Judgment summary
This is a decision of the First-tier Tribunal (Tax Chamber) concerning an appeal by Gordon Berry against penalties imposed by HMRC under Schedule 55 of the Finance Act 2009 for the late filing of his self assessment tax return (SATR) for the tax year ending 5 April 2024 (1). The return was ultimately filed on 16 April 2026 (1).
The penalties charged were a £100 initial late filing penalty, £900 in daily penalties, a £300 six month penalty, and a £300 twelve month penalty (2). The Tribunal found that it had no jurisdiction over the twelve month penalty because it had not been issued at the time the appellant lodged his appeal with the Tribunal, and struck out that part of the appeal (75, 76).
The Tribunal considered whether the appellant had a reasonable excuse for the late filing, applying the tests in Clean Car Company Limited v CEE, Barrett v HMRC, and Christine Perrin v HMRC, and the guidance in Matthew Harrison v HMRC (81-87). It concluded that the appellant did not have a reasonable excuse for the initial failure to file and did not remedy the default without unreasonable delay (93, 109, 115).
The Tribunal also considered whether there were 'special circumstances' under paragraph 16 of Schedule 55 that might justify a reduction in the penalties, applying Barry Edwards v HMRC, and found that HMRC's decision that there were no special circumstances was not flawed in a judicial review sense (120-132). The appeal was dismissed and the penalties upheld (134).
Background
The appellant, a former builder and joiner with no O-levels, had been within the self assessment regime since 8 July 2016 (12). He is not computer literate and does not have access to a computer; a friend had previously filed his tax returns online, including his 2022/23 return on 28 December 2023 (12). That friend became ill in July 2024 and died in October 2024 (18).
On 16 March 2024, the appellant wrote to HMRC about a self assessment statement he did not understand, noting he had worked for R&W Joinery since 26 September 2022 with 30% tax deducted under what was in fact the Construction Industry Scheme (CIS) (13). HMRC replied on 10 April 2024 explaining CIS registration and the filing deadlines of 31 October 2024 for a paper return or 31 January 2025 for an online return (14).
A Notice to File for 2023/24, dated 6 April 2024, was despatched on 2 May 2024 and estimated to have been delivered around 6 May 2024 (15). It stated that a return had to be filed even if the taxpayer believed no tax was owed, unless HMRC agreed otherwise before 31 January 2025 (16).
In January 2026, the appellant engaged his friend Mr Aitken, who was not a tax specialist but had an IT management background, to assist with correspondence with HMRC (18). From 16 January 2025 onwards, the appellant (through Mr Aitken) sent extensive correspondence to HMRC asserting that no SATR was required because his income was below the personal allowance, and seeking a refund of CIS deductions totalling £2,514.40 (19, 45).
HMRC's responses were repeatedly delayed, inconsistent, and in some instances did not address the appellant's arguments, a matter conceded by HMRC's representative, Ms Ritchie (74). The paper SATR was eventually filed on 16 April 2026 and received by HMRC on 21 April 2026 (59). HMRC subsequently confirmed on 22 May 2026 that a refund of £2,514.14 in CIS deductions would be made (60).
Core dispute
The issues before the Tribunal were whether the late filing penalties under Schedule 55 of the Finance Act 2009 had been correctly issued, and if so, whether the appellant had established a reasonable excuse for the late filing throughout the period of default (7, 8).
A preliminary dispute arose as to whether the appeal had been made late, which HMRC's representative conceded was not the case (4, 5). A further preliminary dispute concerned whether the twelve month penalty had been appealed, with the Tribunal finding it had no jurisdiction over that penalty since it had not been issued when the Tribunal appeal was lodged (6, 75, 76).
The appellant's central argument, advanced through Mr Aitken, was that because his total income for 2023/24 was below the personal tax free allowance, no SATR was required, and therefore the late filing penalties were a 'total irrelevance' (45). He also argued that HMRC's own agreement that no return was needed for 2024/25 supported this position (46), and that the effective filing date should be treated as 1 April 2025 due to HMRC's delays in responding (61).
