Meydan Asset Management Ltd v The Commissioners for HMRC [2026] UKFTT 613 (TC)

[2026] UKFTT 00613 (TC)

Case No TC 09852

FIRST-TIER TRIBUNAL

TAX CHAMBER

Hearing Heard on: 9 December 2025

Date Judgment date: 21 April 2026

By remote video hearing

Appeal reference: TC/2025/00352

Accelerated Payment Notices; Late payment penalties; Reasonable excuse; Special circumstances; Schedule 56 FA 2009; APN regime

Before

TRIBUNAL JUDGE GERAINT WILLIAMS

CHARLOTTE BARBOUR

Between

MEYDAN ASSET MANAGEMENT LTDAppellant

THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondent

David Jones of UHY Ross Brooke and Siobhan Duncan, of counsel. for Appellant

Leigh Reynold litigator of HM Revenue and Customs’ Solicitor’s Office for Respondents

DECISION

Introduction

[1]This decision concerns an appeal by Meydan Asset Management Ltd (“the Appellant”) against six penalties imposed by the Respondents (“HMRC”) under paragraph 3 of Schedule 56 to the Finance Act 2009 (“Sch 56”). These penalties were issued on 3 May 2024 following the Appellant’s failure to pay six Accelerated Payment Notices (“APNs”) by 8 March 2024. The APNs had been issued to the Appellant under section 219 of the Finance Act 2014 (“FA 2014”) in respect of its participation in the Goldfinger aka Sally, Echo or Karat tax avoidance scheme.

[2]The Appellant does not dispute that the APNs were issued nor does it dispute that no payment was made by the due date. It appeals the penalties on the basis that it had a reasonable excuse for non-payment within paragraph 16 of Sch 56, or alternatively that the penalties should be reduced under the “special circumstances” provision in paragraph 9 of Sch 56. The Appellant accepts that this Tribunal has no jurisdiction to consider the validity of the APNs themselves, in accordance with the Court of Appeal’s decision in Beadle v HMRC

[2020] EWCA Civ 562

EVIDENCE

[3]The documents before us included a hearing bundle containing the pleadings, relevant correspondence and documents, witness statement with exhibits of Mr Anthony Esse dated 29 July 2025, the parties’ skeleton arguments and an authorities bundle.

[4]Mr Esse attended the hearing and was cross-examined. His evidence and cross-examination are summarised below.

[5]Mr Esse is the sole director and shareholder of the Appellant company. The company ceased trading some years ago and has since held only illiquid assets, principally interests in property or investment holdings that could not be realised quickly without significant loss or legal complication. The company had no liquid cash reserves and no access to external borrowing.

[6]During the period in which the APNs were issued, he was engaged in protracted and expensive divorce proceedings in the Family Court. The evidence exhibited to his witness statement show that the divorce proceedings gave rise to substantial payments to his former spouse, including payments arising from the sale of the family home (approximately £1.17m), the entirety of the sale proceeds of a French chalet, and the majority of the proceeds of sale of the yacht “Baby X”. His evidence is that these sums were not discretionary but required by court order.

[7]Mr Esse incurred very substantial legal fees in connection with the divorce, approximately £1.3 million over several years. There were also further court ordered lump sum payments of £965,000 scheduled for July 2025 and again for July 2026. Mr Esse states that these obligations generated acute liquidity pressure for him personally.

[8]He asserts that the company’s inability to fund the APNs was directly linked to his own financial position because he was the only plausible source of funds for the Appellant. Although the company was a separate legal entity, its ability to pay depended wholly on him, and the constraints imposed by the Family Court prevented him from providing funds without violating court orders or generating a risk of bankruptcy.

[9]He also states that, throughout the APN process, the Appellant did not receive pooling notices, bound arrangement notices or other statutory documents.

[10]In his evidence he describes the time to pay (“TTP”) proposal submitted to HMRC on 5 March 2024, offering an immediate £50,000 followed by structured quarterly payments. HMRC refused that proposal on 7 March 2024.

[11]During cross-examination, Mr Esse accepted that the Appellant company had been notified of potential tax liabilities for some time and that he remained aware of HMRC’s long-standing view that PAYE and NIC were payable. He accepted that none of the APNs had been paid. Asked whether he had “plenty of time to raise funds”, he disagreed, explaining that the company had no trading income and that his personal assets were, during the relevant period, either frozen or controlled by the Family Court. He said that the APN amounts could not have been paid without breaching court-ordered financial obligations and that his finances were being monitored by his divorce solicitors and the court.

[12]He was asked whether he recalled the content of the 2 February 2024 letter from HMRC and whether he understood that the APNs would fall due for payment on 8 March 2024. The letter responded to the Appellant’s representations made on 8 February 2023 and confirmed that the conditions for issue of the APNs had been met, they were issued in the correct amounts and the APNs fell due on 8 March 2024. He accepted that he received the letter but stated that he could not recall the details and had relied on advisers. He said that he believed HMRC’s refusal to grant the TTP proposal left him with no viable mechanism to pay.

[13]Mr Esse was asked whether the Appellant had made any payments towards the APNs at any time. He confirmed that no payment had been made, repeating that neither he nor the company had available liquid funds and that the company’s assets could not be realised within the statutory timeframe.

[14]He further accepted that he could not produce evidence from Shaw Gibbs (his agent) showing that the statutory notices had not been received, explaining that Shaw Gibbs were acting primarily as a “postbox” and that he did not have access to their internal delivery records.

[15]We have taken into account that Mr Esse was giving evidence about events spanning several years, including a complex divorce process. His evidence was consistent with the documentary record in relation to the Family Court obligations and the lack of liquidity. However, his evidence regarding missing statutory notices was unsupported by third-party corroboration. We bear these matters in mind when assessing the weight to be attached to his evidence.

Facts

[16]The Appellant is a UK-incorporated company. At all material times it was controlled by its sole director and shareholder, Mr Anthony Esse. The Appellant was previously engaged in activities in respect of its participation in the Goldfinger scheme which HMRC later considered to give rise to PAYE and NIC liabilities. By the period with which this appeal is concerned, the Appellant was no longer trading and did not generate trading income.

[17]On 13 March 2018, the HMRC sent the Appellant a notice of determination and decision under Regulation 80 of Income Tax (Pay As You Earn) Regulations 2003 (“Reg 80”) and section 8 of the Social Security Contributions (Transfer Functions, etc) Act 1999 (“s8 SSC”), for Income Tax and National Insurance contributions relating to the company’s use of the scheme for the tax year ending 5 April 2014. The Appellant was informed of its rights to appeal.

[18]On 28 March 2018, the Appellant’s representative, Shaw Gibbs, appealed against the Notice of Determination and Decision sent on 13 March 2018 for tax year ending 5 April 2014.

[19]On 17 April 2018, HMRC wrote to the Appellant direct to acknowledge the appeals as HMRC had not been provided with authorisation for Shaw Gibbs to act on behalf of the Appellant.

[20]On 26 February 2019, HMRC sent the Appellant a Notice of Determination and Decision under Reg 80 and s8 SSC, for Income Tax and National Insurance contributions relating to the Appellant’s use of the scheme for the tax year ending 5 April 2015. The Appellant was informed of its rights to appeal and advised that a copy of the letter was sent to its agent, Shaw Gibbs.

[21]On 15 January 2020, HMRC sent the Appellant a Notice of Determination and Decision under Reg 80 and s8 SSC for Income Tax and National Insurance contributions relating to the company’s use of the scheme for the tax year ending 5 April 2016. The Appellant was informed of its rights to appeal and advised that a copy of the letter was sent to its agent, Shaw Gibbs.

[22]On 17 January 2020, the Appellant’s representative, Shaw Gibbs, appealed against the Notice of Determination and Decision sent to it on 15 January 2020 for the tax year ending 5 April 2016.

[23]On 20 July 2020, HMRC sent the Appellant Bound Arrangements Notices of Final Decision under paragraph 9 of Schedule 43A to the Finance Act 2013 relating to the tax arrangements set out in the notice of binding sent to the Appellant on 17 October 2019 which related to the joint acquisition of a bond on 30 June 2014.The notice outlined the amount of employment income and/or earnings on which the company should have accounted for Income Tax under PAYE and Class 1 NICs. A cover letter was sent to Shaw Gibbs enclosing copies of the Bound Arrangements Notices of Final Decision sent to the Appellant.

[24]On 25 November 2020, HMRC sent the Appellant a notice of determination and decision under Reg 80 and s8 SSC for Income Tax and National Insurance contributions relating to the company’s use of the scheme for the tax year ending 5 April 2017. The Appellant was informed of its rights to appeal and advised that a copy of the letter was sent to its agent, Shaw Gibbs.

[25]On 10 December 2020, the Appellant’s representative, Shaw Gibbs, appealed against the Notice of Determination and Decision sent on 25 November 2020 for the tax year ending 5 April 2017.

[26]By this stage, the Appellant had ceased trading and the company had no ongoing business activities generating income.

[27]On 14 October 2022, HMRC issued an advance notice letter to the Appellant of their intention to issue APNs for tax years ending 5 April 2014, 2015, 2016 and 2017.

[28]On 9 November 2022, HMRC issued APNs to the Appellant under Part 4, Chapter 3 of FA 2014 and Schedule 2 to the National Insurance Contributions Act 2015 as detailed below: Year Tax Amount 5 April 2014 PAYE £1,291,098.00 5 April 2015 PAYE £886,127.00 5 April 2015 NICs £318,133.85 5 April 2016 PAYE £323,643.00 5 April 2016 NICs £120,651.84 5 April 2017 PAYE £1,111,100.00 5 April 2017 NICs £397,213.34

[29]The APNs advised that the due date for payment was 10 February 2023 and also advised that the due date for sending written representations under section 222 FA 2014 was 10 February 2023. The letter stated “We have sent a copy of this letter to the company’s tax adviser, Shaw Gibbs Ltd. You may want to discuss this matter with them.”

