Asim Hussain v The Commissioners for HMRC [2025] UKFTT 546 (TC)

[2025] UKFTT 00546 (TC)Case No TC09525
FIRST-TIER TRIBUNAL
TAX CHAMBER
Hearing Heard on: 28 February 2025Date Judgment date: 19 May 2025
By remote video hearing
Appeal reference: TC/2024/03442
INCOME TAX – property letting income received – failure to notify liability to income tax under section 7 of the Taxes Management Act 1970 – penalty issued pursuant to Schedule 41 to the Finance Act 2008 - whether Appellant had a reasonable excuse – no – appeal dismissed
Before
TRIBUNAL JUDGE MICHAELA SNELDERSDEREK ROBERTSON
Between
ASIM HUSSAINAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentAsim Hussain, appeared in person for AppellantFor HMRC: Vicki Anne Wood, Litigator of HM Revenue and Customs’ Solicitor’s OfficeDECISION

Introduction

[1]With the consent of the parties, the form of the hearing was video on the Teams video platform. A face to face hearing was not held because it was considered more expedient to use the video platform. The documents to which we were referred are contained in a hearing bundle of 837 pages and the Respondents’ (“HMRC”) Statement of Reasons of 20 pages. The Appellant informed the Tribunal that he had not received the hearing bundle nor HMRC’s Statement of Reasons but stated that he wished to proceed with the hearing. During the hearing HMRC also provided the Tribunal and the Appellant with an example of a standard SA251 letter (“SA251”).[2]Prior notice of the hearing had been published on the gov.uk website, with information about how representatives of the media or members of the public could apply to join the hearing remotely in order to observe the proceedings. As such, the hearing was held in public.[3]The Appellant appeals against penalties issued to him for his failure to notify his liability to pay tax for the years ending 5 April 2017 to 5 April 2021 inclusive. The penalties were issued to the Appellant on 29 February 2024 pursuant to Schedule 41 to the Finance Act 2008 (“Schedule 41”) in the amount of £757.87.[4]We gave an ex tempore decision at the hearing of this matter dismissing the appeal. The Appellant requested a full written decision.

Facts and procedural Background

[5]The Appellant had been in the Self-Assessment regime since 18 June 2002 and completed a Self-Assessment Tax Return (“SATR”) for all tax years up to and including the tax year 2015/16 except 2005/06, 2006/07, 2007/08, 2008/09.[6]The Appellant asserts that at some point in 2015, 2016 or 2017, HMRC wrote to him informing him that he did not need to complete a SATR and as a result he did not complete a SATR after that date. The Appellant stated in oral evidence at the hearing that he had taken this letter to mean that he would never have to complete a SATR again, even if he had a liability to tax in later years, and that he had assumed that any tax liabilities would be deducted from his pay by his employer through PAYE.[7]The Appellant no longer has this letter and so was unable to show it to the Tribunal. HMRC had no record on theor system of such a letter being sent to the Appellant but suggested that a computer-generated letter SA251 may have been sent to him if his last SATR had shown that he had no liability to tax for that year and possibly earlier years.[8]HMRC provided the Tribunal with an example of an SA251 which included the following relevant wording:
“Your Self Assessment tax return Thank you for sending your Self Assessment tax return for [user to enter tax year]. Based on the information you gave us, that was the last year that you needed to send us a return. ……. If your circumstances change If your circumstances change, you can easily view and update your tax information online at any time. You can do this using your Personal Tax Account. ……. If you need to fill in a tax return in the future, you’ll still be able to use your original Self Assessment online account. To open your account again you’ll need your Unique Taxpayer Reference (UTR) which is shown at the top of this letter. To check if you need to fill in a tax return, go to www.gov.uk/check-if-you-need-tax-return If you do not have a Self Assessment online account, you can set one up for free. To do this go to www.gov.uk/log-in-file-self-assessment-tax-return”

