Case Number: TC09578
[By remote video/telephone hearing]
Appeal reference: TC/2024/06472
Income tax – late filing penalty - whether reasonable excuse
Judgment date: 11 July 2025
Before
TRIBUNAL JUDGE RUPERT DAVIES
MRS SONIA GABLE
Between
SAYRUN LAMUTH
Appellant
and
THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS
Respondents
Representation:
For the Appellant: Ms Sayrun Lamuth, in person.
For the Respondents: Mrs Tracey Francis litigator of HM Revenue and Customs’ Solicitor’s Office.
DECISION
Introduction
With the consent of the parties, the form of the hearing was V (video), all parties attended remotely via Microsoft Teams.
Prior notice of the hearing had been published on the gov.uk website, with information about how representatives of the media or members of the public could apply to join the hearing remotely in order to observe the proceedings. As such, the hearing was held in public.
This is an appeal by Ms Sayrun Lamuth, the Appellant, against late payment penalties for the tax years ending 5 April 2021, 5 April 2022, and 5 April 2023 charged to her under Schedule 56 Finance Act 2009 (“Sch. 56”).
The Appellant was charged the following penalties:
Tax Year ending 5 April | Date of Penalty | Legislation | Description | Amount |
2021 | 17/9/2024 | Para 3(2) Sch.56 | 30-day late payment penalty | £128 |
2021 | 17/9/2024 | Para 3(3) Sch.56 | 6-month late payment penalty | £128 |
2021 | 17/9/2024 | Para 3(4) Sch.56 | 12-month late payment penalty | £128 |
2022 | 17/9/2024 | Para 3(2) Sch.56 | 30-day late payment penalty | £132 |
2022 | 17/9/2024 | Para 3(3) Sch.56 | 6-month late payment penalty | £132 |
2022 | 17/9/2024 | Para 3(4) Sch.56 | 12-month late payment penalty | £132 |
2023 | 17/9/2024 | Para 3(2) Sch.56 | 30-day late payment penalty | £135 |
2023 | 17/9/2024 | Para 3(3) Sch.56 | 6-month late payment penalty | £135 |
TOTAL | £1,050 |
The Appellant’s Notice of Appeal was late, however the Respondents acknowledge that the Appellant’s appeal to them was made in time but was incorrectly treated as being late. Accordingly, they do not object to the appeal being heard out of time. The Tribunal allows the late appeal to proceed.
The documents to which we were referred were in a hearing bundle of 135 pages and the Respondents’ Statement of Reasons of 25 pages.
The grounds of appeal as set out in the Appellant’s Notice of Appeal dated 29 November 2024 primarily address the reasons why the appeal was not lodged on time. Further grounds have been set out in correspondence. Those grounds were:
The Appellant received a letter from the Respondent dated 17 March 2017, addressed to her ex-husband, which granted him approval to receive rental income with no tax deducted. Upon reading this letter she assumed that rents he received are not liable to tax in the UK because he is not British and was not resident in the UK. She misunderstood the letter and assumed that the rental income she was receiving was not liable to tax.
On 31 July 2019 the Appellant called the Respondent and was told she did not need to file any returns from the tax year 2018-2019 onwards.
On 27 March 2024 the Appellant called the Respondents. During that call, the Appellant explained that she had been in receipt of rental income since 2017. The advisor explained to the Appellant that she had misunderstood the position with respect to the rental income. The advisor also confirmed that she had been told in 2019 that she did not need to complete returns from 2018-19 onwards and that she was told that there wouldn’t be any interest and penalties for late payments.
The Appellant completed tax returns and sent them to the Respondent by post on 18 May 2024 and on 8 June 2024. She received her SA Tax calculation letter dated 28 August 2024 on 5 September 2024. She did not know how to make a payment until she called the Debt Management team. She made total payment on 6 September 2024.
The issues considered by the Tribunal were:
Whether the late payment penalties were correctly assessed.
Whether the late payment penalty notices had been correctly issued.
Whether Ms Lamuth had a reasonable excuse for the late payment of the tax.
Whether HMRC’s decision in relation to special reduction of the penalties was flawed.
FACTS
We find the following facts after taking into account the evidence in the bundle, the evidence given by the Appellant, and the submissions from the presenting officer for the Respondent. We found it difficult to follow the Appellant’s evidence, but we found her to be a willing and truthful witness that was not seeking to mislead.
The Appellant was divorced from her ex-husband and he left the country in 2011. The Appellant and her husband were, prior to 2015, joint owners of property that yielded rental income. The nature of the ownership post 2015 was difficult to determine, the Appellant having stated both that it was put into trust for her three children in 2015 and that she and her ex-husband were each 50% owners. The Respondents did not put any questions to the Appellant regarding the ownership of the property. We find as a fact that the Appellant considers that she was a 50% owner post 2015, and that she collected rent from it. The Appellant also stated that she gave her share of the rental income to her ex-husband. This assertion was not challenged by the Respondents, and we find it to be true.
