Case Number: T09636
Appeal reference: TC/2024/00088
Income tax – appeal against penalties for late filing of self-assessment tax returns – appeal refused
Judgment date: 8 September 2025
Before
TRIBUNAL JUDGE HARRIET MORGAN
Between
PATRICIA MBOMI
Appellant
and
THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS
Respondents
Representation:
For the Appellant: The appellant representing herself
For the Respondents: Ms Deborah Elton, litigator of HM Revenue and Customs’ Solicitor’s Office
DECISION
I have made this decision, with the consent of the parties, on the basis of the papers and having listened to the recording of the hearing which took place in May 2024.
The appellant appealed against penalties of £3,200 charged by HMRC under Schedule 55 to the Finance Act 2009 (“Schedule 55”) in respect of the late filing of her self-assessment tax return for the tax years 2016/17 and 2017/18 which:
for the tax year 2016/17, HMRC have imposed (a) on 13 February 2017 under para 3, a penalty of £100, (b) on 31 July 2017, under para 4, daily penalties of £900, (c) on 10 August 2018 under para 5, a six month penalty of £300, and (d) on 19 February 2019 under para 6, a 12 month penalty of £300; and
for the tax year 2017/18, HMRC imposed (a) on 26 March 2019 under para 3, an initial penalty of £100, (b) on 9 August 2019 under para 4, daily penalties of £900, (c) on 9 August 2019 under para 5, a six month penalty of £300, and (d) on 18 February 2020 under para 6, a 12 month penalty of £300.
All references to paras are to paras in Schedule 55.
As set out in further detail in the appendix, penalties are due where a taxpayer fails to submit a tax return by the specified deadlines as set out in Schedule 55. It was not disputed that:
On 6 April 2017, HMRC issued the appellant with a notice to file a tax return for the 2016/17 tax year to the address which they had on file for sending correspondence to the appellant. The filing date was 31 October 2017 for a non-electronic return or 31 January 2018 for an electronic return (under s 8(1D) of the Taxes Management Act 1970 (“TMA”)). The appellant submitted a non-electronic return for this year on 9 March 2023.
On 6 April 2018, HMRC issued the appellant with a notice to file for the tax year 2017/2018 to the address which HMRC had on file for sending correspondence. The filing date was 31 October 2018 for a non-electronic return or 31 January 2019 for an electronic return (under s 8(1D) TMA). On 9 March 2023, the appellant submitted a non-electronic return for this year.
If HMRC think it right because of special circumstances, they may reduce a penalty imposed under Schedule 55 (under para 16(1)). Special circumstances does not include ability to pay or the fact that a potential loss of revenue from one taxpayer is balanced by a potential over-payment by another (para 16(2)).
A taxpayer can appeal to the tribunal against a penalty or in respect of the amount of a penalty (and any such appeal is treated in the same way as an appeal against an assessment to tax). On an appeal against a penalty that is notified to the tribunal, the tribunal may affirm or cancel HMRC’s decision (under para 22(1)). On any appeal in respect of the amount of a penalty which is notified to the tribunal the tribunal may affirm HMRC’s decision or substitute for HMRC’s decision another decision that HMRC had power to make (under s 22(2) of Schedule 55). There are special rules about the application of para 16 of Schedule 55 if the tribunal substitutes its own decision.
There is no liability to a penalty under Schedule 55 in relation to a failure to make a return if the person satisfies HMRC or (on appeal) the tribunal that there is a reasonable excuse for the failure (under para 23(1)). For the purposes of this provision (a) an insufficiency of funds is not a reasonable excuse, unless attributable to events outside the person’s control, (b) where the person relies on another person to do anything, that is not a reasonable excuse unless he/she took reasonable care to avoid the failure, and (c) where the person had a reasonable excuse for the failure but the excuse has ceased, he/she is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased (under para 23(2)).
HMRC assert that they issued notices of penalty assessment to the same address as they had on file for the appellant at the relevant time. As regards each penalty (a) HMRC explained that penalty notices are issued directly to the taxpayer and copies of such are not held on the individual’s records for HMRC to access, (b) as evidence of the issue of the penalty notices, HMRC produced (i) a specimen notice of penalty assessment (SA326D), and (ii) an extract from HMRC’s computer records which describes the issue of the penalty in question.
