Philip McBean v The Commissioners for HMRC [2026] UKFTT 799 (TC)

[2026] UKFTT 00799 (TC)Case No TC 09899
FIRST-TIER TRIBUNAL
TAX CHAMBER
Hearing Heard on: 19 May 2026Date Judgment date: 28 May 2026
By remote video hearing
Appeal reference: TC/2022/07557
VAT – appeal against registration and penalty for failure to notify of liability to register – turnover exceeded the threshold – no reasonable excuse – appeal dismissed
Before
TRIBUNAL JUDGE MATTHEW DONMALLJANE CUMMINS
Between
PHILIP MCBEANAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentAlan Rashleigh of Alan Rashleigh & Associates Ltd for AppellantHeather Sercombe, litigator of HM Revenue and Customs’ Solicitor’s Office for RespondentsDECISION

Introduction

[1]This is an appeal against the decision of HMRC to register the Appellant for VAT from 1 October 2013 to 27 July 2020 (the Registration Decision) and to issue a penalty for failure to notify HMRC of his liability in the sum of £9,236.80 (the Penalty). The notice of appeal also had sought to challenge VAT assessments in the total sum of £47,748.45 (the Assessments), but as the Tribunal informed the Appellant by letter of 14 April 2023, as the Appellant had not filed any VAT returns for the relevant periods, the Assessments could not be appealed to the Tribunal.[2]For the reasons set out below, we dismiss the Appellant’s appeal. As at 31 August 2013, he was liable to be registered under the Value Added Tax Act 1994 (VATA) because the value of his taxable supplies in the period of one year then ending exceeded the statutory threshold (then £79,000), such that under Schedule 1 VATA (Schedule 1) para 5(2), the Commissioners must register him with effect from the end of September 2013, i.e. from 1 October 2013 as they did. Further, as he had failed to comply with the obligation upon him to notify HMRC of his liability to register, the Penalty became payable under the Finance Act 2008, Schedule 41, and we are not satisfied that there is a reasonable excuse for that failure.

