Case: Appeal against penalties for the non-payment of APNs

[2019] UKFTT 0220 (TC)

Judge Jonathan Cannan

Decision released 2 April 2019

Income tax – Accelerated payment notices (APNs) – Penalties for non-compliance – Time to pay agreement – Reasonable excuse – Appeal allowed in part – FA 2014, Pt. 4, Ch. 3 – FA 2009, Sch. 56.

ASE Plc [2019] TC 07067


HMRC issued ASE Plc (the appellant) with three APNs pursuant to FA 2014, s. 219 in connection with the appellant’s use of an avoidance scheme. As the APNs had not been paid by the due date, 5 months after the penalty date or 11 months after the penalty date, HMRC assessed the appellant to penalties of 5% of the tax unpaid on each of these three occasions pursuant to FA 2014, s. 226.

The appellant appealed against the penalties on the grounds that:

it had requested time to pay the disputed tax whilst negotiating the underlying tax liabilities; and/or

it had a reasonable excuse for non-payment of the disputed tax; and/or

there were special circumstances by reference to which HMRC should have reduced the penalties for non-payment to nil.

The FTT was not satisfied that there was any request for deferral of the disputed tax before it became due and payable. There was simply an understanding on the part of the appellant’s head of tax (Mr Cummings) that the disputed tax would not be payable whilst the settlement discussions were ongoing.

On the issue of whether there was a reasonable excuse for the late payment, the FTT found that Mr Cummings and the HMRC officer with overall responsibility for the scheme used by the appellant (Mr Cliffe) were at cross-purposes. Mr Cliffe was primarily concerned with negotiating the underlying tax liabilities, whereas Mr Cummings wanted to negotiate those liabilities as well as the APNs and time for payment of the disputed tax. Mr Cummings had not appreciated that Mr Cliffe considered he had no responsibility in relation to the APNs and time to pay (TTP) the disputed tax because they were dealt with by the APN team.

The FTT was satisfied that Mr Cummings genuinely and honestly believed that Mr Cliffe was treating the disputed tax as deferred whilst settlement negotiations were continuing. It was also satisfied that viewed objectively this was a reasonable belief and amounted to a reasonable excuse for non-payment of the disputed tax whilst the negotiations were in progress.

This excuse ended when Mr Cliffe confirmed in a meeting that HMRC were not deferring payment of the disputed tax and were pursuing the APN penalties. Considering FA 2009, Sch. 56, para. 16(2)(c), which provided that the appellant should be treated as continuing to have a reasonable excuse if a failure is remedied without unreasonable delay after the excuse ceased, the FTT thought that a period of seven weeks was enough time for the appellant to put forward a TTP arrangement. Therefore, the reasonable excuse ended on this date.

Because the appellant had neither paid the sum due in the APN nor arranged a TTP by the date the reasonable excuse ended, the FTT was satisfied that the appellant was liable for a first penalty of 5% of the disputed tax. However, the FTT found that no liability arose for any subsequent penalties and it accordingly cancelled those penalties.

Finally, the FTT did not consider that HMRC’s decision not to give a special reduction was flawed. The appellant’s case on special circumstances was effectively the same as its case on reasonable excuse.

The appeal was partly allowed.


This decision highlights that where a taxpayer wants a time to pay arrangement in relation to an amount in an APN, they should contact the APN team using the details given in the APN. This is instead of contacting the HMRC officer dealing with their case, who will be primarily concerned with settling liabilities in relation to the underlying scheme.

For commentary on APNs, see In-Depth at ¶192-765ff..

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