The First-tier Tribunal (FTT) has allowed a taxpayer’s appeal against late filing penalties where he had not received a notice to file a tax return, after reviewing an earlier decision in which it had upheld most of the penalties.

HM Revenue and Customs (HMRC) considered that the taxpayer had been late in submitting tax returns for the 2010/11, 2011/12, 2012/13 and 2014/15 tax years, and raised late filing penalties totalling £4,500. In March 2022, HMRC wrote to the taxpayer notifying him of the penalties and the fact that interest was accruing on them. He was given permission to make a late appeal against the penalties to the FTT.

He argued that HMRC had not established that valid notices to file were served on him. He asserted that the penalties related to years in which no tax liability arose and so no tax had been lost to HMRC. His accountant, whom he had relied on to deal with his tax affairs, had been ill for several years and had subsequently died. He claimed that the first time he had become aware of the outstanding liabilities was when HMRC had written to him in March 2022.

The FTT did not consider that HMRC’s evidence came anywhere close to establishing that valid notices to file had been served on the taxpayer. However, that did not invalidate the late filing penalties. Under Section 12D of the Taxes Management Act 1970, a voluntary return is treated as having been made in response to a valid notice to file even if, as a matter of fact, no such notice was served.

The FTT found that he had a reasonable excuse in respect of the £100 penalty for the late filing of his return for the 2010/11 tax year. After that penalty had been issued, however, he would have been on notice that his accountant had not submitted the return by the deadline. The penalties for the other three tax years were therefore upheld.

The taxpayer applied for permission to appeal to the Upper Tribunal on the grounds that, having concluded that he had never received valid notices to file, and having correctly identified that the returns were therefore voluntary, the FTT had erred in law in failing to recognise that the due date for filing did not arise until the date on which the returns were submitted. The FTT was asked to review its decision in light of the grounds of appeal, and decided to set aside and re-decide the parts of its decision relating to the other three tax years.

The FTT noted that, under Section 12D, a notice to file is deemed to have been given to a taxpayer in respect of a voluntary return on the day that the return is submitted. No actual notices had been served on the taxpayer, and the returns were therefore due three months after they had been submitted. It was not possible, on the facts of the case, for them to have been submitted late. The appeal was allowed and the penalties overturned.