HMRC assert that in addition to the late filing penalty notifications the appellant was sent “Self-Assessment Statements” on 08 March 2018, 13 September 2018, 7 March 2019, 18 April 2019, 12 September 2018, 12 March 2020, 31 December 2020 and 11 March 2021, a 30 day “daily penalty reminder” on 5 June 2018, a 60 day “daily penalty reminder” on 3 July 2018, a 30 day “daily penalty reminder” on 4 June 2019 and a 60 day “daily penalty reminder” on 2 July 2019. They produced a specimen copy of the 30 day and 60 day “daily penalty reminders”. Their records do not show any correspondence has been returned undelivered and the appellant did not dispute receipt of the notices to file or any of the late filing penalty notifications at any stage of the appeal process until the hearing (see below). In HMRC’s view appellant was correctly made aware of both the requirement to file tax returns for the 2016/17 and 2017/18 tax years and of the accruing penalties.
HMRC’s records show that the appellant registered for self-assessment on 24 June 2014 and has filed self-assessment tax returns previously. HMRC have no record of any correspondence having been received from the appellant or any agent during the period 11 September 2015 to 18 May 2021, the date on which the appellant submitted paper employment supplementary pages for the tax years 2016/17 and 2017/18. As set out below, the appellant was not informed by HMRC that these did not constitute full tax returns for those years until 2023.
At the hearing the appellant suggested that she may not have received some of the penalty notices as there had been difficulties sometimes with her receiving post at the relevant address HMRC state they were sent to. However, she was hesitant and not specific about the reason for the difficulties or which penalty notices she thought she may not have received, she had not raised this as an issue at any time prior to the hearing and, as set out below, the transcript of recorded calls which she had with HMRC record her as referring to receiving many penalty notices. On balance I consider it more likely than not that the appellant received all the penalty notices and other correspondence HMRC referred to.
Procedural issue
The procedural history is as follows:
The appellant’s appeal to HMRC in respect of the penalties imposed in both 2016/17 and 2017/18 was rejected by HMRC in a letter of 19 June 2023.
On 8 July 2023 the appellant requested a review of HMRC’s decision in respect of the penalties imposed in both tax years. HMRC upheld their decision on review in respect of the penalties imposed for the 2016/17 tax year in a letter of 4 December 2023. However, although the appellant had plainly requested a review in respect of the penalties imposed in the 2017/18 tax year the letter did not make any reference to those penalties/that tax year. HMRC said this was an error as an entry on their internal system seems to show; the review was intended to apply to both years and all the same points apply to the penalties imposed in the 2017/18 tax year as made in the letter of 4 December 2023 in relation to the penalties imposed in the 2016/17 tax year.
The appellant then appealed to the tribunal in respect of the penalties imposed in both tax years and sent the tribunal the review letter dated 4 December 2023.
There was some debate at the hearing about the fact that the review letter only expressly refers to the penalties imposed in the 2016/17 tax year. The concern was whether the appellant could properly appeal to the tribunal in respect of the penalties imposed in the 2017/18 tax year given the lack of an express review decision.
The relevant law on this is as follows:
Under s 49A where, as in this case, a notice of appeal against a decision such as this has been given to HMRC, the appellant may notify HMRC that the appellant requires HMRC to review the matter in question (see s 49B), or may proceed directly to notifying the appeal to the tribunal. In this case the appellant requested a review as set out above.
Under s 49B TMA if the appellant notifies HMRC that the appellant requires HMRC to review the matter in question (1) HMRC must, within the relevant period (broadly 30 days after the notification is received or such longer period as is reasonable), notify the appellant of HMRC’s view of the matter in question, and (2) HMRC must review the matter in question in accordance with s 49E.
Under s 49D if notice of appeal has been given to HMRC, (a) the appellant may notify the appeal to the tribunal, and if it does so, the tribunal is to decide the matter in question, and (b) that does not apply where HMRC have given a notification of their view of the matter in question under section 49B. In that case the appellant may notify the appeal to the tribunal, but only if permitted to do so by section 49G.
Under s 49E HMRC must notify the appellant of the conclusions of the review and their reasoning broadly within a period of 45 days or such other period as may be agreed. Under sub-s (8) where HMRC are required to undertake a review but do not give notice of the conclusions within the time period specified the review is to be treated as having concluded that HMRC’s view of the matter in question is upheld and, in that case, under sub-s (9) HMRC must notify the appellant of the conclusion which the review is treated as having reached
Under s 49G if (a) HMRC have given notice of the conclusions of a review in accordance with section 49E, or (b) the period specified in section 49E(6) has ended and HMRC have not given notice of the conclusions of the review, the appellant may notify the appeal to the tribunal within “the post-review period” or if that period has ended may do so only if the tribunal gives permission. If the appellant notifies the appeal to the tribunal, the tribunal is to determine the matter in question.
