Case: Late filing penalties quashed

[2019] UKFTT 0135 (TC)

Judge Richard Thomas

Decision released 26 February 2019

Income tax – Penalties for late delivery of tax return – Whether return issued for requisite purpose: no, Goldsmith applied - Whether reasonable excuse: no – Whether special circumstances: yes – HMRC failed to take into account that over-repayment should have been coded out – Appeal allowed – FA 2009, Sch. 55 – TMA 1970, s. 8.

Rich [2019] TC 07001


Mr Rich (the appellant) was employed and paid tax through PAYE. He had been issued with a P800 for 2015-16 which showed that he had a tax underpayment. As the appellant did not voluntarily pay the tax shortfall HMRC issued him with a notice to file a tax return. The appellant did not submit his tax return by the relevant deadline and HMRC accordingly issued him with late filing penalties. The appellant appealed against the penalties.

The FTT agreed with HMRC that the appellant did not have a reasonable excuse for his failure to file his return on time. However, Judge Richard Thomas, as he had in Goldsmith [2018] TC 06284, allowed the appeal because the purpose of issuing the notice to file had been to collect tax rather than to establish the appellant’s tax liability, and therefore the notice to file had not been issued legitimately under TMA 1970, s. 8(1) and therefore the penalties were invalid.

In case Judge Thomas’ decision in Goldsmith had been wrong, he also considered the issue of special reduction. He found that HMRC’s consideration that the £241 underpayment could not be coded out because of the appellant’s low income was ‘nonsense’, unsupportable and an error of law. Judge Thomas therefore concluded that he could remake the special reduction decision and had he needed to, he would have reduced the penalties to nil.


HMRC issued a notice to file a tax return because they wanted to collect an underpayment of tax on the taxpayer’s employment income for which they had sent voluntary payment letters which had been ignored. Going forward such underpayments should be able to be dealt with through simple assessments and real-time changes to PAYE tax codes, but both projects have been problematic and are currently on hold to allow HMRC to prepare for Brexit.

HMRC have been granted leave to appeal the Goldsmith decision applied in this case and the hearing is scheduled for July 2019.

It is worth noting that while several judges have followed the Goldsmith decision, not all have. In Crawford [2018] TC 06594 Judge Barbara Mosedale decided not to follow Goldsmith, instead deciding that a notice to file could be validly issued simply to assess a known liability to tax, rather than to calculate a person’s liability.

For commentary on penalties for late returns, see In-Depth at ¶181-500 and for commentary on notices to file returns under TMA 1970, s. 8, see In-Depth at ¶180-015.

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