance the circumstance in question must operate on the particular individual, and not be a mere general circumstance that applies to many taxpayers by virtue of the schemes or provisions themselves.’
Revenue Scotland’s guidance RSTP3023: Reduction of a penalty for special circumstances reads: ‘We may reduce penalties for special circumstances where imposing the penalties would be contrary to the clear compliance intention of the legislation applying to the penalty in question.’ Accordingly, the case analyses the compliance intention and the proportionality of the penalty.
There was no potential loss in tax revenue, and the tax was paid earlier than was believed, albeit erroneously, to be necessary. In such circumstances was the penalty proportionate? The appeal was upheld in part but with the penalty reduced to £100. The full penalty had not been proportionate.
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