In the absence of a certificate of posting, could a CIS return be deemed to be delivered in the ordinary course of post?

Background

Heronslea Limited (Heronslea) was a contractor operating within the Construction Industry Scheme (CIS) which requires contractors to file monthly returns, the late filing of which triggers a penalty. Heronslea had appealed against a £100 late filing penalty for the tax month ended 5 June 2010.

Facts

HMRC's case was that Heronslea's CIS return for June 2010 which was due on 19 June 2010 was not received until 22 June, and that therefore the company was due to pay the £100 late filing penalty. Heronslea appealed claiming that the return was posted in good time, using first class mail. The company cited the post as being to blame noting that HMRC's ‘Charge Notice’ took ten days to reach them.

HMRC refused to accept the appeal and this was followed by Heronslea requesting a review of this decision. The HMRC Appeal Review Unit upheld the original decision citing that the company had previous appeals upheld in its favour and an ‘education letter’ had been issued on 5 May 2010 advising that ordinary first class post is insufficient. That education letter also advised that if future appeals cited postal delays, HMRC would require evidence of postage with the appeal and that as proof of posting had not been provided, the original decision was upheld.

In respect of its failure to obtain proof of posting, the company cited the fact that the local post office is often closed when their working day finishes. The company had twice attempted to obtain proof of posting but gave up due to the length of the queue.

HMRC confirmed that “the return was finally received on 22 June 2010” and they responded to Heronslea's grounds of appeal by stating that as a contractor is obliged to ensure that HMRC has received their return by the 19th of the month, it is not enough simply to have posted the return in what is believed to be sufficient time to reach HMRC by the deadline. In HMRC's opinion, the return should be sent using the first class letter rate. The education letter should have put a reasonable taxpayer on particular notice to ensure that the risk of postal delays was minimised and that proof of posting should be routinely obtained.

Although HMRC recognised that proof of posting is not a legislative procedure, in cases where the grounds for reasonable excuse are cited as postal delays or when it is contend that the return was posted in good time, HMRC believed that it is reasonable to expect that some evidence of actual postage should be provided. As part of its evidence, HMRC cited that the appellant had neither provided HMRC with evidence of postage nor an actual date when the return was posted.

HMRC also submitted that “the penalties were imposed to promote the efficient operation of the system” and that “HMRC have to be seen to be consistent in our approach to all our customers, particularly those who comply with the regulations.”

Issue

The first question the Tribunal considered was when the company posted the return. Whilst not provided with the date of posting, the company submitted that returns are always posted in good time. On the evidence provided, the company's normal pattern was that the return was posted between 11^th and 13^th of the month, and the Tribunal accepted that this is what the company meant by “in good time”.

Secondly, the Tribunal considered if the company posted this particular return in accordance with its normal pattern. The evidence was that this was so. The Tribunal had considered the other evidence available to it, and in particular whether Heronslea had – as HMRC had implied – a history of late filing.

Of the four previous penalty notices, two were cancelled because the fault lay with HMRC – once for not sending out a return at all, and once for sending it to the wrong address. The other two were cancelled by HMRC when they accepted that the returns were posted in good time.

Decision

The Tribunal accepted the evidence that the return was posted in good time to reach HMRC by the deadline of 19 June 2010.

Whilst no proof of posting was obtained, as HMRC had already conceded, obtaining proof of posting is not a legal obligation and HMRC could not therefore insist upon it. The Tribunal noted that this can be an onerous requirement, particularly for a small business with extended working hours.

The Tribunal noted that the relevant Regulations require that the CIS return “must be made to the Commissioners” by the due date, and the CIS return can be “made” by being sent in the post. The Tribunal then referred to Section 7 of the Interpretation Act 1978, as applying where:

• “an Act authorises or requires any document to be served by post (whether the expression ‘serve’ or the expression ‘give’ or ‘send’ or any other expression is used) then, unless the contrary intention appears, the service is deemed to be effected by properly addressing, pre-paying and posting a letter containing the document.”

The Tribunal found that in the absence of any contrary intention in the relevant legislation, and in particular the width given to the expression “serve”, that Section 7 of the Interpretation Act applied to the delivery of Heronslea's CIS return to HMRC.

Judicial notice was taken of the fact that first class post normally arrives, if not the next day, at least by the day after that.

Section 7 of the Interpretation Act states that the deemed delivery date applies “unless the contrary is proved”. The Tribunal stated that Heronslea's return was thus deemed to be delivered in the normal course of post unless HMRC could rebut that presumption.

The Tribunal found that once the posting date has been established, the onus is then on HMRC to prove that the return was not delivered in the normal course of post. However, the Tribunal had no evidence, other than the Statement of Case itself and correspondence with the company director, to support HMRC's case that the return was delivered late. Therefore the presumption was not rebutted. HMRC had not discharged this burden and the Tribunal allowed Heronslea's appeal.

The full text of the case can be accessed at http://www.bailii.org/uk/cases/UKFTT/TC/2011/TC00978.html.