A special commissioner confirmed the imposition of a penalty for late payment of stamp duty where, in all the circumstances, the amount of the penalty as determined was appropriate and not excessive.

Facts

The taxpayers agreed to buy a house in 2000. Completion of the purchase took place on 12 September 2000. A transfer, TR1, was executed and dated 12 September 2000. Stamp duty was due 30 days after the execution of the TR1. Section 15B of the Stamp Act 1891 (SA 1891) allowed a penalty of up to 100 per cent of the duty to be imposed for late stamping.

The taxpayer asked how much stamp duty would be due in respect of the TR1 on 17 August 2006 as they wished to register the title so that an equity release scheme could be entered into. A notice of decision on adjudication was issued on 8 March 2007 which indicated (inter alia) that a penalty of £12,600 would be imposed, i.e. an amount equal to the duty. The taxpayers appealed in time against the imposition of the penalty for the late stamping of a deed of transfer. It fell within SA 1891, s. 13(4) and s. 13A was engaged. The appeal thus lay to the special commissioners rather than the High Court. The stamp duty, interest and penalty had been paid so that SA 1891, s. 13(3) was fulfilled.

Issue

Whether the taxpayers had a reasonable excuse for stamping the transfer of land (‘TR1’) almost six years late and, if not, whether the amount of the penalty was excessive.

Decision

The special commissioner (Adrian Shipwright) (dismissing the appeal) said that the document should have been stamped by 12 October 2000. It was agreed by the parties that it had not been stamped by then and that the stamp duty was due. Accordingly, it was presented late for stamping. By SA 1891, s. 15B, a penalty was payable on the stamping of an instrument which was not presented for stamping within 30 days after its execution. Accordingly, s. 15B prima facie allowed a penalty to be imposed.

Under SA 1891, s. 15B(5) no penalty was payable if there was a reasonable excuse for the delay in presenting the instrument for stamping. Reasonable excuse was not defined for those purposes. There was no provision equivalent to VATA 1994, s. 71(1) that insufficiency of funds was not a reasonable excuse. However, that did not mean that an insufficiency of funds was a reasonable excuse. It all depended on the circumstances of the particular case. The taxpayers chose to buy the house at that particular price. They could have bought a cheaper house and had not considered renting which was another option open to them. However, they chose to buy the particular house notwithstanding their admitted financial difficulties. It was a deliberate choice on their part to complete the purchase of the house. It was not an external circumstance not under their control. The consequence of completing the purchase was that a stamp duty liability arose. If they went ahead regardless of whether they had the funds to pay the stamp duty, then that could not constitute a reasonable excuse. On the particular facts of this case there was no reasonable excuse for failing to pay the stamp duty on time. Accordingly, as there was no reasonable excuse, a penalty was payable.

By SA 1891, s. 13A(5)(c), the special commissioners might reduce the amount of a penalty if it appeared to October.qxd 10/11/07 4:12 PM Page 40 them to be excessive. The maximum penalty was 100 per cent of the duty. That was what was imposed. The section provided for a cap if the document was presented within a year but those restrictions did not apply in the present circumstances. The Revenue might mitigate a penalty if they thought fit. Whether the amount was excessive had to be determined on an objective basis. There was a range of possible amounts of penalty which objectively were not excessive (nor insufficient) where reasonable minds could differ. The question whether the penalty was excessive was to be approached by asking whether a reasonable ordinary person would consider the proposed amount of the penalty to be significantly outside the range of what was required to signal the need for compliance with the provisions requiring stamping within the prescribed period. As the appeal was the taxpayers' appeal, the onus was on the taxpayers to show that the penalty was excessive in the sense of the legislation. The only basis put forward by the taxpayers for a lower penalty was that they felt that a lower penalty was more reasonable. But there was nothing put forward which objectively showed that the penalty was excessive. On an objective basis, the penalty was not excessive. In any event, on a subjective basis, the penalty was not excessive. Given that the period was in excess of six years from the due date of stamping, an ordinary reasonable person would think the penalty was within the range of penalty amounts that were not excessive. Taking into account all the circumstances of the case, the penalty was not excessive. Section 13A(5)(b) provided that if the amount determined appeared to the special commissioners to be appropriate, they might confirm the decision.

(2007) Sp C 627.
Decision released 14 August 2007.