[30]On 22 December 2022, the Appellant wrote to HMRC requesting further information in relation to the APNs. This letter raised various questions regarding the tax calculations, made reference to documents not received and queried who had told HMRC that the Appellant wanted to settle its tax affairs.

[31]On 28 December 2022, HMRC sent letters to the Appellant reminding it of the deadline by which to make payment or submit representations. Copies of the letters were sent to the Appellant’s agent, Shaw Gibbs.

[32]On 2 February 2023, HMRC replied to the letter from the Appellant dated 22 December 2022. This letter enclosed copies of the documents that the Appellant disputed it had received and stated, “Receipt of all of the notices of final decision was acknowledged by Shaw Gibbs.”

[33]On 8 February 2023, the Appellant made representations against the seven APNs. The letter stated “we enquired by a letter to you dated 22 December 2022 in relation to a number of notices which the Company has not received. We have had no response to that letter and as such address the following on the basis that the notices were never given.”

[34]On 9 February 2023, the Appellant emailed HMRC to acknowledge that the HMRC letter dated 2 February 2023 was “only received today (9 February 2023) and so has crossed with our letter of Formal Representations of yesterday’s date … Our current position is that they, Shaw Gibbs, may have had no authority to receive these documents on our behalf” and reiterated that their formal representations remained valid.

[35]On 14 February 2023, HMRC wrote to acknowledge receipt of the Appellant’s representations against the seven APNs. With regard to Shaw Gibbs, HMRC’s letter stated:

“I have noted your comments regarding Shaw Gibbs Ltd authority to act on your behalf in and forwarded these on to colleague, David Watkins, to make him aware. Please note, our systems currently indicate that there is 64-8 agent authority in place for Shaw Gibbs Ltd.”

[36]On 2 February 2024, nearly a year later, HMRC wrote to the Appellant in response to the representations made against the APNs. The letter was written following HMRC’s completion of the statutory review of those representations. HMRC apologised for the delay in providing its response. The letter variously stated:(1) HMRC recorded that the Appellant’s representations objected to the APNs on the grounds that Conditions B and C in section 219 of the Finance Act 2014 were not met, and that the NICs liabilities were unenforceable because they were time‑barred. HMRC noted that the Appellant did not dispute that Condition A was satisfied, nor that the amounts specified in the APNs were incorrect. HMRC confirmed that the representations were made under section 222(2) of the Finance Act 2014 and that it was required to consider them as part of the statutory APN process.

(2) In relation to Condition B, HMRC addressed the Appellant’s contention that the APNs did not specify the relevant tax advantage or arrangements, beyond identifying them as “Goldfinger AKA Sally, Echo or Karat”. HMRC stated that Condition B requires only that the appeal against the underlying determinations is made on the basis that a tax advantage results from the chosen arrangements. HMRC noted that it had issued PAYE determinations under Regulation 80 of the Income Tax (Pay As You Earn) Regulations 2003 and NICs decisions under section 8 of the Social Security Contributions (Transfer of Functions, etc.) Act 1999 in respect of unpaid PAYE and NICs, and that the Appellant had appealed those determinations and decisions on the basis that the liabilities were not due. HMRC stated its view that the arrangements were designed to reward employees without operating PAYE and NICs, and that the avoidance of PAYE and NICs constituted a “tax advantage” within the meaning of section 201 of the Finance Act 2014. On that basis, HMRC concluded that Condition B was satisfied.

(3) In relation to Condition C, HMRC recorded that the Appellant disputed whether any valid notices under paragraphs 8(2) or 9(2) of Schedule 43A to the Finance Act 2013 had been issued. HMRC stated that it understood that the Appellant had been issued with Notices of Final Decision under Schedule 43A in December 2019 and July and August 2020, covering adjustments for the relevant tax years and amounts. HMRC also addressed the Appellant’s assertion that, even if such notices had been issued, they would have no legal effect due to alleged failures to issue earlier notices required by the legislation. HMRC rejected that assertion and listed a series of earlier GAAR‑related notices which it stated had been issued to the Appellant between November 2018 and February 2020, including pooling notices, pooled arrangement’s opinion notices, notices of binding and bound arrangement’s opinion notices. HMRC stated that those notices informed the Appellant of its rights to make representations and that HMRC had no record of any such representations being received, nor of any notices being returned undelivered. HMRC concluded that the notices of final decision had been validly issued in accordance with the legislation and that Condition C was therefore met.

(4) HMRC also addressed matters raised by the Appellant which it regarded as falling outside section 222(2). It stated that the relevance of pooling notices allegedly issued to Mr Esse was outside the scope of its review, which was confined to the APNs issued to the Appellant.

(5) In relation to NICs, HMRC addressed the Appellant’s contention that the liabilities were time‑barred. HMRC stated that the relevant date for limitation purposes was six years from the date on which the NICs became due and payable. HMRC provided a table listing the dates on which notices of decision under section 8 of the 1999 Act had been issued for the relevant tax years, together with the corresponding limitation dates. HMRC stated that none of those limitation dates had been reached and concluded that there was no defence available under the Limitation Act 1980 and that the NICs amounts charged by the APNs were enforceable.

(6) HMRC concluded that, having considered the Appellant’s representations and reviewed the relevant statutory provisions, it was satisfied that the conditions for the issue of the APNs were met and that the APNs had been issued in the correct amounts. HMRC therefore confirmed the APNs for each of the relevant years and set out the PAYE and NICs amounts due for each year.

(7) The letter stated that it concluded the statutory representations process under Chapter 3, Part 4 of the Finance Act 2014 and that any further representations made outside the statutory period would have no effect on the payment deadline. HMRC distinguished the APN process from any settlement opportunity in relation to the substantive tax dispute and advised the Appellant to contact HMRC separately if it considered that it had agreed a settlement in respect of the underlying arrangements.

(8) HMRC stated that the accelerated payments were due in full by 8 March 2024, warned that penalties would be charged if payment was not made by that date, and indicated that HMRC would enforce recovery of the accelerated payments and any associated penalties. The letter provided payment details and contact information and advised the Appellant to contact HMRC if it anticipated difficulty in paying.

[37]On 29 February 2024, UHY Ross Brooke (“UHY RB”), emailed HMRC to request that the 8 March 2024 APN payment date be withdrawn or modified or suspended to 8 May 2024. The letter enclosed the Appellant’s authority for UHY RB to act.

[38]On 1 March 2024, HMRC emailed UHY RB to request the Appellant’s payment offer by 5 March 2024.

[39]On 5 March 2024, HMRC emailed UHY RB confirming that it could not extend the payment date for the APN.

[40]On 5 March 2024, UHY RB emailed HMRC with a completed questionnaire, time to pay proposal and supporting documentation. It was proposed to pay the APNs by way of an initial £50,000 payment followed by subsequent quarterly payments.

[41]On 7 March 2024, HMRC wrote to the Appellant refusing the TTP proposal as “the offer to pay the APN amounts by way of an initial £50,000 payment followed by subsequent quarterly payments cannot be agreed as it is contingent on several uncertain future events”. A copy of this letter was sent to UHY RB.

[42]On 26 April 2024, Burges Salmon, acting on behalf of the Appellant, sent to HMRC Solicitor’s Office a pre-action letter in relation to a proposed claim for judicial review of HMRC’s decision to reject the representations in relation to the accelerated payment notices.

[43]On 1 May 2024, HMRC wrote to the Appellant to withdraw the APN issued for tax year 2015 for the amount of £318,133.85. This was because “we can no longer collect the underlying National Insurance Contributions it relates to.”

Tax Year

[44]On 24 May 2024, UHY RB sent an email to HMRC appealing the first late payment penalties.

[45]On 25 September 2024, HMRC issued a View of the Matter decision letter to the Appellant in response to the appeal, upholding the penalties and offering a statutory review of the decision.

[46]On 24 October 2024, UHY RB emailed HMRC to accept the offer of a statutory review.

[47]On 2 December 2024, HMRC sent the Appellant a Review Conclusion letter. The letter stated that the penalties were correctly issued and upheld the decision outlined in the letter of 25 September 2024. The letter included details of how to appeal to the Tribunal and the statutory timeframe within which to do so.

[48]On 24 December 2024, the Appellant sent its Notice of Appeal to the Tribunal.

LEGISLATION

[49]The legislative provisions relevant to this appeal are contained principally in the Taxes Management Act 1970 (“TMA 1970”), the Finance Act 2009 (“FA 2009”), the Finance Act 2013 (“FA 2013”), the Finance Act 2014 (“FA 2014”), and the National Insurance Contributions Act 2015 (“NICA 2015”). Those provisions, so far as they are material to the issues we must determine, are set out in the attached appendix. Case law relied upon by the parties Jurisdiction and the scope of penalty appeals in the APN/PPN context

Case law relied upon by the parties

[50]The leading authority on the limits of the Tribunal’s jurisdiction in penalty appeals arising from accelerated or partner payment notices is Beadle v HMRC (Court of Appeal)

[2020] EWCA Civ 562

(“Beadle CA”)

David Beadle v HMRC (FTT) [2017] UKFTT 0829 (TC) (“Beadle FTT”)

[51]HMRC rely upon David Beadle v HMRC (FTT)

[2017] UKFTT 0829 (TC)

where

Judge Rupert Jones explained the scope of the Tribunal’s task in a penalty appeal:

“202. There is no need to conduct this exercise. Even if the appellant had a reasonable belief, subjectively, objectively or both, and based upon professional advice, that he was not liable to pay the underlying understated partner tax liability, this could not form a reasonable excuse for failure to pay the PPN within the payment period. 203. Applying the test in the Clean Car Company, a reasonable taxpayer in the appellant’s position would make payment of the sum under the PPN within the payment period and make whatever challenges (whether statutory or extra statutory) to the underlying liability he or she chose to do in the mean-time. This would be the case, whatever his or her reasonable belief as to the merits of his substantive challenge. If such a challenge were successful then the appellant would receive a refund or repayment but this cannot reasonably excuse making a payment on the sum due under the PPN that Parliament has required should be made in the interim.”