In my view it is plain that under this legislation the appellant retains the right to appeal to the tribunal where HMRC fail to comply with their obligation to review a decision and to the extent permission is required by the tribunal for that to take place, permission is given. I note that HMRC have raised no objection to the appellant being able to appeal to the tribunal in respect of both tax years and it would plainly be unjust and unfair for the appellant not to be able to do so due to an administrative error by HMRC.
Reasonable excuse
There is no statutory definition of reasonable excuse, which “is a matter to be considered in the light of all the circumstances of the particular case” (Rowland v HMRC [2006] STC (SCD) 536 at [19]). As Judge Medd QC said in The Clean Car Co Ltd (1991) BVC 568:
“One must ask oneself: was what the taxpayer did a reasonable thing for a responsible trader conscious of and intending to comply with his obligations regarding tax, but having the experience and other relevant attributes of the taxpayer and placed in the situation that the taxpayer found himself at the relevant time, a reasonable thing to do? Put in another way, which does not I think alter the sense of the question; was what the taxpayer did not an unreasonable thing for a trader of the sort I have envisaged, in the position that the taxpayer found himself, to do?”
In Christine Perrin v HMRC [2018] UKUT 0156 (TCC) at [81] the Upper Tribunal said that the correct approach is as follows:
“81. When considering a “reasonable excuse” defence, therefore, in our view the FTT can usefully approach matters in the following way:
(1) First, establish what facts the taxpayer asserts give rise to a reasonable excuse (this may include the belief, acts or omissions of the taxpayer or any other person, the taxpayer’s own experience or relevant attributes, the situation of the taxpayer at any relevant time and any other relevant external facts).
(2) Second, decide which of those facts are proven.
(1) Third, decide whether, viewed objectively, those proven facts do indeed amount to an objectively reasonable excuse for the default and the time when that objectively reasonable excuse ceased. In doing so, it should take into account the experience and other relevant attributes of the taxpayer and the situation in which the taxpayer found himself at the relevant time or times. It might assist the FTT, in this context, to ask itself the question “was what the taxpayer did (or omitted to do or believed) objectively reasonable for this taxpayer in those circumstances?”
(4) Fourth, having decided when any reasonable excuse ceased, decide whether the taxpayer remedied the failure without unreasonable delay after that time (unless, exceptionally, the failure was remedied before the reasonable excuse ceased). In doing so, the FTT should again decide the matter objectively, but taking into account the experience and other relevant attributes of the taxpayer and the situation in which the taxpayer found himself at the relevant time or times.”
The appellant submitted, essentially, that she took all reasonable steps to complete her returns on time as she considers is demonstrated by the evidence set out below. She said that:
She tried to complete her return for 2016/17 on time and online by herself but experienced problems. She made calls to HMRC in 2017 to ask for help. She has submitted a handwritten note made during a call to HMRC in 2017 to support this. She did what HMRC advised her to do but was still unable to file her return so commissioned an accountant to do it for her.
The accountant whom she appointed to file her returns had a problem with registration. He tried contacting HMRC by phone to resolve this in the summer of 2017, but his calls sat in a queue and were not answered by HMRC. The accountant informed her that he had tried everything to complete her return online but could not.
She made HMRC aware of the difficulties she/her accountant were having on a number of calls. She understands that if she employs an agent to complete and file her return it remains her responsibility to ensure that it is completed a filed on time. She did not ignore or do nothing about completing the returns. She made numerous calls to HMRC and incessant efforts to file the returns on time. The long delays in HMRC answering her calls or HMRC not being able to hear her when she could hear them or cutting her off was the reason why her returns were not filed on time.
The appellant also submitted that HMRC confirmed they received returns in May 2021 but did not let her know the returns were incorrectly completed until 11 January 2023 when she contacted them regarding a repayment for the 2021/22 tax year or that the time limit for sending in her 2016/17 return in late was 5 April 2021. If HMRC had informed her that the deadline for submitting her 2016/17 return late was 4 years and ran out on 5 April 2021 she would have made sure HMRC had received it within the timescale. She made a number of other points relating to her conversations with HMRC in 2021 and later. I note that action taken in the period from 18 February 2020 onwards is not relevant to the reasonable excuse issue as the penalties in dispute were no longer accruing after that date.
HMRC submit that the appellant has not demonstrated on the balance of probabilities that she took reasonable care to avoid the failure to file her 2016/17 and 2017/18 returns on or before their legislative filing deadline dates and even if the facts asserted by the appellant are true, they do not objectively constitute a reasonable excuse.
