T09636 - [2025] UKFTT 01099 (TC)

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.

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.”