Law

[3]Schedule 1 has effect with respect to registration, under s.3(2). Paragraph 1(1)(a) of Schedule 1, as amended by the Value Added Tax (Increase of Registration Limits) Order 2013 provided as of 1 April 2013, that a person is liable to be registered if at the end of any month, the value of his taxable supplies in the year then ending has exceeded £79,000:
“Subject to sub-paragraphs (3) to (7) below, a person who makes taxable supplies but is not registered under this Act becomes liable to be registered under this Schedule— (a) at the end of any month, if the person is UK-established and the value of his taxable supplies in the period of one year then ending has exceeded £79,000;”
[4]Paragraph 5(1) provides that a person who becomes liable to be registered by virtue of paragraph 1(1)(a) shall notify the Commissioners of the liability within 30 days of the end of the relevant month.[5]Paragraph 5(2) provides that the Commissioners shall register any such person (whether or not he so notifies them) with effect from the end of the month following the relevant month or from such earlier date as may be agreed between them and him.[6]Section 25 VATA provides that a taxable person shall in respect of supplies made by him “account for and pay VAT” by reference to prescribed accounting periods, and regulation 25 of the VAT Regulations 1995 requires every person who is registered or is required to be registered shall make VAT returns showing the amount of VAT payable by him.[7]As regards the making of assessments, s.73(1) provides that where a person has failed to make any returns required under VATA, the Commissioners may assess the amount of VAT due from him to the best of their judgment and notify it to him.[8]Section 77(4), (4A) and (4C) together provide that an assessment may be made at any time not more than 20 years after the end of the prescribed accounting period or event giving rise to the penalty in cases involving a loss of VAT attributable to a failure to comply with the notification obligation under paragraph 5(1) of Schedule 1.[9]Section 83(1) provides that an appeal shall lie to the Tribunal on matters including (a) the registration of any person, and (p) an assessment under s.73 “in respect of a period for which the appellant has made a return”. There is, therefore, no ability to appeal an VAT assessment if the taxpayer has not made VAT returns for the relevant periods.[10]Under the Finance Act 2008, Schedule 41 (Schedule 41) paragraph 1, a penalty is payable where a person fails to comply with this obligation to notify of the liability to register under para 5(1) of Schedule 1. Where a person becomes liable for such a penalty, HMRC shall assess it, notify the person and state in the notice the period in respect of which the penalty is assessed (para 16).[11]The amount of such a penalty is provided for under various paragraphs of Schedule 41 read together:(1) Paragraph 6 provides for the standard amount of the penalty payable for a domestic matter (as here) for cases where there is not a deliberate failure, as 30% of the potential lost revenue.(2) Paragraph 7(6) and (7) define the potential lost revenue in the case of a failure to notify of liability to registration as being the amount of VAT for which the person is liable for the period beginning with the date with effect from which he is required to be registered and ending on the date on which HMRC received notification of, or otherwise became fully aware of, his liability to be registered.(3) Paragraphs 12 and 13 provide for reductions for disclosure. Under para 12(3), disclosure of a relevant failure (here, to notify) is “unprompted” if made at a time when the person making it has no reason to believe that HMRC have discovered or are about to discover the relevant failure, otherwise, is “prompted”. In the case of a standard 30% penalty in a case where (as here) HMRC became aware of the failure to notify more than 12 months after tax first becomes unpaid by reason of the failure, the minimum % of the penalty for prompted disclosure is 20%, or if unprompted is 10%. In other words, even if HMRC give maximum reduction for disclosure, the minimum penalty in a prompted disclosure case would be 20% of the potential lost revenue.(4) Under paragraph 14, HMRC may reduce a penalty if they think it right because of special circumstances, but the exercise of HMRC’s discretion under this paragraph can only be altered on appeal if the Tribunal thinks that HMRC’s decision in respect of the application 14 was flawed, in light of the principles applicable in proceedings for judicial review (para 19(3)-(4)).[12]Paragraph 20 provides that liability for a penalty does not arise in respect of a failure that is not deliberate if the person satisfies HMRC or the Tribunal on appeal that there is a reasonable excuse for the failure.[13]Under paragraph 17, an appeal may be brought both against a decision that a penalty is payable, and as to the amount of such penalty, and an appeal shall be treated in the same way as an appeal against an assessment to VAT.[14]In Sintra Global Inc v HMRC [2025] EWCA Civ 1661, the Court of Appeal considered the issue of where the burden of proof lies when a civil penalty is imposed and the taxpayer wishes to challenge the penalty on the ground that the underlying liability to tax which underpins the penalty is wrong. In the course of discussion it noted that:(1) The taxpayer bore the burden to displace HMRC’s decision that the taxpayer was liable to register for VAT [124];(2) HMRC bore the burden to establish the ingredients of liability to the penalty [125]. So for a registration penalty, HMRC would need to establish the basic conditions of liability under para 1 of Schedule 41.[15]On the issue being specifically considered by the Court of Appeal, it held that in penalty proceedings under schedule 41, if a taxpayer wishes to challenge the underlying tax liability on which the penalty is based, the legal burden rests on the taxpayer to show that the underlying tax liability is wrong in the same way as it would on appeal against the relevant assessment [130]. This is the case even if the taxpayer is unable to pursue an appeal against the VAT assessment itself [145]. It is evident in its reasoning that the Court of Appeal accepted that a taxpayer could challenge the quantum of a penalty even if it could not challenge the underlying assessment to VAT: the disputed point before it was upon whom the burden lay in relation to such a challenge. As to its decision on that point, although on 30 March 2026 the Supreme Court gave permission for an appeal against the Court of Appeal’s decision in Sintra, for the present the decision remains good law. In any event, for the reasons developed below, the determination of the Appellant’s appeal against the penalty in this case does not turn on whether or not the Appellant bears the burden of proof.