This appeal is not concerned with specialist or obscure areas of tax law. It is concerned with the ordinary everyday responsibilities of the appellant to ensure her tax returns were filed by their legislative due dates.
HMRC can choose to issue a notice to file a return (under s 8 TMA) to any customer. The business determines, usually based on risk, which customers they require returns from. This is known as the SA criteria. Anyone receiving a notice to file must file a return on time or face being charged penalties. HMRC are entitled to satisfy themselves that no tax is due in any tax year. The notice to file and late filing penalty notifications were all issued to the notified address at that time and effectively served following the provisions of s 115 TMA 1and s 7 of the Interpretation Act 1978. As set out above the appellant was sent numerous self-assessment statements in addition to the late filing penalty notifications. No correspondence has been returned undelivered.
The appellant was notified promptly that she had missed a deadline and had been charged a £100 penalty and was made aware of the additional penalties she would incur if she did not file her returns. As the appellant registered for self-assessment on 24 June 2014 and has filed returns previously, HMRC would expect the appellant to be familiar with the filing deadlines for her returns and the penalties for filing late. HMRC consider it unreasonable that if the appellant and agent were experiencing difficulties contacting HMRC by phone they would not have attempted to contact HMRC by post.
HMRC have no record of any correspondence having been received from the appellant or her agent during the period 11 September 2015 to 18 May 2021. The appellant was advised on the calls she made how to proceed but failed to take prompt action to bring her tax affairs up to date and was not constant in resolving the issues she had with regards to the filing of her returns throughout the period where no returns were filed.
During this time the appellant was a sole director of Regimol Limited and managed to file accounts for the company until it was dissolved in 2022. HMRC have provided transcripts of the calls made by the appellant to HMRC which demonstrate HMRC made every effort to understand and address the issues the appellant was having with the filing of her returns.
The responsibility to submit a self-assessment return by the due date remains with the appellant regardless of whether she delegated that task to another person. Para 23(2)(b) of Schedule 55 specifically precludes reliance on a third party unless the appellant took reasonable care to avoid the failure. The appellant has not provided any evidence to show that she exercised any supervision or made any enquiries of her previous accountant to ensure her returns would be filed on or before their filing deadline dates nor has the appellant provided any evidence of her previous accountant’s assurance to her that the returns would be filed on time or that she employed and paid her previous accountant to file these particular returns. Entrusting the agent with responsibility to file the return does not absolve the appellant of responsibility to make any necessary checks that the submission has been made. In the absence of evidence to demonstrate that the appellant took reasonable steps to ensure that their agent actually filed the return, this does not amount to a reasonable excuse
HMRC’s records show the appellant appointed an agent to act for her on 25 May 2022 and that the 2021/2 self-assessment return was filed online on time on 14 January 2023. It is unreasonable that the appellant was able to put measures in place to ensure her 2021/22 return was filed on time but failed to do the same with regards to her 2016/17 and 2017/18 returns.
HMRC acknowledge that the Employment Supplementary pages filed by the appellant on 18 May 2021 were not sent back to her as incomplete and unsatisfactory as is HMRC’s standard procedure. HMRC apologise for this oversight. However, the 2016/17 and 2017/18 returns were both already more than 12 months late by 18 May 2021. This oversight therefore had no impact on the penalties charged as all penalties in respect of the late submission of the 2016/17 and 2017/18 returns had been charged on or before 18 February 2020.
The time limit to submit a late return to HMRC is four years after the end of the tax year in question. The fact that the appellant has stated that she was not informed of this is not relevant and has no impact on the late filing penalties charged for the late submission of the two returns.
There is some evidence that the appellant made a number of calls to HMRC, as recorded in transcripts of calls as follows:
A call was made to the Employer Helpline on the 13 June 2017. A note of this call was therefore made under the employer record for the appellant’s company, Regimol Ltd and not her personal self-assessment record. The appellant requested a User ID in the call and was given advice with regards to requesting a new password.
HMRC had no record of the appellant contacting them again until 21 July 2018, more than a year later. HMRC do not have a transcript of that call. There is also a record of calls made by the appellant on 25 October 2018 and on 13 December 2019 and in March and April 2021.