If your circumstances change

[9]On 24 November 2021, HMRC issued a letter to the Appellant opening an enquiry into the rental income he had received from property. This letter requested the Appellant provide HMRC with information relating to property income that he had received.[10]The Appellant did not reply to this letter and so on 28 January 2022 HMRC issued an Information Notice pursuant to Paragraph 1 of Schedule 36 to the Finance Act 2008.[11]The parties then entered into correspondence between 21 February 2022 and 26 April 2022, during which the Appellant provided some information relating to income he had received from property. During this period in March 2022 the Appellant wrote to HMRC explaining that his son was disabled as a result of having cerebral palsy and that he required 24 hours a day care from the Appellant and his wife, that he was trying to build an extension at a cost of £110,000 to make his home more suitable for his son and that he had received no financial support for his son from the state nor any contribution towards the cost of the extension.[12]On 27 April 2022, HMRC sent the Appellant estimated tax calculations based on the information that he had provided.[13]The parties entered into a further period of correspondence between 9 May 2022 and 26 January 2024, which included multiple requests from the Appellant for more time to provide the requested information.[14]On 26 February 2024, HMRC issued Notices of Assessment to the Appellant pursuant to Section 29 of the Taxes Management Act 1970 (“TMA 1970”) for the tax years 2016/17 to 2020/21 in the amount of £3,166.60.[15]On 29 February 2024, HMRC issued Penalty Assessments to the Appellant pursuant to Schedule 41 for his failure to notify his tax liability for the tax years 2016/17 to 2020/21 inclusive (“FTN penalties”) in the amount of £757.87.[16]The Appellant appealed against the Assessments and FTN penalties to HMRC by letter dated 13 March 2024.[17]On 3 April 2024, HMRC issued their View of the Matter letter to the Appellant upholding the Assessments and the FTN penalties. This letter also offered a statutory review or the option to appeal to the First Tier Tribunal.[18]The Appellant accepted an offer of a review and provided bank statements and receipts showing expenses that he asserted had been for the rental properties for the period September 2015 to September 2021.[19]On 21 May 2024, HMRC issued their Review Conclusion letter to the Appellant which upheld the decision to issue the Assessments and FTN penalties.[20]On 13 June 2024, the Appellant lodged an appeal before the First Tier Tribunal in which he stated that he was appealing against a penalty for late filing of a SATR and that his desired outcome was as follows:
“I would like the penalty notice to be removed I willing to pay the tax assessment although I don’t agree to these but then penalty assessment Is far to high.”

Legal obligation to notify liability to income tax

[21]Every person has a statutory obligation to notify HMRC if they have a liability to pay tax in a tax year. This obligation is set out in section 7 of the TMA 1970 which provides as follows: “7. — Notice of liability to income tax and capital gains tax. (1) Every person who— (a) is chargeable to income tax or capital gains tax for any year of assessment, and (b) falls within subsection (1A) or (1B), shall, subject to subsection (3) below, within the notification period, give notice to an officer of the Board that he is so chargeable. (1A) A person falls within this subsection if the person has not received a notice under section 8 requiring a return for the year of assessment of the person's total income and chargeable gains. …. (1C) In subsection (1) “the notification period” means— (a) in the case of a person who falls within subsection (1A), the period of 6 months from the end of the year of assessment,” (a) is chargeable to income tax or capital gains tax for any year of assessment, and

Penalty for failure to notify

[22]Where a person fails to notify HMRC of their liability to pay tax in a tax year in accordance with section 7 of TMA 1970, that person is liable to a penalty pursuant to paragraph 1 of Schedule 41.