On 17 March 2017, the Respondents wrote to the Appellant’s ex-husband, granting approval for his application to collect rents without the deduction of tax under the non-resident landlord scheme. The letter went on to state, “Your rents are still liable to tax in the United Kingdom and you should enter details on your Self-Assessment Tax Return. I will arrange for a record to be set up for you and to send you the relevant tax returns.” The letter was addressed to her ex-husband, and did not name the Appellant. The letter was nevertheless opened and read by the Appellant.
The Appellant completed a Self-Assessment Tax Return for the tax year 2016/17, dated 5 October 2017, but signed 29 November 2017. In the section marked “UK property” she marked the “No” box stating that she did not have income from UK property. The Appellant also left the “Any other information” box blank.
However, on 29 November 2017 the Appellant wrote a letter addressed to “A Dalgleish, Assistant Officer, PAYE and Self-Assessment”. In that letter she referred to a letter from the Respondent dated 16 November 2017 (which we have not seen and was not in the bundle). The Appellant’s letter stated:
“Thank you for your letter dated 16 November 2017 informing me about my 2016 to 2017 tax return. After reading UK property notes & details, I would like to inform you that I don't have any income from property let jointly with my ex-husband, Mr Lao (NRL748769) who was approved to receive rental income with no tax deducted. In our divorce in 2011, instead of selling & sharing the family home, I proposed that he would have all the rental income if he agreed to put it in trust for our 3 children. Mr Lao and I, have put the family home in trust in 2015. Please advise, what else I need to do to make sure that my 2016 to 2017 tax return is accepted.”
Mrs Francis, on behalf of the Respondent, helpfully checked online during the hearing, and stated that she could not find any record of a response to that letter having been sent to the Appellant. We find that no response was sent, and we are grateful for Mrs Francis’ assistance.
The Appellant completed a Self-Assessment tax return on behalf of her ex-husband for the 2017/18 tax year, dated 20 August 2018. The return was ultimately rejected by the Respondents by letter dated 13 November 2018, as it had not been signed by Mr Lao. However, in that return she marked the box stating that he was in receipt of income from UK property and in the “Any other information” box she wrote that she passed on the income from their joint property to him, via acquaintances of his in Cambodia.
In her Self-Assessment tax return for 2017/18, the Appellant again stated that she had no income from UK property.
The Appellant’s unchallenged oral evidence was that she believed that, because she was giving her half of the rental income to her husband, she was not personally in receipt of it and did not need to declare it. We accept that this was her genuine belief.
On 31 July 2019, the Appellant phoned and spoke to the Respondents, asking whether she needed to complete a Self-Assessment Tax Return. A transcript of the conversation was included in the bundle of documents, we find that it is an accurate record of the conversation that took place.
The adviser explained that the Appellant’s self-assessment record had been automatically closed after the submission of her 2018 return because it did not meet the self-assessment criteria. The adviser asked whether the Appellant’s only income was her pension and some small amount of investment income. The Appellant replied “yes,” and stated that nothing had changed at all. She was advised by the Respondents’ adviser that she did not need to complete a Self-Assessment Tax Return.
On 27 March 2024 the Appellant again contacted the respondent by telephone. A transcript of the conversation was included in the bundle of documents, and we again find that it is likely to be an accurate record of the conversation that took place. During the conversation, the Appellant confirmed that she owned a 50% share in the rental property and that she was personally in receipt of rental income and had been since 2017. However, she also explained that she gave her half of the rental income to her husband. The Appellant was advised that if she was receiving half of the rental income it needed to be declared and tax paid upon it, even if she chose to give it away.
The Appellant contends that during that conversation she was told that there would be no interest or penalties due upon the late payments, however, we find, based upon the transcript, that this was not said or implied.
The Appellant completed tax returns for five years and posted them to the Respondents on 18 May 2024. These went undelivered, and she reposted the returns on 8 June 2024. The returns did not include a calculation of the tax due.
A Tax Calculation dated 28 August 2024 was sent to the Appellant, which she received on 5 September 2024 (however, she actually found out about the amount by checking online on 4 September 2024). We accept that the Appellant did not know how to make the payments until she contacted the Respondent’s debt management team on 6 September 2024.
The Appellant made payments of the outstanding tax by way of two bank transfers on 6 September 2024 totalling £11,797.24.
SUBMISSIONS
The Appellant’s oral submissions reflected her written grounds of appeal. However, she also made submissions that we summarise as follows:
She thought that, because she was giving her half of the rental income to her ex-husband, she did not need to pay tax upon it.