[52]At [204], relevant for these purposes,

Judge Rupert Jones stated:

“204. This is all the more so in circumstances where the appellant had already challenged the substantive liability in his Chancery Division Claim in 2014 and indicated he would pursue a judicial review on 28 May 2015 before payment was due under the PPN by 14 June 2015.”

[53]Those passages are relied upon as confirming that a penalty appeal is not a vehicle for challenging either the validity of the APN itself or the amount of tax specified in it.

Beadle CA

[54]Both parties rely upon paragraphs [48]–[50] of the judgment of Simler LJ, where the Court of Appeal endorsed the approach in Beadle FTT:

“48. Having regard to all of these considerations, it is a clear and necessary implication of the FA 2014 scheme for PPN (and APN) notices, construed as a whole and in light of its statutory purpose, that the ability to raise a collateral public law challenge to the validity of the underlying PPN is excluded at the penalty and enforcement stages. My reasons for that conclusion follow. 49. First, the PPN regime has as its express purpose deterring marketed tax avoidance schemes by removing the cash flow benefit which would otherwise accrue to taxpayers while such schemes are contested and irrespective of the validity of such schemes. The recipient of a PPN must pay the sum identified as the potential tax advantage within 90 days from the notice being given or, if challenged, within 30 days of receipt of HMRC’s response to representations. The whole purpose and policy intention of this detailed statutory scheme would be subverted if it were open to a taxpayer like Mr Beadle not only to sit back without challenging the PPN and await penalty notice or enforcement proceedings before seeking to challenge it; but also to retain the disputed tax during the course of a potentially lengthy and convoluted appeals process that would or might follow. In substance although not in form that would amount to a statutory appeal by the back door against the PPN, for which Parliament has expressly not provided, and during the course of which the disputed tax would be retained by the taxpayer, enabling him to enjoy the cash flow benefits that the scheme is designed to remove. 50. Secondly, the giving of a PPN does not determine what tax is ultimately due, but simply who should hold the disputed tax pending the determination of the underlying tax liability. The PPN is in that sense an interim decision determining where the disputed tax should sit, which may be rescinded (and the monies obtained repaid with interest) if the final decision in the substantive tax dispute is resolved in favour of the taxpayer. In that context the deliberate omission of statutory appeal rights against the PPN itself is both rational and explicable as Ms Aparna Nathan QC and Ms Marika Lemos on behalf of HMRC submit. It is a clear indication that Parliament does not intend taxpayers to be able to make direct challenges to PPNs on appeal to the FTT in circumstances where the underlying tax dispute affords full appeal rights, and by necessary implication, indirect challenges in the course of penalty or other proceedings cannot have been intended either.”

Reasonable excuse: general principles Perrin v HMRC

[2018] UKUT 156 (TCC)

(“Perrin”)

Reasonable excuse: general principles

[55]Both parties rely upon Perrin as setting out the general approach to “reasonable excuse”. The relevant passages are paragraphs [69]–[76], and [81]: 69. Before any question of reasonable excuse comes into play, it is important to remember that the initial burden lies on HMRC to establish that events have occurred as a result of which a penalty is, prima facie, due. A mere assertion of the occurrence of the relevant events in a statement of case is not sufficient. Evidence is required and unless sufficient evidence is provided to prove the relevant facts on a balance of probabilities, the penalty must be cancelled without any question of “reasonable excuse” becoming relevant. 70. Assuming that hurdle to have been overcome by HMRC, the task facing the FTT when considering a reasonable excuse defence is to determine whether facts exist which, when judged objectively, amount to a reasonable excuse for the default and accordingly give rise to a valid defence. The burden of establishing the existence of those facts, on a balance of probabilities, lies on the taxpayer. In making its determination, the tribunal is making a value judgment which, assuming it has(a) found facts capable of being supported by the evidence,

(b) applied the correct legal test and

(c) come to a conclusion which is within the range of reasonable conclusions, no appellate tribunal or court can interfere with. 71. In deciding whether the excuse put forward is, viewed objectively, sufficient to amount to a reasonable excuse, the tribunal should bear in mind all relevant circumstances; because the issue is whether the particular taxpayer has a reasonable excuse, the experience, knowledge and other attributes of the particular taxpayer should be taken into account, as well as the situation in which that taxpayer was at the relevant time or times (in accordance with the decisions in The Clean Car Co and Coales). 72. Where the facts upon which the taxpayer relies include assertions as to some individual’s state of mind (e.g. “I thought I had filed the required return”, or “I did not believe it was necessary to file a return in these circumstances”), the question of whether that state of mind actually existed must be decided by the FTT just as much as any other facts relied on. In doing so, the FTT, as the primary fact-finding tribunal, is entitled to make an assessment of the credibility of the relevant witness using all the usual tools available to it, and one of those tools is the inherent probability (or otherwise) that the belief which is being asserted was in fact held; as Lord Hoffman said in In re B (Children)

[2008] UKHL 35

[2009] 1AC 11

at [15]: ”There is only one rule of law, namely that the occurrence of the fact in issue must be proved to have been more probable than not. Common sense, not law, requires that in deciding this question, regard should be had, to whatever extent appropriate, to inherent probabilities.” 73. Once it has made its findings of all the relevant facts, then the FTT must assess whether those facts (including, where relevant, the state of mind of any relevant witness) are sufficient to amount to a reasonable excuse, judged objectively. 74. Where a taxpayer’s belief is in issue, it is often put forward as either the sole or main fact which is being relied on – e.g. “I did not think it was necessary to file a return”, or “I genuinely and honestly believed that I had submitted a return”. In such cases, the FTT may accept that the taxpayer did indeed genuinely and honestly hold the belief that he/she asserts; however that fact on its own is not enough. The FTT must still reach a decision as to whether that belief, in all the circumstances, was enough to amount to a reasonable excuse. So a taxpayer who was well used to filing annual self- assessment returns but was told by a friend one year in the pub that the annual filing requirement had been abolished might persuade a tribunal that he honestly and genuinely believed he was not required to file a return, but he would be unlikely to persuade it that the belief was objectively a reasonable one which could give rise to a reasonable excuse. 75. It follows from the above that we consider the FTT was correct to say (at [88] of the 2014 Decision) that “to be a reasonable excuse, the excuse must not only be genuine, but also objectively reasonable when the circumstances and attributes of the actual taxpayer are taken into account.” … 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. Reasonable excuse in the APN regime Sheiling Properties Ltd v HMRC

[2018] UKFTT 0247 (TC)

(“Sheiling FTT”)

Reasonable excuse in the APN regime

[56]The Appellant relies expressly on paragraphs [51]–[53] and [58] of the First tier Tribunal decision:51. I respectfully agree with what Judge Berner said about the concept of “reasonable excuse” in Barrett v HMRC

[2015] UKFTT 329 (TC)

: The test is one of reasonableness. No higher (or lower) standard should be applied. The mere fact that something that could have been done has not been done does not of itself necessarily mean that an individual’s conduct in failing to act in a particular way is to be regarded as unreasonable. It is a question of degree having regard to all the circumstances, including the particular circumstances of the individual taxpayer. There can be no universal rule; what might be considered an unreasonable failure on the part of one taxpayer in one set of circumstances might be regarded as not unreasonable in the case of another whose circumstances are different.

52. I also respectfully agree with the way that Judge Hellier approached the taxpayer’s argument, in Francis Chapman v HMRC

[2017] UKFTT 0800 (TC)

, that a belief in the likely success of judicial review proceedings, amounted to a reasonable excuse for non-payment of an accelerated payment demanded pursuant to an APN. Like Judge Hellier, I do not consider that there is any rule of law that prevents such a belief from amounting to a reasonable excuse. Neither FA 2014 nor Schedule 56 set out any such limitation. Nor can any such rule of law be inferred from various statements that the courts have made in judicial review proceedings on the lawfulness of particular APNs (for example the judgment of Simler J at first instance in Rowe that Judge Hellier referred to in his decision).

53. However, even though there is no rule of law that precludes the excuse that the Company is putting forward from being a “reasonable excuse”, I consider that the reasonableness or otherwise of that excuse has to take into account the effect of the statutory regime on APNs that Parliament has enacted. As Simler J noted at [30] of her decision at first instance in Rowe , the APN regime was enacted to ensure that, where a tax avoidance scheme is involved, HMRC, and not the taxpayer, hold the tax in dispute while the efficacy or otherwise of the avoidance scheme is determined. To achieve that legislative purpose, Parliament has enacted a regime that permits HMRC to demand accelerated payment of amounts of tax that are in dispute following implementation of an avoidance scheme. Of course, Parliament enacted various safeguards to protect the interests of taxpayers, including the right to make representations unders222 of FA 2014. However, in assessing whether it is reasonable for the Company to withhold payment of an accelerated payment, I must take into account that Parliament has legislated specifically to permit HMRC to demand accelerated payment and has done so to combat what it regards as the “mischief” of tax avoidance schemes. Given the regime that Parliament has enacted, I respectfully agree with Judge Hellier’s observation at [72] of his decision in Chapman that in deciding how to respond to an APN, a reasonable taxpayer would not lightly assume that HMRC have acted unlawfully in issuing an APN. On the contrary, given the statutory background, the taxpayer would need to demonstrate that, viewed objectively, there is a high degree of confidence that the APNs are invalid. Judge Hellier gave some examples of the kind of factors that might to such a high degree of confidence (for example, if it is clear that a decimal point has been put in the wrong place on the APN). Judge Hellier’s examples are not, of course, binding on me and cannot set out an exhaustive list of when it will, or will not, be reasonable for a taxpayer to refuse to pay an accelerated payment because it believes the APN to be invalid. However, his examples neatly illustrate the point that a high degree of confidence in the invalidity of the APNs that is objectively justified is likely to be necessary.

