It is generally well known that the normal deadline for individuals and trustees to submit tax returns to HM Revenue and Customs (HMRC) is 31st October following the end of the relevant tax year for ‘paper’ (i.e. non-electronic) returns, or 31st January if the return is filed online.
If a paper return is filed late, HMRC’s view is that it is not possible to avoid a late filing penalty by filing a further tax return online before 31st January (see HMRC’s Self Assessment manual at SAM120530). HMRC will register on their system the first tax return received, and only in “exceptional circumstances” will a penalty not be charged where an online return reaches HMRC’s computer systems before a paper return filed after 31st October.
A valid return?
In most cases, it will be clear if and when a paper and/or electronic return has been submitted to HMRC. However, the position may become a little blurred if there has been any correspondence from the taxpayer (or agent) to HMRC, involving the submission of a copy tax return or a document which may be construed as a return.
In Executor of the Estate of Teresa Rosenbaum (deceased) v Revenue & Customs  UKFTT 408 (TC), HMRC issued a £100 penalty notice in respect of a late trust tax return for the year ended 5 April 2012. HMRC’s contention was that a paper return was received on 14th January 2013. The main issue in this case was whether that document was a valid return.
The ‘return’ had been accompanied by a letter from the appellant’s agent stating the following:
“Please find enclosed the tax return of the above-named estate for the year ended 5th April 2012.
The estate disposed of its final investment in 2011, which resulted in a £nil gain due to losses brought forward.
There is no further income and the final distributions have been made.
Please confirm no other returns are required.”
The appellant’s tax return for the above year was filed online on 24th January 2013.
Following receipt of the penalty notice, the appellant’s agent wrote to HMRC, pointing out: “The copy sent in with our covering letter was merely to confirm that this was the last return and no further income or tax return would be due.” It was subsequently pointed out to HMRC that a paper copy of the return was attached to the agent’s letter for “administrative purposes”, and that the intention had been to submit the return online by 31 January 2013. It was never intended for the paper ‘return’ to be treated as a submission copy. HMRC argued that the agent’s covering letter sent with the paper return made no reference to an online return, and did not advise that the return enclosed with the letter was not to be treated as a return.
The tribunal agreed with HMRC’s basic proposition that a paper return automatically gives rise to a £100 penalty (under FA 2009, Sch 55, paras 1, 3) if it is submitted after 31st October. However, the issue was whether the document received by HMRC on 14th January 2013 was a valid tax return. The onus of proof on this point rested with HMRC, on a balance of probabilities. The document itself had not been produced by HMRC at the hearing. HMRC’s practice was that a paper return must be signed by the taxpayer in order to be valid. However, there was no evidence that the document had been signed by the appellant. HMRC had therefore failed to show that the paper document was a valid return under TMA 1970, s 8A. The appeal against the late filing penalty was therefore allowed.
An interesting postscript to the above case is that HMRC subsequently applied to the First-tier Tribunal to have its original decision allowing the taxpayer’s appeal to be set aside (Executor of the Estate of Teresa Rosenbaum (Deceased) v Revenue & Customs  UKFTT 495 (TC)). HMRC provided the tribunal with a copy of the disputed paper tax return, which had not been provided at the first hearing, but without an explanation why it had not originally been provided. The tribunal stated that there was no reason why the disputed return could not have been provided for the original hearing, and HMRC had not put forward an explanation for this failure. The tribunal held that the statutory conditions for setting aside the decision had not been met, but even if they had been satisfied, it would not be in the interests of justice to set aside the tribunal’s original decision. HMRC’s application was dismissed.
The tribunal’s decisions in the appellant’s favour could perhaps be viewed as rather fortunate for two main reasons. First, the appellant’s agent’s covering letter referred to a “return”. The tribunal did not consider this to be sufficiently clear evidence that the document satisfied the requirements to be a valid tax return. Secondly, HMRC were unable (or unwilling) to produce the relevant document at the first tribunal hearing.
The lesson of this case would therefore seem to be that taxpayers (or their agents) should be careful about submitting documents which could be construed as paper tax returns, particularly if the filing deadline for such returns has already passed.
Finally, as an aside it should be noted that paper returns can have the later filing deadline of 31st January, where there are operational and/or technical reasons for being unable to file online (see SAM 120545), such as returns for the trustees of registered pension schemes, non-resident company landlords and non-UK resident partnerships.