Tribunals force rethink on Scottish land tax penalties rules

An Upper Tribunal for Scotland ruling has highlighted administrative issues over the issue of penalty notices for Land and Buildings Transaction Tax late payments, but Revenue Scotland vows to continue charging daily penalties

Following two rulings from the UTS in July 2019 (Revenue Scotland and Michael Robert Harrison & Sharon Ross UTS/AP/18/0015, and Revenue Scotland and Begbies Traynor (Central)), Revenue Scotland has confirmed it will continue to charge daily penalties for late LBTT returns, but will amend its procedures so that in effect two notices will be issued.

The penalties were incurred under s161 Revenue Scotland and Tax Powers Act 2014 (RSTPA 2014) for any LBTT return that was not received within three months of the filing date.

In line with an earlier First Tier Tribunal for Scotland (FTTS), the UTS said that Revenue Scotland had failed to provide evidence of its decision to charge the penalties as required under s161 RSTPA 2014.

In both cases the LBTT return was filed more than six months after the filing date, incurring penalties totalling £1,000, made up of an initial fixed penalty of £100 plus daily penalties of £10 per day for 90 days. The appeals to the FTTS and UTS related to the £900 in daily penalties.

The UTS upheld the decision of the FTTS to cancel the daily penalties.

However, the UTS also considered the statutory provisions of s161(1)(c) and 179 RSTPA 2014 and whether a single penalty assessment notice (PAN) would act as both a notice of liability (under section 161(1)(c)) and an assessment notice (under section 179) or whether two separate notices have to be issued.

The UTS concluded that a single PAN was not sufficient and that two separate notices were required.

As a result, Revenue Scotland has said that two notices may be required in future with the notice under s161(1)(c) preceding the PAN issued under s179.

But it has also said that it will not repay daily penalties applied in previous late return cases because it considers those matters to have been finalised as the penalty assessments have been paid without dispute or, for a small number, they have previously been upheld by decisions of the FTTS or UTS.

LBTT Technical Bulletin – 21 August

​By Philip Smith

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