[57]At [58], relevantly for these purposes, Judge Jonathan Richards stated: 58. There is another reason why I do not consider the Company had a reasonable excuse. I have concluded that the predominant reason why the Company did not pay the accelerated payments was because it was worried about its cash flow and was concerned that, if it paid HMRC, it could suffer severe financial consequences (see [32] above). The Company’s genuine belief that it had a good prospect of demonstrating that the APNs were unlawful caused it to believe that it was justified in not paying the accelerated payments, or that it might not suffer consequences for failing to do so. However, the predominant reason for non-payment was insufficiency of funds. That could be a reasonable excuse only if the insufficiency in question was attributable to events outside the Company’s control. Mr Houchen’s evidence gave little specific reason for the Company’s insufficiency of funds beyond alluding to difficult conditions in the construction industry and the difficulty of obtaining bank finance. I am not, therefore, satisfied that the Company’s insufficiency of funds was attributable to events outside its control.

Sheiling Properties Ltd v HMRC [2020] UKUT 175 (TCC) (“Sheiling UT”)

[58]The Respondents rely upon paragraphs [81] and [84] of the Upper Tribunal’s decision, where the UT approved the FTT’s approach: 81. We consider, therefore, that in assessing the objective reasonableness of a belief which a taxpayer had been found to hold that the APN issued to him is procedurally invalid, the FTT’s assessment should take into account the following points:(1) In line with Perrin, it should consider all the surrounding facts and circumstances, including the foundation for the taxpayer’s belief, any advice on which he has relied, and whether that advice is specific to his APN.

(2) It should identify precisely what the taxpayer does believe; is it that the APN is obviously procedurally invalid, or merely that it is arguable (however strongly) that it is?

(3) It should take into account the reason for the alleged procedural invalidity. We observe that in Francis Chapman, to which the FTT referred in this case in forming its view, the FTT referred at [72] to “an obvious or gross error” in the notice, such as where the decimal point had slipped in the statement of the amount to be paid. One can postulate other similar errors. One would hope that in practice such errors would be corrected through the process of representations. In any event, the assessment of objective reasonableness in such a situation will be much more straightforward than one where the determination of validity turns on detailed legal arguments and the outcome of a judicial review.

(4) In view of the concerns we have set out above, it would not be desirable or appropriate for the FTT to conduct a “mini-trial” of the arguments which a taxpayer asserts mean that his judicial review into procedural invalidity will or is likely to be successful.

(5) It must be borne in mind that substantive invalidity cannot form the basis for a reasonable excuse. While the dividing line between substantive and procedural invalidity is clear in principle, there may be instances where the taxpayer’s excuse is really the former dressed up as the latter. 84. The second ground of appeal is that, in the alternative, the FTT erred in concluding that it was not satisfied that objectively the company had a strong case in its judicial review proceedings. As we have explained, this is a debate which the FTT should resist the temptation to be drawn into. Indeed, if the alleged ground of procedural invalidity requires detailed submissions by the parties on competing legal arguments, it is by definition not a gross or obvious error, and, as such, is considerably less likely to be objectively reasonable in this context. We do not accept that the FTT’s assessment in this respect was one which no reasonable tribunal could have reached, but, more importantly, there was no need in any event for a “mini-trial” of Sheiling’s judicial review case in order to assess its objective reasonableness as an excuse for not paying the APNs. Statutory construction and penalty regimes Advanced Scaffolding (Bristol) Ltd v HMRC

[2018] UKFTT 0744 (TC)

(“Advanced Scaffolding”)

Statutory construction and penalty regimes

[59]HMRC rely upon paragraphs [101]–[102], where Judge Vos explained the Tribunal’s limited role when considering special circumstances:101. I appreciate that care must be taken in deriving principles based on cases dealing with different legislation. However, I can see nothing in schedule 55 which evidences any intention that the phrase “special circumstances” should be given a narrow meaning.

102. It is clear that, in enactingparagraph 16 of schedule 55, Parliament intended to give HMRC and, if HMRC’s decision is flawed, the Tribunal a wide discretion to reduce a penalty where there are circumstances which, in their view, make it right to do so. The only restriction is that the circumstances must be “special”. Whether this is interpreted as meaning out of the ordinary, uncommon, exceptional, abnormal, unusual, peculiar or distinctive does not really take the debate any further. What matters is whether HMRC (or, where appropriate, the Tribunal) consider that the circumstances are sufficiently special that it is right to reduce the amount of the penalty. Flawed decision making and special circumstances Barry Edwards v HMRC

[2018] UKUT 134 (TCC)

(“Edwards UT”)

Flawed decision making and special circumstances

[60]The Appellant relies on paragraphs [72]–[74], where the Upper Tribunal described the threshold for intervention:72. In our view, as the FTT said in Advanced Scaffolding (Bristol) Limited v HMRC

[2018] UKFTT 0744 (TC)

at [99], there is no reason for the FTT to seek to restrict the wording of paragraph 16 of Schedule 55 FA 2019 by adding a judicial gloss to the phrase. In support of that approach the FTT referred to the observation made by Lord Reid in Crabtree v Hinchcliffe at page 731D-E when considering the scope of “special circumstances” as follows: ”the respondent argues that this provision has a very limited application… I can see nothing in the phraseology or in the apparent object of this provision to justify so narrow a reading of it”.

73. The FTT then said this at [101] and [102]:

74. We respectfully agree. As the FTT went on to say at [105], special circumstances may or may not operate on the person involved but what is key is whether the circumstance is relevant to the issue under consideration.

White v HMRC [2012] UKFTT 364 (TC) (“White”)

[61]The Appellant relies upon paragraphs [52]–[71]. In those paragraphs, the Tribunal emphasised the need for HMRC to engage with the taxpayer’s explanations and evidence, and that a failure properly to do so may render a penalty decision unsustainable. Special circumstances52. Paragraph 11 Schedule 24 gives HMRC a discretion to reduce the penalty because of “special circumstances.” The expression “special circumstances” is an unusual one in a tax context. …

53. The expression “special circumstances” was considered in the well-known decision of the Court of Appeal in Clarks of Hove Ltd. v Bakers’ Union [1978] 1 W.L.R. 1207 (Stephenson, Roskill and Geoffrey Lane LJJ). Geoffrey Lane LJ said (at page 1216), in a much-quoted passage:

“What, then is meant by “special circumstances”? Here we come to the crux of the case… In other words, to be special the event must be something out of the ordinary, something uncommon; and that is the meaning of the words “special” in the context of this Act.” (Emphasis added)

54. With respect, we think it is correct to adopt the same interpretation of the expression “special circumstances” as it appears in paragraph 11, save that the expression should, of course, be interpreted in accordance with its statutory context, i.e. Schedule 24 Finance Act 2007 . … 60. The reference to “exceptional circumstances” is not, perhaps, the best summary of the test to be applied. It would be better to use the better-known phraseology of Geoffrey Lane LJ (“something out of the ordinary, something uncommon”), which was plainly the concept that those drafting the legislation had in mind. “Exceptional” circumstances may be a passable summary of that concept and is the word used in the less-quoted judgment of Roskill LJ in the Bakers’ Union decision – although it can perhaps too easily be given an over-restrictive meaning. 61. As with the case of suspension, our jurisdiction in relation to an appeal in respect of a refusal by HMRC to exercise its discretion under paragraph 11 is limited. Paragraph 15 provides: “(1) P may appeal against a decision of HMRC that a penalty is payable by P. (2) P may appeal against a decision of HMRC as to the amount of a penalty payable by P. (3) P may appeal against a decision of HMRC not to suspend a penalty payable by P. (4) P may appeal against a decision of HMRC setting conditions of suspension of a penalty payable by P.” 62. An appeal against a refusal by HMRC to exercise its discretion under paragraph 11 or an appeal that its decision under paragraph 11 on the basis that its decision was flawed, would, in our view, be an appeal under paragraph 15 (2). 63. Paragraph 17 sets out the jurisdiction of this Tribunal in relation to paragraph 11: “(3) If the appellate tribunal substitutes its decision for HMRC’s, the appellate tribunal may rely on paragraph 11— (a) to the same extent as HMRC (which may mean applying the same percentage reduction as HMRC to a different starting point), or (b) to a different extent, but only if the appellate tribunal thinks that HMRC’s decision in respect of the application of paragraph 11 was flawed. … (6) In sub-paragraph… (3)(b) …“flawed” means flawed when considered in the light of the principles applicable in proceedings for judicial review.” 64. We have reached the conclusion that HMRC’s decision in respect of paragraph 11 was flawed. We base our conclusion on two grounds. 65. First, there is no evidence before us, and Mrs Weare for HMRC accepted in answer to the Tribunal’s questions at the hearing that she had seen none, that the officer (Mr Bains) considered whether to exercise his discretion reduce the penalty pursuant to paragraph 11 when issuing the penalty determination. We do not consider that an ex post facto consideration of whether the discretion in paragraph 11 should be exercised (as contained in Mr Bains’s letter of 8 March 2012) validates the original decision – the determination has already been made. As Judge Hellier said in Rodney Warren v HMRC Commissioners

[2012] UKFTT 57 (TC)

: “That failure to consider paragraph 9 at all flawed [the] decision for the purposes of paragraph 15(3). It is thus open to the tribunal to rely upon paragraph 9 to the extent it considers it right in the circumstances.” 66. We note that a similar conclusion to that of Judge Hellier was reached by this Tribunal in Thomas Hardy v HMRC Commissioners

[2011] UKFTT 592 (TC)

and G D & Mrs D Lewis T/a Russell Francis Interiors v HMRC Commissioners

[2011] UKFTT 107 (TC)

. 67. Secondly, we consider that (if we are wrong on this first point and that an ex post facto consideration whether to exercise discretion contained in paragraph 11 validated the penalty determination) insofar as the officer did consider whether to exercise HMRC’s discretion under paragraph 11, he gave no reasons for his conclusion that there were no special circumstances justifying a reduction in the penalty. 68. It is true that the common law, “at present”, does not recognise a general duty to give reasons for administrative decisions ( R v Home Secretary ex p. Doody

