TC09585 - [2025] UKFTT 00867 (TC)

we would start by observing that each of the three areas on which Mr Gordon seeks to rely has a specific ambit.

The reasonable excuse defence is exclusively focused on the period prior to the commencement of the dispute. In this case, it requires us to identify the reasons why the Appellant failed to notify the Respondents of his tax liability and to consider whether, viewed objectively, those reasons amount to an objectively reasonable excuse for the failure, taking into account the experience and other relevant attributes of the Appellant (see Perrin). The Appellant’s conduct during the course of the dispute is irrelevant.

In contrast, when we are considering the discount for disclosure, it is the Appellant’s behaviour during the course of the dispute which we need to consider and the reasons why the Appellant failed to notify the Respondents of his liability are irrelevant.

The special circumstances defence is something of a hybrid of the first two in that it is all–embracing and therefore capable of being satisfied by reference both to events preceding the dispute and events in the course of the dispute. In this case, it requires us to consider whether the Respondents’ decision to the effect that the circumstances in this case were not sufficiently special to justify a reduction in the Penalties for special circumstances was flawed;

turning then to the reasonable excuse defence, on the assumption which we are necessarily making for the purpose of addressing the issue of Penalties that the Appellant was liable to CGT in respect of the gains in question, we do not agree that the Appellant’s failure to notify the Respondents of the liabilities was objectively reasonable on the basis described in Perrin. It would seem from the Appellant’s initial response to Officer Weir of 1 September 2017 that the Appellant was at that stage unaware that he might be able to claim the benefit of the principal private residence exemption based on the existence of JRA and was under the impression that the exemption was available for a property as long as he intended to live in it and the relevant property was the only property that he owned.

Believing that he had had no liability to notify the Respondents of his gains on any of the Properties on that basis was not an objectively reasonable conclusion to have reached given that:

Those facts, coupled with the number of properties that he had owned and the significant quantum of the gains that he had made on them should have led the Appellant to take professional advice (or to ask the Respondents) before concluding that the principal private residence exemption was available for each Property.

We do not consider that the pressure under which the Appellant was operating as a result of his caring responsibilities and his family circumstances in general affects that conclusion. The Appellant has shown by his actions that, notwithstanding those responsibilities and circumstances, he was perfectly capable of carrying out renovations to the Properties and consulting professional advisers when required. He should have taken the appropriate professional advice at the time;

as for the level of the discount for disclosure, we do not agree with Mr Gordon that the Appellant’s disclosure in relation to the first three Properties which he owned was “unprompted”. Under paragraph 12(3) of Schedule 41, a disclosure of an act or failure made by a person when that person has reason to believe that the Respondents either have discovered, or are about to discover, the relevant act or failure is “prompted”. In this case, it is plain from the correspondence which passed between the Appellant and Officer Weir that the Appellant did not disclose his ownership of those three Properties until after he received Officer Weir’s email of 1 September 2017. In that email, Officer Weir revealed to the Appellant that the Respondents were aware that the Appellant had made gains on other properties. In saying that, Officer Weir gave the Appellant reason to believe that the Respondents had discovered his failure to notify his liability to tax in respect of those three Properties. Accordingly, his subsequent disclosure of that failure was “prompted”. That means that the range of possible penalties for the failure to notify his liability to tax on the gain made on each of those Properties was 20% to 30%, which is the approach which the Respondents have taken in determining the Penalties in the SOC;

in considering whether the discount that the Respondents then gave for the Appellant’s disclosure during the dispute was correct, we do not agree with Mr Gordon’s submission in paragraphs 136 to 140 above. If that submission were to be correct, then its effect would be that a taxpayer would be able to benefit from the maximum available discount in each case even where the taxpayer has scored considerably less than 100% on “Telling”, “Helping” and “Giving”. It seems to us that that, in and of itself, is an indication that the basis described by Mr Gordon is incorrect. The position should be that a taxpayer who scores 100% on “Telling”, “Helping” and “Giving” should be subject to the minimum penalty and that a taxpayer who scores something less than 100% on those three measures should be subject to a penalty that exceeds the minimum by an amount that reflects the shortfall in disclosure.

Approaching the language in the legislation more technically, there is nothing in the language of paragraph 13(1) of Schedule 41 that requires the Respondents to apply the discount calculated in accordance with their three measures to the standard penalty. The paragraph merely specifies that the standard penalty is to be reduced to one that reflects the quality of the disclosure. In the circumstances, the Respondents are perfectly entitled to calculate the penalty by applying the discount percentage they calculate to the difference between the standard percentage and the minimum percentage. Indeed, we would say that they would be wrong to do otherwise given the illogical outcome to which we have referred in the paragraph immediately above;

as for the scores which the Respondents gave to the Appellant for “Telling”, “Helping” and “Giving”, we agree with almost all of them. Specifically:

having said that, we agree with Mr Gordon that it was not appropriate to reduce the discount for “Helping” simply because the Appellant, through his representatives, continued to maintain that he was entitled to the principal private residence exemption. Disagreeing over the existence of the liability is not a lack of co–operation in making disclosure. Taking that into account, were the Penalties issue to be a live issue, we would be inclined to give the Appellant a 30% discount (instead of a 25% discount) for “Helping”, taking the overall discount percentage to 75% from 70%; and

finally, we do not see anything in the circumstances of this case which is sufficiently “special” to mean that the Respondents’ decision not to apply a reduction in the Penalties for that reason was flawed. The mere fact that the Appellant had difficult personal circumstances does not mean that he was entitled to ignore his responsibilities in relation to tax.