Evidence

[16]The Tribunal had before it a bundle of evidence and legislative authorities of 1,561 pages, and a witness statement of the Appellant of a single page. While HMRC had filed and served a short witness statement from Kier Twyford, Mr Twyford did not attend the court hearing and was not therefore available for questioning. In circumstances where Mr Rashleigh said that he would have had questions for Mr Twyford, and given that the substance of Mr Twyford’s statement seemed largely to be taken from correspondence between the parties, the Tribunal decided that it would not admit Mr Twyford’s witness statement into evidence, and we place no reliance upon it.[17]The Appellant, Mr McBean, gave evidence orally, in response to supplementary questions from Mr Rashleigh, cross-examination by Ms Sercombe, and questions from the Tribunal. We found him to be a truthful witness, although in certain respects his evidence was not entirely consistent or clear as discussed in our findings of fact below.[18]Additionally, we should record that on the morning of the hearing, Mr Rashleigh referred to some correspondence that was not in the hearing bundle from 2023 about the nature of some of the Appellant’s supplies in the relevant period being in relation to energy-saving materials. The Tribunal had directed that parties should provide a list of all documents on which it wished to rely by 10 May 2024, and this correspondence was not included in the Appellant’s list of documents. We invited him therefore to email copies of that correspondence to the Tribunal and HMRC, as a precursor to him making an application for permission to rely on them, and we took a break for that purpose. After the break, however, Mr Rashleigh stated that he was not able to locate the correspondence and so did not pursue such an application. In any case, as we note further below, it was not part of the Appellant’s grounds of appeal that the calculation of the potential lost revenue for the purposes of the Penalty was incorrect, nor was there any documentary material within the bundle upon which any finding could have been made that some of the Appellant’s supplies were of a zero or reduced rate of VAT.

