Finola Owens v The Commissioners for HMRC
[2024] UKFTT 192 (TC)
Roy Bevan v The Commissioners for HMRC
1 July 2024
[2024] UKFTT 586 (TC)
First-tier Tribunal
Someone didn't tell the taxman about rental income from a property they jointly owned. They said they didn't know they had to, but the judge said that's not a good enough reason. They had to pay the penalties, even though they eventually paid the tax itself.
Key Facts
- •Mr. Roy Bevan failed to notify HMRC of his liability to income tax on property letting income for tax years 2006-07 to 2020-21.
- •HMRC issued penalties totaling £1,803.11 under Schedule 41 of the Finance Act 2008.
- •Mr. Bevan argued that he was unaware of the tax implications of jointly owned rental property and that his wife's personal allowance covered the income.
- •The property was purchased in 1999 and let out from February 2007.
- •Mr. Bevan paid the tax due after HMRC contacted him.
- •The appeal focused on whether Mr. Bevan had a reasonable excuse for failing to notify HMRC.
Legal Principles
A penalty for failure to notify tax liability can only be imposed if the taxpayer is in default of a statutory obligation.
Perrin v R & C Comrs [2018] BTC 513
The initial burden of proof is on HMRC to show a prima facie case of default; the taxpayer then bears the burden of proving a reasonable excuse.
Perrin v R & C Comrs [2018] BTC 513
Section 7 of the Taxes Management Act 1970 requires notification of income tax liability.
Taxes Management Act 1970, section 7
Schedule 41 of the Finance Act 2008 provides for penalties for failure to notify.
Finance Act 2008, Schedule 41
The test for 'reasonable excuse' is objective: would a reasonable taxpayer in the same situation have acted differently?
The Clean Car Co. Ltd. v C&E Commissioners [1991] VATTR 234
Ignorance of the law is not a reasonable excuse.
Hesketh & Anor v HMRC [2018] TC 06266, Spring Capital v HMRC [2015] UKFTT 8 (TC), Lau v HMRC [2018] UKFTT 230 (TC), Gilbert v HMRC [2018] UKFTT 437 (TC), Holland v German Property Administrator [1936] 3 All ER 6, Qualaphram Ltd v HMRC [2016] UKFTT 100 (TC)
Special circumstances must be exceptional or unusual to justify a penalty reduction.
Crabtree v Hinchcliffe [1971] 3 All ER 967, Clarks of Hove Ltd v Bakers Union [1979] 1 All ER 152
Outcomes
Appeal dismissed.
The appellant failed to establish a reasonable excuse for not notifying his tax liability. His ignorance of the law, even if honestly held, did not meet the objective standard of a reasonable taxpayer.
Penalties upheld.
HMRC correctly charged the penalties, and the appellant did not meet the threshold for a reasonable excuse or special circumstances to reduce the penalties.