[1994] 1 AC 531

per Lord Mustill at page 564). However, in many cases if a public body, such as HMRC, fails to give reasons for its decision it will be found to have acted unlawfully. As explained in “Administrative Law” (10th edition) Wade & Forsyth, there is no closed list of circumstances in which fairness will require reasons to be given. 69. In this case, paragraph 17(3)(b) envisages this Tribunal having to decide whether HMRC’s decision is flawed, in the judicial review sense of that term. A failure to give reasons for a decision makes this task almost impossible. It would not then possible to determine whether the decision-maker applied the correct legal test, whether he took account of all relevant factors or whether he took account of irrelevant factors. In short, a failure to give reasons makes it almost impossible for the Tribunal to determine the issue of Wednesbury unreasonableness. Parliament must have envisaged that an officer of HMRC deciding whether to exercise the discretion in paragraph 11 would give reasons for the decision. For this reason, we consider that the failure by Mr Bains to give reasons for his conclusion that there were no special circumstances with the result that no reduction of the penalty should be made under paragraph 11, meant that HMRC’s decision was flawed. 70. Accordingly, the Tribunal must consider whether there were special circumstances which would justify it substituting its decision for that of HMRC pursuant to paragraph 17 (3) (b). In our view, there were special circumstances applicable in this case. As already discussed, we take “special circumstances” to mean “something out of the ordinary, something uncommon” in accordance with the Bakers’ Union decision. The legislation in paragraph 11(2) excludes from consideration the taxpayer’s inability to pay, and the argument that there is no net loss to the exchequer because one person’s underpayment is balanced by another’s overpayment; it also seems to us, and we note that HMRC accept this in their Manual (quoted in paragraph 59 above), that because the legislation already provides a reduction for the quality of the taxpayer’s disclosure, these special circumstances must relate to matters which cannot be taken into account in the reductions set out in the statute, and go to the events underlying the understatement of liability rather than the taxpayer’s reaction to HMRC’s challenge to that understatement. 71. In this case the Appellant, who had not been employed in a financial, accounting or personnel function but in advertising sales, and could not therefore be expected to have any special familiarity with redundancy payments, received confusing information from her employer concerning the tax treatment of her redundancy payment. She was hampered by the fact that her employer (GMTV) had been taken over by ITV and that, therefore, it was difficult for her to track down someone who could help her. She made genuine efforts to resolve her confusion but help was not forthcoming. It is true that when she could not find a satisfactory answer to her difficulties she failed to ask HMRC or to highlight this in her tax return. For this reason, we have found her to be careless. Nonetheless, the factors that we have identified, in our view, take this case out of the ordinary. We consider that these unusual circumstances mitigate the culpability of the Appellant. They should, therefore, be taken into account as special circumstances justifying a reduction in the penalty. In all the circumstances, we consider that a 60% reduction in the penalty is justified and we so decide. The penalty in respect of the GMTV matter is therefore reduced to £254.14, which together with the BSkyB penalty of £58.29, leaves a total payable of £312.43.

Bluu Solutions Ltd v HMRC [2015] UKFTT 0095 (TC)

[62]Both parties referred us to paragraphs [128] and [151]–[157]: 128. If HMRC have made a special circumstances decision, then para 15(4) provides that the tribunal must assess it in the light of the principles applicable during judicial review proceedings. These were helpfully set out in Collis v HMRC

[2011] UKFTT 588 (TC)

(Judge Berner and Mr Adams): “[36] … Judicial review may be pursued in relation to decisions of public bodies on a number of grounds. Included amongst these are the grounds of illegality and fairness. In the context of a decision of HMRC as to whether a reduction in a penalty should be made on account of special circumstances, the general test will be whether the decision is so demonstrably unreasonable as to be irrational or perverse, such that no reasonable authority could ever have come to it (Associated Provincial Picture Houses Ltd v Wednesbury Corporation

[1948] 1 KB 223

, HL). [37] …The tribunal should also consider whether HMRC have erred on a point of law (see Customs & Excise Commissioners v J H Corbitt (Numismatists) Ltd

[1980] STC 23

1; John Dee Ltd v Customs & Excise Commissioners

[1995] STC 941

). This will also include considering whether any internal HMRC policy on the application of the special circumstances rule is being applied too rigidly so as to amount to a fetter on HMRC’s discretion.”151. What is the position where, as here, it is HMRC’s presenting officer who has made the special circumstances decision? We know from our own experience that presenting officers can and do make concessions during the hearing: for instance, to reduce the amount under appeal or even to withdraw assessments entirely. Presenting officers are not only advocates, but representatives who have authority to make compromises and settlements on HMRC’s behalf. We see no reason why a presenting officer should be unable to exercise the discretion contained in para 9. Indeed, that she should be able to do so is entirely consistent with the reference in para 9(3)(b) to the special circumstances discretion including “agreeing a compromise in relation to proceedings for a penalty.”

152. We therefore find that Mrs Levy was exercising the discretion given to HMRC under para 9, and that there was no failure by HMRC to consider the exercise of that discretion.

153. Where it is the presenting officer who makes the decision, she must give her reasons orally to the tribunal, as Mrs Levy has done. Our task is therefore to consider whether her decision was “flawed” according to the principles of judicial review. As we have already recorded, she reviewed each of Mr Roach’s submissions to see if, while not constituting a reasonable excuse, one or more might fall within the special circumstances provision, but found that none did. She also considered the other material available to her, but again, found nothing that caused her to reduce the penalty under appeal.

154. It cannot be unreasonable for HMRC to find that the company’s financial and economic difficulties were not “exceptional” or “abnormal”: they resulted from a general recession affecting many businesses. It is also entirely reasonable to conclude that retentions are a normal part of the company’s business. There is also no basis on which we can interfere with her decision that neither the departure of the financial controller nor the communications between the company and HMRC were exceptional or unusual.

155. There were no other matters which we considered should have been taken into account, and no matters taken into account which should have been omitted from consideration. The lack of ability to pay is, as Mrs Levy said, precluded by statute from coming within the special circumstances provisions. There was no error of law in her approach.

156. As a result, HMRC’s decision in respect of the application of the special circumstances provision in para 9 was not flawed.

157. In view of the different interpretations of the scope of HMRC’s discretion, see §130ff, we confirm that, had the tribunal exercised its own discretion under para 9, we would also have concluded that there were no special circumstances. APN penalty appeals and judicial review Fraser v HMRC

[2018] UKFTT 301 (TC)

(“Fraser”)

APN penalty appeals and judicial review

[63]HMRC rely on Fraser, where

Judge Cannan reiterated:

“(3) Special Circumstances 70. The third ground of appeal is that the circumstances amount to special circumstances and the penalty should be subject to a special reduction. This was very much a subsidiary argument and did not appear in the grounds of appeal or Mr Jones’ skeleton argument. Indeed, it only appeared to arise because the question of special circumstances was raised by Ms Rhind in her skeleton argument. Ms Rhind did not object to the appellant relying on arguments as to special circumstances and I shall treat it as a separate ground of appeal. 71. The jurisdiction of the tribunal in relation to special circumstances arises only where it finds that HMRC’s decision on special circumstances was “flawed” in the sense that they failed to take into account a relevant factor, took into account an irrelevant factor, erred in law or reached a decision which was perverse or irrational such that no reasonable authority could have reached it. 72. HMRC’s decision on special circumstances was set out in their review decisions following the appellant’s notification of his appeals against the penalties. Those decisions were dated 10 February 2017, 24 May 2017 and 26 July 2017. The appellant did not rely at that stage when making his appeals to HMRC on the fact that he had not received a notice of enquiry for 2011-12. The appellant in making his appeals was simply relying on the fact that he was challenging the APN’s by way of judicial review. I do not consider therefore that HMRC’s decision in relation to special circumstances could be described as flawed in failing to take into account the appellant’s present case that Condition A was not satisfied. 72. Further, what amounts to special circumstances must also be considered in the light of the purpose of the statutory scheme. In my view special circumstances cannot be based on an allegation that the APN is invalid. Such arguments would be inconsistent with the statutory scheme in the same way that they are for reasonable excuse.”

Principles derived from the case law

[64]From the above case law we derive the following principles.

[65]First, Beadle confirms that Parliament deliberately confined the Tribunal’s role in relation to APNs. A penalty appeal is not a forum for challenging the validity, correctness, or underlying lawfulness of an APN. Permitting collateral challenges in penalty proceedings would undermine the statutory “pay now, dispute later” scheme.

[66]Secondly, Perrin establishes that the reasonable excuse test is objective but contextual. The Tribunal must ask whether a reasonable taxpayer, having the attributes and circumstances of the appellant, would have acted as it did. An honest or sincerely held belief is insufficient unless it is objectively reasonable when judged in its statutory context.

[67]Thirdly, Sheiling UT makes clear that in the APN context a belief in invalidity may amount to a reasonable excuse only in a narrow category of cases. That category is confined to circumstances where procedural defects are apparent on the face of the notice and incontrovertible. Where the alleged defects depend on contested legal arguments, detailed statutory interpretation, or judicial review proceedings, they are unlikely to found a reasonable excuse defence.

[68]Fourthly, Fraser confirms that the mere existence of judicial review proceedings challenging an APN does not suspend the statutory obligation to pay, nor does it, without more, render HMRC’s penalty decision flawed. Arguments based on alleged APN invalidity, including reliance on judicial review, cannot ordinarily constitute reasonable excuse or special circumstances as that would be inconsistent with the statutory scheme.

[69]Finally, Edwards together with Advanced Scaffolding and White, establishes that the Tribunal’s role in relation to special circumstances is supervisory only. The Tribunal may intervene only if HMRC’s decision is flawed in a public law sense. Mere disagreement with the outcome, or with the weight attached to particular factors, is insufficient to justify substitution of the Tribunal’s own view. Parties submissions Appellant’s submissions

Parties submissions

[70]The Appellant’s submissions are summarised as follows.

[71]The submissions proceed on three principal grounds:(1) that the Appellant had a reasonable excuse for non‑payment of the APNs due to HMRC’s procedural failures;

(2) that independently and additionally, the Appellant had a reasonable excuse because of severe financial constraints attributable to matters outside its control; and

(3) that even if no reasonable excuse existed, the penalties should be reduced to nil pursuant to paragraph 9 of Schedule 56 FA 2009 because HMRC’s special‑circumstances decision was flawed in law. The Appellant does not challenge the validity of the APNs themselves, correctly accepting the jurisdictional limit established in Beadle.