HMRC argued that once a Notice to File under section 8 TMA had been issued, the appellant was legally obliged to file the return regardless of his belief about tax liability, since his income exceeded the £1,000 threshold requiring a full return (54, 58). HMRC also argued that no reasonable excuse existed and that there were no special circumstances warranting a reduction in the penalties (123-128).
Court findings
The Tribunal found that the appellant had appealed the three penalties (other than the twelve month penalty) timeously, and that since the SATR had not been filed following service of the Notice to File, the penalties had been competently and timeously issued and correctly calculated, discharging HMRC's burden of proof (78).
The period of default was found to run from the paper filing deadline of 31 October 2024 until the SATR was received by HMRC on 21 April 2026, a period of 537 days (79).
Applying the objective test for reasonable excuse derived from Clean Car, Barrett, Perrin, and Harrison, the Tribunal found that the appellant knew the paper filing deadline had passed, as shown in his own letter of 16 January 2025, and that both HMRC's letter of 10 April 2024 and the Notice to File were expressed in plain English with explicit deadlines (89, 90). The Tribunal found that a prudent taxpayer should have filed the SATR before the October 2024 deadline, and that no reasonable excuse had been established for the initial failure (93).
The Tribunal found that the belief, adopted via Mr Aitken, that no SATR was required because income was below the personal allowance was a mistake rather than a reasonable excuse, citing Garnmoss Limited v HMRC for the proposition that the Act does not provide shelter for mistakes (98-100). The Tribunal further found that circumstances arising after the filing date were only relevant to whether the default was remedied without unreasonable delay, per Harrison (101, 114).
The Tribunal found that the appellant was told repeatedly, including in the penalty notice of 10 March 2025, HMRC's letters of 5 August, 15 September and 23 October 2025, and the litigator's letter of 3 March 2026, that he was required to file the SATR regardless of his belief about tax liability, yet he did not do so until April 2026 (104-108). The Tribunal concluded that the appellant did not remedy the default without unreasonable delay (109).
On special circumstances, the Tribunal found, applying Barry Edwards v HMRC, that HMRC had taken into account all relevant arguments, including their own delays, had not taken into account irrelevant factors, and that their decision that there were no special circumstances was not irrational or flawed in the judicial review sense (131, 132).
The Tribunal noted that it had no jurisdiction to order a tax repayment, interest, or compensation, nor to discharge penalties on grounds of unfairness, citing HMRC v Hok (73, 133). The Tribunal observed that HMRC's handling of the appellant's correspondence had been consistently poor, a point conceded and apologised for by HMRC's representative, but noted that the appellant's remedy for this lay through HMRC's complaints process, not the Tribunal (74, 110-113).
Outcome
The Tribunal struck out the part of the appeal relating to the twelve month penalty for want of jurisdiction, as that penalty had not been issued until after the Tribunal appeal was lodged (75, 76). HMRC agreed to treat the appellant as having a reasonable excuse for believing he had appealed that penalty to them and to process that appeal after the decision was issued (77).
In relation to the remaining three penalties (the £100 initial penalty, the £900 daily penalties, and the £300 six month penalty), the Tribunal found that no reasonable excuse had been established and that no special circumstances applied. The penalties were upheld and the appeal was dismissed (134).
Major issues / areas of contention
- Whether the late filing penalties under Schedule 55 of the Finance Act 2009 were correctly and competently issued.
- Whether the appellant had established a reasonable excuse for failing to file his 2023/24 self assessment return on time.
- Whether any reasonable excuse, if it existed, subsisted throughout the period of default.
- Whether the appellant remedied the failure to file without unreasonable delay once any reasonable excuse ceased.
- Whether the Tribunal had jurisdiction over the twelve month penalty, given it was issued after the Tribunal appeal was lodged.
- Whether there were 'special circumstances' under paragraph 16 of Schedule 55 justifying a reduction in the penalties.
- Whether the Tribunal had jurisdiction to order a tax repayment, interest, or compensation for HMRC's poor correspondence handling.