She sent the letter dated 29 November 2017 to the Respondents to make them aware of what she was doing and to check that it was correct.
She considered that she had always tried to act properly and lawfully.
The Respondents submitted:
The submissions within their Statement of Reasons were relied upon in full.
The Appellant failed to pay her tax on time and the Respondents correctly raised the penalties.
There was no reasonable excuse:
The Appellant was not entitled to rely upon the letter dated 17 March 2017 and in any event the letter stated that tax was still due upon rental income.
The Appellant’s returns for 2016/17 and 2017/18 both had the box declaring no UK rental income ticked. The advice given in 2019 to the effect that the Appellant did not need to complete returns was based on the information given by the Appellant that there was no change in circumstances. If the Appellant was unclear about her tax position she ought to have sought advice from the Respondents or a tax professional.
In 2024, during the Appellant’s conversation with the Respondent’s advisor, the Appellant was clear that she owned 50% of the rental property.
At no point during the 2024 conversation did the Respondent advise that there would be no interest or penalties to pay.
Having filed her returns, the Appellant ought to have estimated her tax liability and paid that amount rather than waiting for the calculation.
Information on how to pay is readily available online.
THE LAW
Assessment of late payment penalties
Pursuant to section 59B(4) Taxes Management Act 1970 (TMA 1970), the due date for payment of an income tax liability through Self-Assessment is on or before 31 January following the year of assessment.
The provisions governing the assessment of the relevant penalties are set out in Sch. 56. Paragraph 1(1) provides that:
“1(1) A penalty is payable by a person (P) where P fails to pay an amount of tax specified in column 3 of the Table on or before the date specified in column 4.”
The date specified is the date 30 days after the date for payment. The exception to this was 2022, when the Respondents allowed an extra month to make payment due to Covid-19.
Where a person fails to make payment on or before the penalty date, a penalty may be assessed under paragraph 3, Sch. 56, which provides for a penalty of 5% to be imposed, a further penalty of 5% after five months and a further penalty of 5% after 11 months.
Notification
Where a penalty arises, it must be notified to the taxpayer pursuant to paragraph 11, Sch. 56:
Where P is liable for a penalty under any paragraph of this Schedule HMRC must-
assess the penalty,
notify P, and
state in the notice the period in respect of which the penalty is assessed.
Reasonable excuse
Paragraph 16, Sch. 56 provides that a penalty does not arise in respect of the late payment if there is a reasonable excuse for the late payment and the failure to make the payment was rectified without unreasonable delay after the excuse had ended.
There is no statutory definition of “reasonable excuse”.
In Rowland v Revenue & Customs Commissioners [2006] STC (SCD) 536 at [19] the Tribunal stated that the issue was to be considered in the light of all the circumstances of the particular case. In The Clean Car Company Ltd v The Commissioners of Customs and Excise [1991] VATTR 234, Judge Medd QC set out that the test is an objective one, where the Tribunal must ask itself: “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?”
In Christine Perrin v HMRC [2018] UKUT 0156 (TCC) (“Perrin”), the Upper Tribunal set out the approach to take when considering “reasonable excuse,” at [81]:
When considering a “reasonable excuse” defence, therefore, in our view the FTT can usefully approach matters in the following way:
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).
Second, decide which of those facts are proven.
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?”
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.”
Special Reduction
Paragraph 9, Sch. 56 provides discretion for HMRC to reduce any penalty charged if they think it right to do so because of special circumstances. Where a person appeals against the amount of a penalty, paragraphs 15(2) and (3) Sch. 56 gives the Tribunal the power to substitute HMRC’s decision with another that HMRC had the power to make.
The Tribunal may rely on para 9, Sch. 56 only if they think HMRC’s decision was flawed when considered in the light of the well-established principles applicable in proceedings for judicial review: whether the decision-maker has taken account of all relevant factors; whether the decision-maker has taken account of no irrelevant factors, and; whether the decision is one that a reasonable decision-maker having regard to the available evidence could make.
DISCUSSION
Assessment of late payment penalties
There is no dispute that the tax for 20/21 was due on 2 April 2022, the tax for 21/22 was due on 31 January 2023 and the tax for 22/23 was due on 31 January 2024. There is also no dispute that the tax for all three tax years was paid on 6 September 2024. For the tax years 20/21 and 21/22 this payment was over 12 months late, and for the tax year 22/23 the payment was over 6 months late.
We find that the late payment penalties were correctly assessed by HMRC.