The transcript of the call which the appellant made to HMRC on 25 October 2018 records that (a) the appellant made the HMRC adviser aware her accountant was having difficulties completing her return on her behalf and that she had tried to resolve the problem, (b) she asked HMRC for an agent code, but the adviser said the adviser was unable to provide one as HMRC’s records did not have an authorised accountant registered as acting for the appellant (c) the appellant said she had been told the accountant/agent made this application on several occasions and he was telling her that HMRC would send something to her but nothing had come, (d) the appellant was advised by the adviser to ask the agent/accountant to make another 64-8 agent authorisation application so that HMRC could get his details on to the appellant’s account, (e) when advised that it would be best to submit a paper authorisation form as the appellant seemed to be saying it had been sent online but it had not come through, she said that she would contact the accountant by email right away, (f) she said she had received a penalty but did not think she should be penalised. The adviser said that procedure was to send in the 2016/17 outstanding tax return, once that tax return has been submitted, she could then appeal in writing against the late filing penalties, and HMRC would review them for her. She said her accountant would have to do that as she did not know how to. The adviser repeated that the 2016/17 tax return must be sent in first and the appellant replied that she would email the accountant then.
The transcript of the call the appellant made on 13 December 2019 records that the appellant asked for a user ID and password for the self-assessment system. She said that it had been a long time in which she was trying to give her self-assessment, her accountant usually does this for her, she just needed the information, she was not able to do her self-assessment, her accountant had been trying to do it, he had made several attempts and it was frustrating him and he was asking her now to get the information. It appears she was not able to obtain a new user ID as she did not pass the security questions.
The appellant made a further call to HMRC on 31 March 2021. The transcript records that (a) said she had made several attempts, and Martin Walker, the firm, had also made attempts and HMRC kept sending her penalty sentence so she needed to know the last contact, and the advice given, (b) the HMRC adviser responded that there was no agent or accountants registered for her, (c) the appellant said that her agent had put her on the phone on two different occasions, when he was trying to speak to HMRC but after a point he gave up and she gave up as well and she kept getting letters from HMRC. She wanted to know what records they have about her and to be able to challenge the service from them. She said that she was really exhausted from problems and getting these letters from HMRC, (d) the adviser told her there was no agent or accountant registered on her self-assessment. She seemed to dispute this and said there was evidence, and that is why she needed the records. The advisor advised her to write to HMRC. The appellant suggested she did not have the time and that she had spent about three hours of her time trying to speak to HMRC and waited for half an hour but there was no answer, she called again and was put on hold for more than 30 minutes and was then cut off. She said she was fed up, (e) the adviser said that she could see that the appellant had been told on an earlier call to submit the tax return, and appeal the penalty in writing. She said that she does not know how to do that, (f) the adviser sent her a new ID and advised on how to file a return online using that and said that if she had any difficulty to phone back the following morning. She phoned again in the afternoon and referred again to the receipt of several letters, that her accountant had been involved and made many calls and could not log in to her account, she kept getting letters for not filing and she had made many calls to HMRC. She was advised to print off paper returns and send them in the post.
In April 2021, the appellant again contacted HMRC by telephone. The transcript of this call records that (a) HMRC advised her to complete the returns for 2016/17 and 2017/18 on paper which she did, (b) she referred again to her accountant connecting her to his calls and that he made several contacts with HMRC with the difficulties of him not being able to file her self-assessment. She said she had made calls, and spoke to different people who would tell her what to do to be able to file, she tried everything, at a point she gave up, (c) she noted that she had explained all these things yesterday and she had been getting the penalty letters, and after a while, she and the accountant gave up because nothing was really working. For example, yesterday she spent about 4 hours trying to speak to HMRC to find a way of resolving this. She said she was looking for practical support for her to be able to progress this self-assessment issues. She was advised she needed to file returns for the two years, if it was not possible online she could provide paper returns and that she could appeal against the penalties and she was given details of the process for doing so.
The appellant noted that there is no transcript of the call which HMRC’s records show she made on 1 July 2018 or for calls she states she made in 2017 (of unspecified dates) and 2023 (of a number of specified dates). I accept that there may have been other attempted calls in 2017 and the appellant’s evidence of the difficulties of making contact with HMRC by phone. I note, however, that she appears to accept that there was no calls to HMRC 2018, 2019, 2020 and 2021 other than those set out above.
HMRC’s records show that the appellant’s previous agent was removed from her record on 20 May 2017 and that her present agent was not appointed to act for her until 22 May 2022. The appellant said that after filing her 2016/17 and 2017/18 returns on paper in April 2021 she did not have the need to appoint an agent. She only appointed her current accountant to act for her due to a change of circumstances which required her to file a return for the 2021/22 tax year. She said that return was filed on time and HMRC’s records can evidence this. HMRC’ submissions on this point are set out above.
As the returns were not submitted within the applicable time limits, the appellant is liable to the penalties unless she had a reasonable excuse for the initial and the on-going delay in submitting the returns.