reasonable excuse

[23]The penalty for failure to notify pursuant to paragraph 1 of Schedule 41 applies unless the person had a reasonable excuse for the failure to notify. This is set out in Paragraph 20 of Schedule 41 as follows:
“(1) Liability to a penalty under any of paragraphs 1, 2, 3(1) and 4 does not arise in relation to an act or failure which is not deliberate if P satisfies HMRC or (on an appeal notified to the tribunal) the tribunal that there is a reasonable excuse for the act or failure. (2) For the purposes of sub-paragraph (1)– (a) an insufficiency of funds is not a reasonable excuse unless attributable to events outside P's control, (b) where P relies on any other person to do anything, that is not a reasonable excuse unless P took reasonable care to avoid the relevant act or failure, and (c) where P had a reasonable excuse for the relevant act or failure but the excuse has ceased, P is to be treated as having continued to have the excuse if the relevant act or failure is remedied without unreasonable delay after the excuse ceased.” (a) an insufficiency of funds is not a reasonable excuse unless attributable to events outside P's control, (b) where P relies on any other person to do anything, that is not a reasonable excuse unless P took reasonable care to avoid the relevant act or failure, and (c) where P had a reasonable excuse for the relevant act or failure but the excuse has ceased, P is to be treated as having continued to have the excuse if the relevant act or failure is remedied without unreasonable delay after the excuse ceased.”
[24]The Appellant has not satisfied HMRC that he had a reasonable excuse for failing to notify his liability to income tax for the tax years 2016/17- 2020/21 inclusive. It is therefore for this Tribunal to consider the Appellant’s excuse and determine whether it is a reasonable excuse and, if it is, whether the Appellant delivered the return without unreasonable delay after the reasonable excuse ended.[25]In the case of Christine Perrin v Commissioners of Revenue & Customs [2018] UKUT 156 (TCC) (“Perrin”) the Upper Tribunal provided clear guidance to the First- tier Tribunal on how it should approach the consideration of a “reasonable excuse” defence as follows:
“81. When considering a “reasonable excuse” defence, therefore, in our view the FTT can usefully approach matters in the following way: (1) First, establish what facts the taxpayer asserts give rise to a reasonable excuse (this may include the belief, acts or omissions of the taxpayer or any other person, the taxpayer’s own experience or relevant attributes, the situation of the taxpayer at any relevant time and any other relevant external facts). (2) Second, decide which of those facts are proven. (3) Third, decide whether, viewed objectively, those proven facts do indeed amount to an objectively reasonable excuse for the default and the time when that objectively reasonable excuse ceased. In doing so, it should take into account the experience and other relevant attributes of the taxpayer and the situation in which the taxpayer found himself at the relevant time or times. It might assist the FTT, in this context, to ask itself the question “was what the taxpayer did (or omitted to do or believed) objectively reasonable for this taxpayer in those circumstances?” (4) Fourth, having decided when any reasonable excuse ceased, decide whether the taxpayer remedied the failure without unreasonable delay after that time (unless, exceptionally, the failure was remedied before the reasonable excuse ceased). In doing so, the FTT should again decide the matter objectively, but taking into account the experience and other relevant attributes of the taxpayer and the situation in which the taxpayer found himself at the relevant time or times.”
[26]Step 1 – The Appellant is relying on a letter that he asserts he received from HMRC at some point between 2015 and 2017, which informed him that he was no longer required to fill in a tax return. The Appellant understood this letter to mean that he never had to fill in a tax return again, irrespective of whether or not he had a liability to pay tax in a tax year because any future tax liability would be dealt with by his employer making PAYE deductions. The Appellant asserts that his receipt of this letter is a reasonable excuse for his failure to complete a SATR for the tax years ending 5 April 2017 to 5 April 2021.[27]The Appellant is also relying on his caring responsibilities as a reasonable excuse for his failure to make any further enquiries about his tax affairs after he received the letter from HMRC. The Appellant states that his caring responsibilities for his disabled son and the difficulties he has providing a suitable accommodation for him without any support from the state take up all of his time when not at work and therefore he does not have any capacity to deal with his tax affairs.[28]Step 2 – While it is surprising that the Appellant did not keep a copy of the relevant letter from HMRC, we find that on a balance of probabilities he did receive an SA 251 letter from HMRC at some time between 2015 and 2017.[29]We accept the oral evidence given by the Appellant at the hearing with respect to his son’s cerebral palsy and the strain that this causes for him and his wife, in terms of time, money and wellbeing.[30]Step 3 – We find that the opening words of the standard letter, if read in isolation, are misleading where they state:
“Based on the information you gave us, that was the last year that you needed to send us a return.”
However these words cannot be read in isolation and must be read together with the later words:
“If you need to fill in a tax return in the future, you’ll still be able to use your original Self Assessment online account…..”
And the guidance on how to find out if you need to file a tax return in the future as follows:
“To check if you need to fill in a tax return, go to www.gov.uk/check-if-you-need-tax-return”
[31]In the context of the whole letter therefore we do not accept that a person could reasonably understand from this that they would never need to file a tax return again, even if they have a liability to tax in the future.[32]We also do not accept that it was objectively reasonable for the Appellant to assume that any future liability to tax would be deducted from his pay through PAYE without him completing a SATR. The Appellant had been completing his SATR for many years and therefore knew that this was how HMRC collected information on his property income. It was not objectively reasonable for him to assume that HMRC could obtain this information without him completing a SATR.[33]The SA 251 letter provided guidance on how to find out if he needed to complete his SATR in future years. It was not objectively reasonable for the Appellant to simply not make any further enquiries either with HMRC, an accountant, the Citizens Advice Bureau or similar, about whether he needed to complete a SATR in tax years when he had taxable income from the property.[34]We do sympathise with the Appellant’s clearly very challenging personal circumstances with his son but this cannot be a reasonable excuse for making no enquiries about his tax obligations at any time over a five year period from 2016-2021.[35]We find therefore that the Appellant did not have a reasonable excuse for his failure to notify his tax liability for the tax years 2016/17 to 2020/21.[36]Step 4 – As the Appellant did not have a reasonable excuse for his failure to notify we do not need to consider step 4.

Penalty calculation

[37]HMRC has made reductions to the FTN penalties on the grounds that the Appellant’s failure to notify was not deliberate and to recognise his level of co-operation during the enquiry. This has resulted in a 75% reduction in the potential penalty that HMRC could have charged the Appellant. We consider that this reduction is fair and reasonable on the facts of this case.[38]We also find that it is reasonable on the facts of this case for HMRC to conclude that the Appellant’s circumstances are not “special circumstances” for which they have the power to make a special reduction to the FTN penalties.

decision

[39]For the reasons set out above, the appeal against the FTN penalties for the tax years ending 5 April 2017 to 2021 in the sum of £757.87 is dismissed.

Right to apply for permission to appeal

[40]This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. Release date: 19th MAY 2025