Ground 1: Reasonable Excuse Based on Procedural Deficiencies

[72]The Appellant submits that HMRC’s conduct of the APN process was sufficiently defective to constitute a reasonable excuse under paragraph 16 of Schedule 56. The Appellant identifies a series of alleged procedural failures: HMRC did not provide pooling notices, Bound Arrangement Opinion Notices (“BAONs”), Notices of Binding (“NoBs”), or calculation workings explaining the APN amounts; HMRC failed to supply critical statutory materials despite explicit written requests; and HMRC’s correspondence contained assertions unsupported by documentary evidence.

[73]The Appellant “was not sitting on its hands” and it actively sought clarification from HMRC from December 2022 onward. The Appellant wrote on 22 December 2022 asking for GAAR Panel Opinion Notices, GAAR Notices, and other documents, yet HMRC never provided the statutory materials it considered to have been previously issued. When the Appellant received HMRC’s letter of 2 February 2023, it arrived only after representations had already been submitted, and crucially, did not include the documents requested. This demonstrated that “HMRC had not cured the defects, nor made it possible for a reasonable taxpayer to verify the liability.”

[74]Only one pooling notice is in the bundle, which is addressed to Mr Esse and not the Appellant . This is a core statutory deficiency, since Condition C under s219 FA 2014 depends upon correct and timely service of prerequisite notices. Sheiling permits procedural matters to form part of a reasonable excuse where they are not dependent on complex public‑law determinations. The Appellant maintains that its concerns were practical rather than jurisdictional: a reasonable taxpayer would not pay a multimillion‑pound disputed liability “blind”, where HMRC had failed to supply the documents that allegedly grounded the assessments.

[75]The Appellant further submits that HMRC’s one‑year delay in responding to representations (from 8 February 2023 to 2 February 2024) was itself unreasonable this delay “compressed the payment window to less than 30 days” after HMRC’s confirmation letter, creating procedural unfairness. HMRC made it impossible to engage meaningfully as the APNs were confirmed without addressing any of the substantive matters raised. HMRC’s response letter contained wording such as “I understand” and “we believe the figures are correct” evidencing that the review process was lacking in investigation or objectivity.

[76]Perrin confirms that reasonableness must be assessed contextually, considering the taxpayer’s attributes and circumstances, Sheiling confirms that procedural defects, even if short of invalidity, may constitute a reasonable excuse where they render the situation practically opaque.

Ground 2: Reasonable Excuse Based on Financial Constraints

[77]The Appellant’s second ground concerns severe financial constraints attributable to events outside its control, principally arising from the director’s divorce proceedings. The Family Court orders required very substantial payments to the director’s former spouse as well as legal fees exceeding £1.3 million. These constraints were compelling, unavoidable and externally imposed and left the Appellant without access to liquid funds.

[78]Mr Esse’s assets, including the family home, a French chalet and a yacht, were sold or transferred, with proceeds directed by court order to the ex‑spouse. Mr Esse retained only a limited residual amount from the yacht sale and further court‑ordered lump sums were due in 2025 and 2026. These constraints meant that raising the £4.4 million demanded by the APNs by 8 March 2024 was impossible without breaching court orders or triggering insolvency.

[79]These circumstances fall squarely within Sheiling’s acceptance that financial inability caused by events outside control may constitute a reasonable excuse, provided the taxpayer acted reasonably. The Appellant acted reasonably by proposing a detailed TTP arrangement supported by cashflow evidence, offering an immediate £50,000 followed by structured quarterly payments. HMRC refused this proposal on 7 March 2024. The TTP proposal was commercially realistic and represented the maximum feasible payment plan given the ongoing court restrictions.

Ground 3: Special Circumstances Under Paragraph 9

[80]Finally, the Appellant argues that the penalties should be reduced to nil for “special circumstances”, relying on Barry Edwards, Advanced Scaffolding, White, and Bluu Solutions. HMRC had failed to consider relevant matters when deciding whether to exercise the special‑reduction power, including:(1) procedural history and delays;

(2) missing and misdirected statutory materials;

(3) the interaction between the financial constraints and HMRC’s refusal of TTP;

(4) the existence of substantial s.455 CTA 2010 credits (HB 467); and

(5) the withdrawal of the 2015 NICs APN.

[81]HMRC’s analysis of the special circumstances were cursory, undocumented and unsupported by reasons, contrary to the approach mandated by White and Bluu Solutions. The absence of recorded reasoning renders HMRC’s decision flawed in the judicial review sense, enabling the Tribunal to substitute its own decision.

HMRC’s submissions

[82]HMRC’s submissions are summarised as follows.

[83]HMRC’s submissions advance four core propositions:(1) the Tribunal lacks jurisdiction to consider any challenge to the validity of the APNs;

(2) the penalties were correctly issued under Schedule 56 FA 2009;

(3) the Appellant had no reasonable excuse for non‑payment; and

(4) no special circumstances exist warranting any reduction. HMRC emphasises that the Appellant’s case improperly attempts to recast APN validity challenges as penalty‑jurisdiction arguments. (1). Jurisdiction: The Tribunal Cannot Entertain Challenges to APN Validity

[84]HMRC assert that the Tribunal has no jurisdiction to revisit, reconsider, or determine the validity of APNs. The Court of Appeal decision in Beadle established conclusively that Parliament did not provide any right of appeal against the issuing or confirmation of APNs. The Appellant’s remedy for alleged procedural defects would have been judicial review, not a penalty appeal.

[85]HMRC note the Appellant’s repeated assertions of “procedural deficiencies”, but these are irrelevant to the Tribunal’s function. Any assertion that Conditions A, B or C of s219 FA 2014 were not met falls outside the Tribunal’s jurisdiction. The Appellant is attempting to “shoehorn” APN validity complaints into a reasonable excuse argument.

[86]HMRC reiterated that nothing in the Appellant’s evidence identifies any procedural defect that is “gross and obvious” in the Sheiling sense. Sheiling does not permit a penalty appeal to become a disguised challenge to the validity of an APN; rather, it recognises only a narrow category of cases in which procedural defects are apparent on the face of the notice and incontrovertible, none of the Appellant’s allegations reach that threshold. (2). Validity of Penalties Under Schedule 56

[87]HMRC have discharged their initial statutory burden under paras 1 and 3 of Schedule 56 FA 2009. They rely on documentary evidence showing:(1) APNs issued on 9 November 2022;

(2) representations made on 8 February 2023;

(3) representations considered, and APNs confirmed, on 2 February 2024;

(4) payment due on or before 8 March 2024;

(5) non‑payment; and

(6) LPPs issued on 3 May 2024.

[88]The Appellant does not dispute these core factual elements.

[89]The statutory notices such as pooling notices, PAONs, BAONs and NoBs were properly issued in previous years and sent to the Appellant’s recorded address - “The Barn …”, . There is no record of post being undelivered and returned and the documents were also sent to Shaw Gibbs, the representative. This demonstrates that the statutory preconditions for APNs were met and that any assertion to the contrary is an impermissible attempt to reopen APN validity. (3). No Reasonable Excuse: Procedural Matters Do Not Assist the Appellant

[90]Turning to the question of reasonable excuse under para 16 Sch 56, HMRC submits that the procedural deficiency arguments are legally irrelevant as the arguments about missing pooling notices, unclear GAAR reasoning, or lack of detailed calculations are not relevant because:(1) they go to APN validity, a matter outside the Tribunal’s jurisdiction (Beadle).

(2) the APNs themselves were on their face complete, clearly stated the disputed tax, and warned that penalties would arise if unpaid.

(3) Sheiling does not support the Appellant’s position because the defects alleged here are not “obvious to a reasonable taxpayer without legal analysis”. The Appellant’s complaints are detailed submissions on competing legal arguments, which Sheiling expressly states does not fall within reasonable excuse.

(4) they are legally complex questions requiring judicial review, not “gross or obvious” defects within Sheiling.

(5) The Appellant has improperly conflated disagreements about the substantive PAYE/NIC liability, heavily contested for years, with the procedural steps of the APN regime. Even if the Appellant disagreed with HMRC’s views on PAYE/NIC vs dividend treatment, Beadle makes clear this cannot justify non‑payment of an APN.

[91]The Appellant was aware of the potential liabilities since the time of the Reg 80 determinations, which were issued from 2018 onwards, and subsequent GAAR Notices of Final Decision. The APNs were issued in November 2022 giving the Appellant more than a year before the 2024 payment deadline. The inability to pay reflected business choices and priorities not external constraints.

[92]HMRC submits that whilst the one‑year delay in responding to representations was regrettable, it did not excuse non‑payment. The statutory deadline under the APN regime is not contingent upon HMRC’s speed in concluding representations. Once the APNs were confirmed, payment was due.

[93]The Appellant’s attempt to rely on TTP is misconceived. No TTP agreement was ever reached. Paragraph 10 Sch 56 applies only where a TTP agreement is in place before the due date. Here, HMRC refused the proposed arrangement on 7 March 2024, before the due date, and therefore para 10 cannot apply.

[94]The Appellant’s financial constraints cannot amount to a reasonable excuse because:(1) paragraph 16(2)(a) provides that insufficiency of funds is not a reasonable excuse unless attributable to events outside the taxpayer’s control;

(2) the constraints relied on arose from the director’s personal divorce proceedings, not from events affecting the company;

(3) the company’s illiquidity resulted from its own decisions and structure as a non‑trading entity with illiquid assets;

(4) the Appellant could and should have planned from 2022 onwards;

(5) the APNs remain unpaid as of the hearing.

[95]It was Mr Esse that was getting divorced and not the Appellant and thus it was not within the statutory meaning of events outside its control.

[96]The Appellant has not demonstrated any special circumstances as:(1) “ability to pay” is expressly excluded (para 9(2)(a));

(2) procedural issues cannot constitute special circumstances (Fraser);

(3) HMRC did consider special circumstances at each stage; and

(4) the 5% penalties are modest and proportionate relative to the statutory objective of incentivising timely payment.