As set out in full above, there is no statutory definition of what constitutes a reasonable excuse (other than as regards the specific provisions of para 23). On the basis of the wording and the approach taken in other cases in this tribunal and in the Upper Tribunal (as set out above), in summary I understand the term to require consideration of what can reasonably be expected of a prudent person exercising reasonable foresight and due diligence as regards his or her self-assessment obligations in the light of all the circumstances of the taxpayer’s particular case.
It is an essential part of a self-assessment system that there is an obligation on a taxpayer himself or herself correctly to include all taxable income in a tax return and account for the tax due on it and to do so by the relevant deadline. My view is that the hypothetical reasonable and prudent taxpayer can be attributed with an awareness of this obligation and with the need to be mindful to take reasonable steps to fulfil that obligation. A reasonable and prudent taxpayer would, therefore, take all reasonable steps to ensure he/she is aware of the date by which a return must be filed and that the return is filed by that time.
Overall I do not consider that the appellant had a reasonable excuse for the failure to submit her tax returns for the 2016/17 and 2017/18 tax years by the required deadlines. I note that (a) the appellant was given notice of the requirement for her to submit tax returns for the tax years 2016/17 and 2017/18, and (b) she was aware of the need to file her self-assessment tax returns by the relevant deadline as she had previously submitted returns. I accept that the appellant attempted to submit her return for 2016/17 at some point in 2017, she found the online procedure difficult, and, having failed to file the return online, contacted an accountant with a view to him acting for her. However, in my view, the appellant then failed to take reasonable action to submit that return and the return for 2017/18. There is no evidence that the appellant made telephone calls to HMRC in 2018 other than the call of July 2018 and that of 25 October 2018. These calls were made months after the deadline for submitting the 2016/17 return but before the deadline for submitting the 2017/18 return. On the October call the appellant was clearly advised what action she/her accountant needed to take, namely, to submit a paper form authorising her accountant to act for her so that he could submit a return for 2016/17 for her. Whilst the call related to the return for 2016/17 it would be readily apparent to a reasonable taxpayer that this action was also required so that the accountant could submit a return for the 2017/18 tax year, the deadline for which was imminent. The transcript of the next call the appellant made, over a year later, on 13 December 2019 records that the appellant again said that her accountant had been trying to deal with the outstanding tax returns but was getting frustrated. However, there is no record that the appellant had asked the accountant to submit a paper authorisation form or precisely what his issues were with the procedure. The record of the later calls in 2021 also shed no material light on this. The transcripts record the appellant again stating that the accountant had been having trouble with contacting HMRC by phone. However, there is no explanation as to why no paper authorisation form was submitted or why if the issue was with the online procedure and/or telephone contact the accountant/the appellant did not write to HMRC. Moreover, the appellant has not provided any other information on what discussions she had with the accountant, in particular, as regards the need for him to be authorised to act for her, or whether she provided him with the information needed to prepare her returns.
Special circumstances and proportionality
I accept HMRC’s submissions that the tribunal is not able to adjust the penalties in dispute on the grounds of unfairness. In summary, HMRC made the following submissions on this point:
The penalties charged are proportionate and the penalty regime in Schedule 55 is proportionate to its aim. The penalty regime is an administrative means of securing the production of timely returns. Its aim is to encourage compliance, not punish defaults. In Barry Edwards v HMRC [2019] UKUT 137 (TCC), the Upper Tribunal confirmed, at [85], that the Schedule 55 regime was proportionate and penalties are due even in circumstances where there is no additional tax liability:
“In our view, there is a reasonable relationship of proportionality between this legitimate aim and the penalty regime which seeks to realise it. The levels of penalty are fixed by Parliament and have an upper limit. In our view the regime establishes a fair balance between the public interest in ensuring that taxpayers file their returns on time and the financial burden that a taxpayer who does not comply with the statutory requirement will have to bear.
In view of what we have said about the legitimate aim of the penalty scheme, a penalty imposed in accordance with the relevant provisions of Sch 55 FA2009 cannot be regarded as disproportionate in circumstance where no tax is ultimately found to be due…”
The penalty regime includes provisions for reasonable excuses and special circumstance which allow mitigation in appropriate cases. Each case however is taken on its own merits. The Upper Tribunal found in Hok Ltd v HMRC [2012] UKUT 363 (TCC) that this tribunal does not have the power to discharge or adjust a fixed penalty which is properly due because it thinks it is unfair (at [36] to [58]). The decision of the Upper Tribunal creates a precedent and is binding on the tribunal in all cases where similar issues are contend that the responsibility to submit a self-assessment tax return by the due date remains with the appellant regardless of whether they have delegated that task to another person.
