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Sudar Shini Mahendran v HMRC

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In Sudar Shini Mahendran v HMRC [2015] UKFTT 278 (9 June 2015), the FTT found that a taxpayer had a reasonable excuse for the late payment of CGT.

Mrs Mahendran had sold a property and the monies to pay the CGT were held by her solicitor. She had submitted an unsolicited return with a liability of £12,544 consisting entirely of CGT. Payment was due by 31 January 2014 but it was not made until the following September; and HMRC had imposed penalties under FA 2009 sch 56.The issue was whether Mrs Mahendran had had a reasonable excuse.

The FTT first dismissed any contentions that her illness had prevented her from managing her tax affairs, given that she had been able to perform her duties as a primary school teacher and that she had been able to instruct accountants.

Referring to Rowland [2006] STC (SCD) 536, the FTT found that it had been ‘sensible and reasonable’ for Mrs Mahendran to rely ‘upon persons whom she reasonably believed to have the relevant specialist knowledge and expertise’. The issue, under FA 2009 Sch 56 para 16(1)(b), was therefore whether she had taken ‘reasonable care to avoid the failure’. The FTT noted that she had diligently provided her accountants with any information requested and had chased them on several occasions. The FTT added that it had been reasonable for her not to contact HMRC to ask for assistance before the due date, as she thought that matters were being dealt with by her accountants.

Read the decision.

Why it matters: This case offers a useful illustration of the way FA 2009 Sch 56 para 16(1)(b) operates. Taxpayers wishing to rely on this provision should ensure that, like Mrs Mahendran, they keep records of communications (or failed communications) with their tax agents.