Further findings of fact

[97]We make the following further findings of fact. Prior to confirmation that UHY RB were instructed, Shaw Gibbs acted as the Appellant’s authorised tax agent in its dealings with HMRC, including in relation to the Reg 80 determinations, GAAR related notices, the APNs and subsequent correspondence and appeals.

[98]HMRC confirmed to the Appellant that its records showed that Shaw Gibbs held a valid and continuing agent authorisation (form 64-8) in respect of the Appellant throughout the relevant period. There is no evidence before the Tribunal that that authority was withdrawn, restricted, or otherwise qualified prior to or during the period in which the APNs and related statutory notices were issued.

[99]We find that Shaw Gibbs’ role was not limited to the passive receipt of correspondence. On the contrary, Shaw Gibbs actively acted on the Appellant’s behalf, including filing appeals against the Notices of Determination and Decision for multiple tax years and corresponding with HMRC in relation to those appeals.

[100]The suggestion that Shaw Gibbs acted merely as a “postbox” arose for the first time during Mr Esse’s cross-examination. No such characterisation appears in Mr Esse’s witness statement and no contemporaneous document describes Shaw Gibbs’ role in those terms. We therefore treat that description as a later rationalisation rather than as a contemporaneous account of Shaw Gibbs’ function.

[101]In a letter dated 9 February 2023, the Appellant suggested that “Shaw Gibbs may have had no authority to receive these documents on our behalf”. We find that this suggestion was tentative in nature and was not pursued. It was not repeated in subsequent correspondence, was not developed in the Appellant’s skeleton argument and was not relied upon as a substantive point at the hearing.

[102]In any event, the evidence establishes that Shaw Gibbs did in fact act with authority on the Appellant’s behalf during the relevant period. We therefore find that HMRC was entitled to treat service of notices on Shaw Gibbs as service on the Appellant, and that any alleged communication difficulties between Shaw Gibbs and the Appellant do not affect the validity of service or the Appellant’s responsibility to comply with statutory notices.

[103]We further find that the Appellant was professionally represented throughout the relevant period and that the existence of an authorised agent acting actively on the Appellant’s behalf reinforces, rather than undermines, the conclusion that the Appellant was aware of the existence and significance of the APNs and the obligations they imposed.

[104]We have considered the Appellant’s reliance on financial constraints as a basis for reasonable excuse. In doing so, it is necessary to distinguish clearly between financial pressures experienced by Mr Esse personally and those affecting the Appellant company as a separate legal entity. We accept that, as a matter of commercial reality, the Appellant’s finances were closely intertwined with those of its sole shareholder. However, FA 2009, Sch 56, paragraph 16(2)(a) requires the Tribunal to focus on causation and attribution as a matter of law and on that footing the distinction remains material.

[105]We find that the financial constraints relied upon by the Appellant arose from Mr Esse’s personal financial position and not from events affecting the Appellant company itself. The divorce proceedings, the substantial lump-sum payments ordered by the Family Court, and the very significant associated legal costs were obligations imposed on Mr Esse in his personal capacity. Those matters undoubtedly placed acute pressure on his personal finances. However, no evidence was provided that Mr Esse was subject to legal restrictions such that they prevented the Appellant’s ability to meet its statutory obligations.

[106]We have also considered the documentary evidence relating to Mr Esse’s divorce proceedings. While the hearing bundle contained correspondence and material describing the financial consequences of those proceedings, it did not include the Family Court orders themselves. We therefore proceed on the basis of Mr Esse’s description of their effect, rather than on the precise legal terms of the orders. Even accepting that substantial lump-sum payments were required, there was no evidence before the Tribunal that any order prohibited Mr Esse from advancing funds to the Appellant or that doing so would necessarily have placed him in breach of a court order. In the absence of such evidence, we make no finding as to the precise legal terms of any Family Court order beyond what is evidenced; it proceeds on the basis that no order expressly prohibiting funding of the company was demonstrated.

[107]In any event, any dependence by the Appellant on Mr Esse for funding would have been as a consequence of its own corporate structure and historic decisions, rather than the result of any supervening external event. By the period with which this appeal is concerned, the Appellant had ceased trading, held no liquid cash reserves and owned only illiquid assets. That position was longstanding and pre-dated both the issue of the APNs and Mr Esse’s divorce proceedings. The absence of alternative sources of funding, such as external borrowing, or assets capable of timely realisation, was therefore the product of the Appellant’s chosen arrangements and business history.

[108]We have considered carefully the Appellant’s contention that HMRC failed properly to consider whether there were special circumstances justifying a reduction of the penalties, and that HMRC’s decision making in this regard was flawed.

[109]We find that HMRC did in fact identify, consider, and assess the matters relied upon by the Appellant as potential special circumstances, but reached the evaluative conclusion that those matters did not justify the exercise of the special-reduction discretion under paragraph 9 of Schedule 56. We are satisfied that those matters were consciously rejected as insufficiently exceptional, rather than overlooked or ignored.

[110]This finding is based on the contemporaneous correspondence and review documentation. HMRC’s View of the Matter letter and subsequent Review Conclusion letter make clear that HMRC was aware of, and took into account, the procedural history of the APNs, including the representation process and the timing of HMRC’s response; the Appellant’s assertions regarding missing or misdirected statutory documents; the Appellant’s financial representations, including the absence of liquidity and reliance on Mr Esse as a funding source; the existence and impact of Mr Esse’s divorce proceedings; and the later withdrawal of one APN relating to 2015 NICs.

[111]We do not accept the Appellant’s submission that the relative brevity of HMRC’s reasoning demonstrates a failure to consider those matters. The statutory test does not require HMRC to provide a detailed narrative justification for every matter raised, nor to explain at length why each factor does not amount to a special circumstance. What is required is that the decision-maker addresses the representations put forward and reaches a conclusion that is rational and within the scope of the discretion conferred.

[112]Here, the evidence shows that HMRC treated the matters relied upon by the Appellant as falling within categories which Parliament has either expressly excluded from “special circumstances” (such as ability to pay), or which commonly arise in the administration of the APN regime and do not, without more, meet the threshold of exceptionality required. We are satisfied that HMRC’s decision reflects a judgment that these were not circumstances taking the case outside the normal and intended operation of the statutory penalty regime.

[113]We therefore find that HMRC’s special-circumstances decision was the result of an evaluative assessment carried out within the correct statutory framework. The Appellant’s disagreement is with the outcome of that assessment, rather than with the lawfulness of the decision-making process itself. On the evidence, there is no basis for concluding that HMRC failed to consider relevant matters, took account of irrelevant matters, or reached a conclusion that no reasonable decision-maker could reach.

Burden of proof

[114]The burden of proof in this appeal lies on the Appellant. While HMRC must establish that the penalties were validly imposed, it is for the Appellant to satisfy the Tribunal that there was a reasonable excuse within paragraph 16 of Schedule 56, or that HMRC’s decision on special circumstances was flawed in law. The standard of proof is the ordinary civil standard on a balance of probabilities.

Discussion

[115]Before turning to the individual grounds relied upon by the Appellant, we address two preliminary matters emphasised in HMRC’s submissions. First, this is a penalty appeal only; the Tribunal has no jurisdiction to determine the validity of the APNs or whether the statutory conditions for their issue were met. Secondly, the statutory penalty regime under Schedule 56 operates by reference to objective facts. Once it is established that an amount was due and not paid by the prescribed date, a penalty arises unless a statutory defence is made out. Those features of the legislative scheme inform the approach the Tribunal must take to the Appellant’s arguments. (1). Jurisdiction and the relevance of alleged defects in the APN process

[116]The Tribunal’s jurisdiction must be considered first, because it frames the extent to which the Appellant’s criticisms of the APN process can be taken into account at all in this appeal.

[117]It is common ground between the parties that the Tribunal has no jurisdiction to determine the validity of the Accelerated Payment Notices themselves, nor to determine whether Conditions A, B or C in section 219 of the Finance Act 2014 were satisfied. That position follows from the decision of the Court of Appeal in Beadle v HMRC

[2020] EWCA Civ 562

and is properly accepted by the Appellant. As Beadle makes clear, Parliament deliberately withheld a right of appeal against the issue or confirmation of an APN, and challenges to their validity lie, if at all, by way of judicial review. We would add that the commencement of judicial review proceedings does not suspend the operation of the APN or penalty regimes, absent interim relief, which was not sought or obtained in this case.

[118]The significance of Beadle for present purposes lies not merely in that exclusion of jurisdiction, but in the Court of Appeal’s explanation of why collateral challenges are impermissible. To permit arguments about APN validity to be ventilated indirectly through penalty appeals would undermine the statutory scheme, which is explicitly designed to require disputed tax to be paid up-front, with challenges to follow later. The Tribunal must therefore be careful not to allow arguments framed as “context” or “procedural concerns” to amount in substance to a challenge to APN validity.

[119]Against that background, the Appellant did not frame its case as a direct challenge to APN validity. Rather, it sought to rely on a series of alleged procedural deficiencies, most notably the asserted absence or late provision of pooling notices, GAAR notices, Notices of Binding and detailed calculation workings, as forming part of the factual context in which the decision not to pay was taken. It submitted that these matters bore on the question of reasonable excuse, because a reasonable taxpayer could not be expected to pay substantial sums “blind” without being put in possession of the material said to justify the demand.

[120]The Appellant also placed weight on the fact that certain GAAR related notices were not included in the hearing bundle and invited the Tribunal to infer from their absence that they had not been issued or validly served. We do not accept that submission. The composition of the hearing bundle reflects the material selected and collated by the parties for the purposes of this appeal; it is not a definitive record of all documents issued during the course of the underlying tax and GAAR processes. The absence of particular documents from the bundle does not, without more, establish that they were never issued or served. In the present case, HMRC asserted that the relevant notices were issued and relied on contemporaneous correspondence and records to that effect. We are not satisfied that the mere absence of documents from the bundle justifies drawing any adverse inference against HMRC, particularly where the Appellant was professionally represented throughout and did not pursue timely challenges to service at the relevant stages.

