UPDATE: THE FTT HAS REVIEWED THIS DECISION AND ALLOWED THE TAXPAYER’S APPEAL – SEE THE CLARITAX NEWS STORY.
In the case of Wals v HMRC [2025] UKFTT 1331 (TC), the FTT has allowed the taxpayer’s appeal in part against late filing penalties, but only against the initial £100 penalty for the earliest return, leaving the balance of the £4,500 penalties payable.
INCOME TAX – penalties for late filing – reliance on chartered accountant – appellant aware of late filing penalties – reasonable excuse or special circumstances– yes but in respect of one penalty only – appeal allowed in part
On his arrival from Holland, Mr Wals had engaged a Chartered Accountant, Mr Smith, to ensure his UK tax compliance. However, Mr Smith had failed to submit the returns on time resulting in the penalties.
The returns had been voluntary in nature, but as the FTT noted:
“Unfortunately for the appellant, the law was changed in relation to voluntary returns in the Finance Act 2019, as a result of which a voluntary return is treated as having been made in response to a valid notice to file even if, as a matter of fact, no such notice was indeed served on the appellant. So the fact that HMRC have not established that valid notices to file were served on the appellant does not invalidate any penalties which are visited on the appellant as a result of the late filing of a tax return.”
There was evidence that the penalty notices had been issued and the FTT found that it was more likely than not that they had been received by Mr Smith.
The grounds for the appeal were that Mr Wals had relied upon Mr Smith, however the legislation specifically excluded such circumstances as a reasonable excuse noting that “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”. The FTT therefore judged that:
“So whilst we think generally that the appellant took reasonable care, by dint of his meetings and discussions with Mr Smith prior to the submission of his tax returns, this reasonable care ceased once he was on notice that Mr Smith had not submitted his tax returns on time. However, the appellant could still show that he had taken reasonable care if there is evidence that he had raised this with Mr Smith and sought assurances from Mr Smith that the failings evidenced by the penalties would not be repeated.
Unfortunately for the appellant, we have no such evidence. Given that the burden of establishing that the appellant has a reasonable excuse rests with him, we cannot find that he took reasonable care once he was on notice of Mr Smith’s failings.
So, whilst we are prepared to accept that he took reasonable care for the tax return for 2010/2011 in respect of which there is a £100 late filing penalty, we do not accept that he took reasonable care in respect of the subsequent tax returns which were filed late, and the penalties associated therewith.”
There were also no special circumstances:
“In our view, reliance on an agent who then fails to do what he is instructed to do is not sufficiently special that it is right to reduce the amount of the penalties. Frankly, it is a circumstance which we come across regularly in this tribunal and does not warrant a reduction.”
https://caselaw.nationalarchives.gov.uk/ukftt/tc/2025/1331
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