Judgment summary
This is an appeal against four penalties notified on 13 November 2025 under Schedule 24 of the Finance Act 2007, in respect of inaccuracies in the Appellant's Self-Assessment Tax Returns (SATRs) for the tax years ended 5 April 2021 to 5 April 2024 inclusive (1).
The Appellant was not resident in the UK but in Qatar, and received UK income as a non-resident landlord under the non-resident landlord scheme (2). He did not dispute that the Returns contained inaccuracies, but appealed the penalties, primarily on the basis that he had not been careless (2).
Neither the Appellant nor his representative attended the hearing. The Tribunal decided to proceed in his absence under rule 33 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009, being satisfied he had been notified and that it was in the interests of justice to proceed (3)-(6).
The Tribunal considered four issues: liability for each penalty (whether the inaccuracies were careless), correct quantification of the penalties, proportionality, and whether HMRC's decision not to suspend the penalties was flawed (12). The Tribunal found the Appellant liable for all four penalties, upheld their quantification, found they were not disproportionate, and found HMRC's decision not to suspend was not flawed. The appeal was dismissed (53).
Background
The Appellant was non-UK resident, living in Qatar, and received UK income as a non-resident landlord, having applied under the non-resident landlord scheme (2). He was required to submit SATRs for the years ended 5 April 2021 to 5 April 2024 (1).
For 2021 and 2022, he failed to state he was not UK resident and did not complete the SA109 'Residence, remittance basis etc' form, so he was treated as UK resident and benefited from the UK personal allowance (£12,500 for 2021 and £12,570 for 2022), meaning no tax was shown as payable on his UK income (£1,074 in 2021 and £3,223 in 2022), when but for the inaccuracy he would have owed £214.80 and £644.60 respectively (14), (17).
For 2023, he did complete the SA109 and correctly stated non-residence, but ticked Box 15 claiming entitlement to the UK personal allowance under the UK-Qatar Double Taxation Agreement (DTA), when Qatar was not among the countries listed in the SA109 Notes as giving such entitlement; but for this, he would have owed £475.40 on income of £2,377 (20)-(24).
For 2024, he again ticked Box 15 incorrectly (income £8,213, correct liability £1,642.60), and also entered £12,570 in both Box 21 and Box 22, each purporting to claim repayment of UK tax deducted at source under DTA relief provisions, when in fact no tax had been deducted at source and he completed neither the HS302 nor HS304 claim forms, resulting in a purported repayment of £25,140 (28)-(31). HMRC opened an enquiry into the 2024 Return on 14 May 2025 to check the accuracy of this refund (38).
Core dispute
The dispute concerned whether the inaccuracies in the four Returns were 'careless' within paragraph 3 of Schedule 24 Finance Act 2007, such that penalties under paragraph 1 arose, which the Appellant disputed, attributing the errors to language difficulties, lack of tax training, the complexity of the SA109 form and DTA rules, and reliance on guidance from Savills' finance team (15), (25), (32).
The Appellant also disputed whether the penalties were correctly quantified, whether they were proportionate, and whether HMRC's decision not to suspend the penalties under paragraph 14 of Schedule 24 was flawed in public law terms (12), (46), (48).
Court findings
The Tribunal found that for each year the inaccuracies were careless, applying the standard of a prudent and reasonable taxpayer in the Appellant's position, as set out in Collis v HMRC [2011] UKFTT 588 TC (8), (15). It held language difficulties did not excuse the errors, that the Appellant already knew he was non-resident through his prior non-resident landlord application, and that the SA109 Notes clearly stated Qatar was not a qualifying country for the personal allowance claim under Box 15 (15), (26).
For the 2024 Box 21 and Box 22 errors, the Tribunal found the Appellant had not read the relevant guidance notes or completed the required claim forms (HS302 and HS304), and that a reasonable taxpayer would have done so before making such claims (35).
On quantum, the Tribunal confirmed the penalties were correctly set at 15% of potential lost revenue, being the minimum rate for prompted disclosure, and that HMRC were right to treat the disclosure as prompted since it came after HMRC opened its enquiry on 14 May 2025 (38). The potential lost revenue figures of £214.80, £644.60, £475.40 and £26,782.60 were upheld, producing penalties of £32.22, £96.69, £71.31 and £4,017.39 respectively (39)-(41). HMRC's decision that there were no special circumstances warranting further reduction under paragraph 11 was found not to be flawed (42).
On suspension, the Tribunal held that HMRC's discretion under paragraph 14 only permits suspension where a SMART condition can be set to prevent further careless inaccuracies, and found Officer Dixon's reasoning that no such condition could be identified was not irrational or otherwise unlawful (44), (47).
On proportionality, the Tribunal rejected the Appellant's factual assertions, noting the penalties totalled £4,217.61, not over £5,000, and that substantial potential tax loss (up to £25,140 in repayments) had been at stake, and that the inaccuracies did create a burden on HMRC through the investigation (49). Applying the reasoning in Collis v HMRC [2011] UKFTT 588 TC regarding the First Protocol to the European Convention on Human Rights and the margin of appreciation afforded to the state in tax matters, the Tribunal concluded the penalties were not over-penal or disproportionate (51)-(52).
Outcome
The Tribunal dismissed the appeal (53). It found the Appellant liable for all four penalties totalling £4,217.61, confirmed their quantification, found HMRC's decision not to suspend the penalties was not flawed, and found the penalties were not disproportionate.
The decision recorded the parties' right to apply for permission to appeal under Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009, within 56 days of the decision being sent (54).
Major issues / areas of contention
- Whether the Tribunal could proceed with the hearing in the Appellant's absence under rule 33 of the Tribunal Rules
- Whether the inaccuracies in the 2021, 2022, 2023 and 2024 Self-Assessment Tax Returns were careless within paragraph 3 of Schedule 24 Finance Act 2007
- Whether the four penalties were correctly quantified as 15% of the potential lost revenue for each year
- Whether HMRC's decision that there were no special circumstances justifying further reduction of the penalties was flawed
- Whether HMRC's decision not to suspend the penalties under paragraph 14 of Schedule 24 was flawed in public law terms
- Whether the penalties, in particular the penalty for the 2024 Return, were disproportionate