HMRC made the following main submissions in support of their stance that they have correctly decided not to exercise their discretion to reduce the penalties on the basis there are no special circumstances for the purposes of para 16 of Schedule 55:
Special circumstances are undefined save that, under para 16(2), they do not include: the ability to pay, or the fact that a potential loss of revenue from one taxpayer is balanced by a potential over-payment by another.
The purpose of Schedule 55 is to encourage timely compliance with filing obligations such as the self-assessment tax return for income tax. In the absence of the penalty regime to encourage that compliance, it would be much more difficult to administer the tax system.
Para 16 may be applied where, in HMRC’s opinion, the taxpayer’s circumstances are such that the application of a penalty at the statutory level would not be appropriate. This may include circumstances where imposing the penalty would be contrary to the clear compliance intention of the penalty law
In Barry Edwards v HMRC, the Upper Tribunal decided at [68] to [74] that the meaning of special circumstances should not be given a restrictive interpretation. Special circumstances may include any factor which means that a decision to charge a penalty at the level determined by statute would be contrary to Parliament’s intent when the penalty regime was introduced. To be special, any particular circumstance may or may not be specific to the individual taxpayer but it must be relevant to the issue under consideration. If relevant, the circumstance must be sufficiently special such that HMRC considers it right to reduce a penalty under para 16. At [86] in Barry Edwards, it was confirmed that the Schedule 55 regime was proportionate, and penalties are therefore correctly due even in circumstances where there is no additional tax liability:
“In view of what we have said about the legitimate aim of the penalty scheme, a penalty imposed in accordance with the relevant provisions of Schedule 55 FA 2009 cannot be regarded as disproportionate in circumstances where no tax is ultimately found to be due. It follows that such a circumstance cannot constitute a special circumstance for the purposes of paragraph 16 of Schedule 55 FA with the consequence that it is not a relevant circumstance that HMRC must take into account when considering whether special circumstances justify a reduction in a penalty.”
HMRC have considered the appellant’s circumstances in light of paragraph 16(2) and submit that a special reduction is not appropriate for essentially the reasons set out above. Penalties are in place to promote efficient operation of the taxation system and are intended as a measure of fairness, so that customers who file late do not gain any advantage over those who file on time. The amount of the penalties charged is set within the legislation. HMRC has no discretion over the amount charged and must act in accordance with the legislation. By not applying legislation and as such not to have imposed the penalty would mean that HMRC was not adhering to its own legal obligations. Accordingly, HMRC have considered the circumstances described by the appellant (as set out above in her submissions) and submit that penalties of the type charged in this case is directly appropriate in order to encourage future compliance with their filing obligations.
Where a person appeals against the amount of a penalty, para 22(2) and (3) of Schedule 55 provide the tribunal with the power to substitute HMRC’s decision with another decision that HMRC had the power to make. The tribunal may rely on para 16 but only if they think HMRC’s decision was “flawed when considered in the light of the principles applicable in proceedings for judicial review”.
The principles referred to as applicable in proceedings for judicial review include ensuring (a) that the decision maker has taken into account all relevant factors, (b) the decision maker has not taken into account any irrelevant factors, and (c) the decision is one that a reasonable decision maker having regard to the available evidence could make.
The decision not to reduce the penalties under para 16 was not flawed but, if the tribunal disagrees, it is further submitted that there are no special circumstances which would require the tribunal to reduce the penalties.
I consider that HMRC’s decision not to reduce the penalties under para 16 was not flawed and, in any event, there are no special circumstances in this case which would require the tribunal to reduce the penalties imposed.
Conclusion
For all the reasons set out above, the appeal is dismissed.
This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.
RELEASE DATE: 08TH SEPTEMBER 2025
APPENDIX – RELEVANT STATUTORY PROVISIONS
The penalties at issue in this appeal are imposed by Schedule 55. The starting point is paragraph 3 of Schedule 55 which imposes a fixed £100 penalty if a self-assessment return is submitted late.
Paragraph 4 of Schedule 55 provides for daily penalties to accrue where a return is more than three months late as follows:
“4 -
(1) P is liable to a penalty under this paragraph if (and only if)-
(a) P’s failure continues after the end of the period of 3 months beginning with the penalty date,
(b) HMRC decide that such a penalty should be payable, and
(c) HMRC give notice to P specifying the date from which the penalty is payable.
(2) The penalty under this paragraph is £10 for each day that the failure continues during the period of 90 days beginning with the date specified in the notice given under sub-paragraph (1)(c).