[121]We accept as a matter of principle that factual features of the APN process may be considered insofar as they explain the taxpayer’s conduct. Beadle does not require the Tribunal to pretend that the APN process took place in a vacuum. However, Beadle and the subsequent authorities make it clear that this is so only indirectly. The Tribunal must be vigilant to ensure that arguments framed as “context” do not, in substance, amount to a collateral challenge to APN validity.

[122]In the present case, we find that the Appellant’s decision not to pay the APNs was not caused by the asserted absence or late provision of procedural material, but by its settled position that the APNs should be challenged rather than complied with. That finding is based on Mr Esse’s evidence taken as a whole. Although the Appellant did seek further information from HMRC and expressed continuing dissatisfaction with the material provided, there was no evidence that payment would have been made had the requested documents been produced earlier or in a different form. Non-payment pre-dated HMRC’s confirmation letter of 2 February 2024 and continued unchanged thereafter.

[123]That finding is critical to our jurisdictional analysis. Once it is accepted that non-payment was driven by a substantive belief that the liabilities should not be paid pending challenge, the asserted procedural deficiencies cannot be treated as explanatory of the Appellant’s conduct. To give them decisive weight in those circumstances would require the Tribunal to embark on an assessment of whether the alleged procedural steps were, in fact, required and whether their absence undermined the APNs. That would be to trespass directly into the forbidden territory identified in Beadle.

[124]The position is reinforced by our findings concerning service and agency. We have found that Shaw Gibbs acted as the Appellant’s authorised agent throughout the relevant period; that they actively corresponded with HMRC and filed appeals on the Appellant’s behalf; and that HMRC was entitled to treat service of statutory notices on Shaw Gibbs as valid service on the Appellant. The suggestion that Shaw Gibbs acted merely as a “postbox” arose late, was unsupported by contemporaneous evidence, and was not pursued as a substantive point. Any internal communication shortcomings between the Appellant and its agent are therefore matters internal to the Appellant’s arrangements and cannot affect the validity or transparency of the APN process as a matter of law.

[125]HMRC also relied on the fact that its records did not show any relevant correspondence sent to the Appellant as having been returned undelivered. While it does not prove actual receipt by an individual recipient, it is consistent with proper service in the ordinary course of post. In circumstances where correspondence was sent both to the Appellant and to its authorised agent, and where there is no documentary evidence of non-delivery to the Appellant and evidence that correspondence was received by the authorised agent, we are persuaded that the absence of actual receipt by the Appellant has been established.

[126]The Appellant also relied on Sheiling Properties Ltd v HMRC in support of the proposition that procedural defects may, in some cases, give rise to a reasonable excuse. We accept that Sheiling recognises a narrow category of cases in which procedural defects that are apparent on the face of the notice and incontrovertible may be capable of being taken into account. However, we are satisfied that this case does not fall within that category. The matters relied upon by the Appellant are neither apparent on the face of the APNs nor incontrovertible; they depend on contested assertions about the existence, service, and sufficiency of earlier statutory notices and on legal argument as to their effect. Such matters lie squarely outside the limited Sheiling exception.

[127]Accordingly, we conclude that the alleged procedural deficiencies form part of the historical background but do not provide a permissible basis for questioning the payment obligation in this appeal. To treat them otherwise would be inconsistent with Beadle and the statutory scheme. (2). Reasonable excuse for non-payment of the APNs

[128]The central issue in the appeal is whether the Appellant has established a reasonable excuse for non-payment within paragraph 16 of Schedule 56.

[129]We accept that the Appellant’s failure to pay the APNs was not inadvertent. Payment was withheld deliberately during a period when the Appellant was professionally advised and because the Appellant believed that the APNs were unlawful and would ultimately be set aside. We also accept that Mr Esse genuinely held those beliefs. However, as the Upper Tribunal explained in Perrin v HMRC

[2018] UKUT 156 (TCC)

, the test of reasonable excuse is objective. The question is not whether the taxpayer acted honestly or in good faith, but whether a reasonable taxpayer, having the attributes and circumstances of the Appellant, would have acted in the same way.

[130]The appropriate comparator in this case is a reasonable corporate taxpayer in the Appellant’s position, aware of the APN regime, the absence of any right to postpone payment, and the statutory consequences of non-payment. Such a taxpayer is also taken to understand that APNs are deliberately designed to require payment notwithstanding genuine dispute and pending litigation.

[131]Viewed through that lens, we are unable to accept that the Appellant’s belief in the unlawfulness of the APNs constitutes a reasonable excuse. The Upper Tribunal’s decision in Sheiling makes clear that a belief in invalidity may, in principle, amount to a reasonable excuse only in a narrow category of cases where procedural defects are obvious, incontrovertible, and apparent without detailed legal analysis. We have already found that the present case does not fall within that category. The Appellant’s position depended on complex and contested arguments about GAAR notices, agency, service, and the interpretation of statutory conditions. These are precisely the matters which Parliament intended to be resolved separately from the payment obligation.

[132]We place particular weight on the fact that non-payment both pre-dated and continued after the provision of further material by HMRC, and that no evidence was given that payment would have followed had additional documents been supplied. In those circumstances, we are satisfied that the absence of documentation was not causative of the failure to pay.

[133]The Appellant also relied heavily on financial constraints, contending that non-payment was the consequence of severe liquidity pressure caused by Mr Esse’s divorce proceedings and associated court-ordered payments. We have carefully considered this evidence and do not underestimate its seriousness. However, the statutory question posed by paragraph 16(2)(a) is not whether payment would have been difficult or painful, but whether insufficiency of funds was attributable to events outside the taxpayer’s control.

[134]On our findings, the financial constraints relied upon were personal to Mr Esse and not attributable to events affecting the Appellant company itself. The divorce proceedings, lump-sum obligations and legal costs were imposed on Mr Esse personally. While they had indirect consequences for the company because of its dependence on him, there was no evidence that any court order prohibited him from advancing funds to the company, nor that doing so would have placed him in breach of an order as opposed to worsening his overall financial position.

[135]We have also found that the Appellant’s dependence on Mr Esse for funding was a product of its own corporate structure and historic decisions. By the relevant period, the Appellant was a non-trading company with no liquid reserves and only illiquid assets. That position was longstanding and pre-dated both the APNs and the divorce proceedings. The absence of alternative funding options therefore reflected the Appellant’s chosen arrangements rather than a supervening external event. In those circumstances, the statutory exception in paragraph 16(2)(a) is not satisfied.

[136]The Appellant further relied on the submission and refusal of a TTP proposal shortly before the due date. We accept that the proposal was made and that HMRC refused it. However, that proposal did not demonstrate an ability to pay the APNs by the due date beyond a very limited initial sum and was contingent on uncertain future events. No binding TTP agreement was in place, and there is no basis on which the refusal of the proposal could convert an inability to pay into a reasonable excuse under paragraph 16.

[137]Taking these matters together, and applying the principles in Perrin and Sheiling, we conclude that the Appellant has not established a reasonable excuse for non-payment. (3). Special circumstances and HMRC’s decision-making

[138]We turn finally to the Appellant’s reliance on paragraph 9 of Schedule 56 and its contention that the penalties ought to be reduced to nil on account of special circumstances.

[139]The Tribunal’s task in this respect is limited. As explained in Barry Edwards v HMRC

[2018] UKUT 134 (TCC)

and Advanced Scaffolding, the Tribunal does not stand in HMRC’s shoes. It may intervene only if HMRC’s decision on special circumstances is flawed in a public-law sense, for example because relevant matters were not considered, irrelevant matters were taken into account, or the decision was one which no reasonable decision maker could reach.

[140]We have carefully examined the correspondence and review documentation. It has found that HMRC was aware of, and did consider, the matters relied upon by the Appellant as potential special circumstances. Those matters included the procedural history of the APNs, the timing of HMRC’s response to representations, the Appellant’s financial representations, the divorce proceedings affecting Mr Esse, the TTP and the later withdrawal of one NICs related APN.

[141]The Appellant placed particular reliance on the later withdrawal of the 2015 NICs APN. However, that withdrawal occurred after the payment deadline had passed. The penalty regime operates by reference to circumstances existing at the time payment was due and a later change in HMRC’s position does not retrospectively render earlier non-payment reasonable or exceptional. We do not consider that HMRC acted unreasonably in treating that matter as insufficient to engage paragraph 9.

[142]The Appellant criticised the wording of HMRC’s response to the representations, placing particular emphasis on phrases such as “I understand” and “HMRC’s view is”, which it submitted demonstrated a lack of independent analysis. We do not accept that submission. Decision makers frequently summarise competing contentions before explaining why they do not accept them. The use of such language does not, of itself, indicate that matters were misunderstood or disregarded. When the response is read as a whole and in context, it is clear that HMRC identified the representations made, addressed them by reference to the statutory framework, and reached evaluative conclusions. We are not persuaded that the phraseology relied upon undermines the integrity or lawfulness of the representations review.

[143]We do not accept that the relative brevity of HMRC’s reasoning demonstrates a failure to consider relevant matters. The statute does not require HMRC to provide a detailed narrative explanation for each point raised. What matters is that the decision maker engaged with the representations and reached a rational conclusion within the scope of the statutory discretion. On our findings, that is what occurred in this case.

[144]Ultimately, the Appellant’s challenge to HMRC’s special circumstances decision amounts to a disagreement with the evaluative outcome, not to the identification of a flaw in the decision making process. The authorities do not permit the Tribunal to substitute its own view in those circumstances.

[145]We also note that the penalties imposed were those fixed by statute at 5% of the unpaid amounts. They were not increased by HMRC, nor applied selectively or inconsistently. In those circumstances, no issue of disproportionality or irrationality arises.

Conclusion

[146]For the above reasons, the Appellant’s appeal should be dismissed. The penalties are affirmed.

Right to apply for permission to appeal

[147]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: 21 April 2026