Notification of late payment penalties
In the chronology set out in the Appellant’s Notice of Appeal, the Appellant states, “23/9/24: Received Notice of Penalties dated 17/9/24.” The Notice of Appeal goes on to annex copies of the three notices in the sums set out above. We therefore find that the Penalty Notices were sent to the Appellant, and we find that the Appellant received them.
Reasonable Excuse
We applied the test as set out in “Perrin.”
The Appellant contends that: she was mistaken about the need to declare her rental income after having read the letter addressed to her husband and because she was giving her share of the income to him; that she was advised in 2019 that she did not need to complete returns going forwards; that she was advised in 2024 that no interest or penalties would be levied following the late payments, and; that she was unable to make payments until HMRC calculated her tax and she contacted HMRC to find out how to make payment.
We accept that the Appellant was genuinely mistaken when she thought that there was no tax due on her rental income. For the reasons set out above, we further find that the Appellant was in fact advised in 2019 that she did not need to complete Self-Assessment Tax Returns, however, we also find that this advice was predicated upon the failure by the Appellant to state that she was in receipt of rental income. We also find, for the reasons set out above, that the Appellant was not told, in 2024, that interest and penalties would not be levied. We find that the Appellant considered that she was unable to pay until she received the calculation of tax and that she did not know how to make payment until she spoke to the Debt management Team.
We consider that the Appellant’s mistaken belief that she did not need to declare her share of the rental income, in combination with an attempt to enquire as to the correctness of her assumption, amounts to a reasonable excuse.
In the Appellant’s letter dated 29 November 2017 the Appellant set out the position with respect to the rental income and asked what else she needed to do to make sure her 2016/17 return was accepted. The letter was not as clear as it might have been as to whether she was personally in receipt of rental income because it variously stated that: she had no income; that the property was let jointly, and; that it was agreed her ex-husband would have all the income. However, the letter also ended with a request for advice. No response was received.
We consider that, having attempted to set out the position in respect of the rental income, having asked for advice in respect of the 2016/17 return, and having received no response, it was objectively reasonable for the Appellant to conclude that the Respondents did not consider that she ought to have declared the rental income in her 2017/17 return and therefore that she did not need to declare it going forwards.
The Respondent contends in its Statement of Reasons, paragraph 104, that if the Appellant was uncertain about her tax position or the entries needed, she should have sought advice from the Respondents or a tax professional. For the reasons set out above, we find that the Appellant did just that, by way of the letter dated 29 November 2017.
We therefore also find that it was objectively reasonable for her to state to the Respondent’s adviser in 2019 that there was no change in circumstances, which prompted the adviser to state that she no longer needed to complete Self-Assessment tax returns. As far as she was concerned, the circumstances had not changed.
We do not find that it was reasonable for the Appellant to have placed any weight on the letter addressed to her husband dated 17 March 2017, not least because it stated that his rental income was still liable to tax. However, having found that the Appellant did not consider the rental income to be hers, it was objectively reasonable for her to think that that part of the letter did not apply to her.
After being informed of her mistaken belief during the conversation with the Respondent’s adviser dated 27 March 2024, the Appellant completed returns from 2020/21 onwards and filed them. She did not make payment immediately as she did not know how much to pay, instead waiting until she received a calculation from HMRC.
We find that it was objectively reasonable for the Appellant to wait to receive her tax calculation from the Respondent before making payment. When the Appellant spoke on the phone to the Respondent in 2024, she was not advised that she would risk late payment penalties if, upon filing her returns, she did not estimate and pay the tax as soon as possible rather than waiting for a calculation. It was reasonable, in our view, for the Appellant to consider that if the Respondents (who had failed to respond to her letter dated 29 November 2017) considered that she should now estimate her tax and make payment as soon as possible, they would have told her that when they had the opportunity.
We do not find that the delay in making payment due to the Appellant’s lack of knowledge about how to do it, was reasonable, and we find that the reasonable excuse ended once she had received her tax calculation. We accept that the information about making payments is readily available online. However, the 30-day penalty date for the tax year ended 5 April 2023 was 2 March 2024, and the 6-month late payment penalty became due five months later, which was before the Appellant received her tax calculation. All the penalties were therefore raised during the period of reasonable excuse.
We therefore allow the appeal and quash the penalties.
Special Reduction
If we had not found that the Appellant had a reasonable excuse, we would have found that the Respondent’s failure to respond to the letter dated 29 November 2017 amounted to a special circumstance to reduce the penalty to zero.
Finally, we note that the Appellant’s oral evidence to the Tribunal was that she had ultimately declared all the income from the property as her own (that is, both her share and her ex-husband’s share), which may have resulted in an overpayment of tax. We make no findings on this point as it is outside the scope of this appeal, however it may be that the Respondents wish to follow this up with the Appellant.
Right to apply for permission to appeal
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: 11th JULY 2025