(3) The date specified in the notice under sub-paragraph (1)(c)-
(a) may be earlier than the date on which the notice is given, but
(b) may not be earlier than the end of the period mentioned in sub-paragraph (1)(a).”
Paragraph 5 of Schedule 55 provides for further penalties to accrue when a return is more than 6 months late as follows:
“5-
(1) P is liable to a penalty under this paragraph if (and only if) P's failure continues after the end of the period of 6 months beginning with the penalty date.
(2) The penalty under this paragraph is the greater of -
(a) 5% of any liability to tax which would have been shown in the return in question, and
(b) £300.”
Paragraph 6 of Schedule 55 provides for further penalties to accrue when a return is more than 12 months late as follows:
“6 -
(1) P is liable to a penalty under this paragraph if (and only if) P’s failure continues after the end of the period of 12 months beginning with the penalty date.
(2) Where, by failing to make the return, P deliberately withholds information which would enable or assist HMRC to assess P's liability to tax, the penalty under this paragraph is determined in accordance with sub-paragraphs (3) and (4).
(3) If the withholding of the information is deliberate and concealed, the penalty is the greater of -
(a) the relevant percentage of any liability to tax which would have been shown in the return in question, and
(b) £300.
(3A) For the purposes of sub-paragraph (3)(a), the relevant percentage is -
(a) for the withholding of category 1 information, 100%,
(b) for the withholding of category 2 information, 150%, and
(c) for the withholding of category 3 information, 200%.
(4) If the withholding of the information is deliberate but not concealed, the penalty is the greater of—
(a) the relevant percentage of any liability to tax which would have been shown in the return in question, and
(b) £300.
(4A) For the purposes of sub-paragraph (4)(a), the relevant percentage is -
(a) for the withholding of category 1 information, 70%,
(b) for the withholding of category 2 information, 105%, and
(c) for the withholding of category 3 information, 140%.
(5) In any case not falling within sub-paragraph (2), the penalty under this paragraph is the greater of -
(a) 5% of any liability to tax which would have been shown in the return in question, and
(b) £300.
(6) Paragraph 6A explains the 3 categories of information.”
Paragraph 23 of Schedule 55 contains a defence of “reasonable excuse” as follows:
“23 -
(1) Liability to a penalty under any paragraph of this Schedule does not arise in relation to a failure to make a return if P satisfies HMRC or (on appeal) the First-tier Tribunal or Upper Tribunal that there is a reasonable excuse for the failure.
(2) For the purposes of sub-paragraph (1) -
(a) an insufficiency of funds is not a reasonable excuse, unless attributable to events outside P's control,
(b) where P relies on any other person to do anything, that is not a reasonable excuse unless P took reasonable care to avoid the failure, and
(c) where P had a reasonable excuse for the failure but the excuse has ceased, P is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased.”
Paragraph 16 of Schedule 55 gives HMRC power to reduce penalties owing to the presence of “special circumstances” as follows:
“16 -
(1) If HMRC think it right because of special circumstances, they may reduce a penalty under any paragraph of this Schedule.
(2) In sub-paragraph (1) “special circumstances” does not include-
(a) ability to pay, or
(b) the fact that a potential loss of revenue from one taxpayer is balanced by a potential over-payment by another.
(3) In sub-paragraph (1) the reference to reducing a penalty includes a reference to -
(a) staying a penalty, and
(b) agreeing a compromise in relation to proceedings for a penalty.”
Paragraph 20 of Schedule 55 gives a taxpayer a right of appeal to the Tribunal and paragraph 22 of Schedule 55 sets out the scope of the Tribunal’s jurisdiction on such an appeal. In particular, the Tribunal has only a limited jurisdiction on the question of “special circumstances” as set out below:
“22 -
(1) On an appeal under paragraph 20(1) that is notified to the tribunal, the tribunal may affirm or cancel HMRC's decision.
(2) On an appeal under paragraph 20(2) that is notified to the tribunal, the tribunal may—
(a) affirm HMRC’s decision, or
(b) substitute for HMRC’s decision another decision that HMRC had power to make.
(3) If the tribunal substitutes its decision for HMRC’s, the tribunal may rely on paragraph 16 -
(a) to the same extent as HMRC (which may mean applying the same percentage reduction as HMRC to a different starting point), or
(b) to a different extent, but only if the tribunal thinks that HMRC’s decision in respect of the application of paragraph 16 was flawed.
(4) In sub-paragraph (3)(b) “flawed” means flawed when considered in the light of the principles applicable in proceedings for judicial review.”