Findings of fact

[19]On the basis of all the evidence before us we make findings of fact as follows:(1) The Appellant is a registered gas boiler installer.(2) He started in business in 2011 as a sole trader. Although in his oral evidence he made some reference to having registered his business with Companies House, his oral evidence was unclear on this point. There is no documentary evidence of any limited company from 2011, and in correspondence to HMRC in 2021 he had stated “I set up my small business as a sole trader in 07/04/2011” and his witness statement he stated he was a sole proprietor.(3) At some point in 2011 or early 2012, he registered for VAT with the number 110213689.(4) In May 2012, he applied to de-register. In an undated letter to HMRC appended to an email of 17 May 2021, he gave an account of the reason why: The reason I de-registered… was because my profits did not warrant VAT registration. My turnover profits were especially low. During VAT registration, homeowners expectation for using a sole trader business to be the boiler price found on an internet search plus a basic day wage. During VAT registration customer homeowners turned down my VAT quoted services. VAT quoted prices caused job loses, lost time, lost travel expenses to the site where the quote was turned down. Not achieving an income. Starting out at this time of austerity, there appeared to be a fixed budget price target that as a vat registered business, I could not match.(5) We find that he applied to de-register because he considered that he was not required to be registered and because he considered being registered for VAT was causing him to lose business as his prices were not as low for homeowner customers as they would be without VAT.(6) He did not have an accountant at that time.(7) Following his application, he received a telephone call from HMRC (the Telephone Call). He said that he remembers it because it was unusual to get a telephone call from HMRC.(8) During that Telephone Call, the HMRC agent asked him why he wanted to de-register. He recalls explaining that his turnover was not high enough and he considered it would be more profitable not to be registered. The agent told him that he should file a final VAT return and the VAT registration would be closed on 12 June 2012. He said that the conversation then turned to matters of his self-assessment for income tax.(9) The Appellant’s oral evidence was initially that there were no further instructions in respect of VAT. He later qualified this: when asked if he was told that he should re-register if his turnover exceeded the VAT registration limit, he said no, not that he could recall anyway.(10) Subsequent to the Telephone Call, the Appellant duly filed his final VAT return and HMRC cancelled his registration for VAT with effect from 13 June 2012.(11) From 13 June 2012, the Appellant was not registered for VAT.(12) Although he stated that he did not believe he got any letters or further phone calls confirming his de-registration, he accepted it was a long time ago. In any case, we find that as of 13 June 2012, the Appellant’s understanding was that he was no longer registered for VAT, irrespective of whether or not he received a written confirmation of de-registration.(13) On 13 March 2020, HMRC sent the Appellant a compliance check opening notice in relation to his self-assessment tax return for year ended 5 April 2019.(14) On 27 July 2020, the Appellant started trading through a limited company registered at Company House called Heat In Leicester Ltd.(15) On 22 October 2020, HMRC advised the Appellant that his turnover for the year to 5 April 2019 was apparently £140,044, in excess of the VAT registration threshold, so the matter would be reviewed by the HMRC VAT team.(16) There were a number of requests made by HMRC for information and documents, including bank statements. The Appellant was able to provide bank statements back to 6 April 2012, the last of which were provided on 6 September 2021.(17) On 14 January 2022, HMRC issued a pre-decision letter to the Appellant, accompanied by a spreadsheet which set out HMRC’s calculations of the Appellant’s rolling 12 month turnover derived from his bank statements. The Appellant did not challenge these figures.(18) The Appellant’s rolling 12 month turnover to July 2013 was £78,497.07. However, in the 12 months to August 2013, it was £83,196.07, in excess of the VAT registration threshold at the time of £79,000. The Appellant’s 12-month rolling turnover exceeded the relevant VAT registration threshold at all times thereafter up to cessation in July 2020. It was generally over £100,000, and peaked at £177,636.22 in the year to June 2018.[20]Pausing there, the Appellant’s explanation as to why he had not re-registered for VAT at any point after August 2013 is that he had thought at the time that the threshold for VAT registration related to his overall profits, i.e. his sales minus his costs, rather than turnover, i.e. the total value of his taxable supplies over a year. This evidence is broadly consistent with explanations in correspondence such as that in his letter of May 2021, where he referred to “his profits did not warrant VAT registration” and “I believed that as my income profit was less than £85000, I did not have to be vat registered”. Given that HMRC does not allege any deliberate failure on the part of Mr McBean, and did not challenge his evidence on this point in cross-examination, we are satisfied that the Appellant did not re-register for VAT because he did not understand what the correct position in law was as regards the liability to register for VAT, being when the value of his taxable supplies in the period of one year up to the end of any month exceeds the statutory threshold (in August 2013 £79,000). For the avoidance of doubt, we find that any such ignorance or misunderstanding was not as a result of anything said by HMRC during the Telephone Call or otherwise.[21]Resuming the chronological history:(1) On 22 May 2022, HMRC wrote that the Appellant was to be registered as of 1 October 2013 and that the total VAT due was £101,178.95, which was calculated on the basis of taking a flat 12% proportion of the complete income in the period 1 October 2013 to 27 July 2020, 12% being “an industry average” for the trade sector accounting for input tax.(2) This calculation of the VAT due was challenged by the Appellant’s then advisers, Pearl and Co Accountants (Pearl) who argued for a more granular approach to the overall VAT position taking into account actual costs and on 29 August 2022 advanced a net VAT figure of £41,517.84.(3) There was subsequent consideration by Mr Twyford of HMRC, who noted that Pearl had treated all input costs as standard rated, when some input costs such as insurance and education were exempt.(4) On 19 October 2022, Mr Twyford of HMRC wrote to state that he had reviewed the input costs and the re-calculated VAT liability at £47,748.45.(5) On 20 October 2022, Pearl replied thanking Mr Twyford and stating that the updated assessment was “now in line with the actual operation of the business”.(6) On 8 November 2022, HMRC wrote to the Appellant stating that he should have been registered for VAT for the period from 1 October 2013 to 27 July 2020, and was being assessed for £47,748.45, and that that assessment was replacing the one previously issued. The letter expressly stated: Requesting and submitting a VAT return If you do not wish to accept the above assessment, you can make a single VAT return and pay any tax shown on the return as being due. You can do this by requesting the appropriate form to be sent to you. The form needs to be completed in full and returned to us without delay. Our address is at the top of this letter.(7) No such VAT returns were submitted by the Appellant subsequently.(8) On 4 December 2022, the Appellant authorised Alan Rashleigh & Associates Ltd as his nominated agent for dealing with HMRC.(9) On 8 December 2022, Mr Rashleigh on behalf of the Appellant requested a formal review of the 8 November 2022 decision. The argument expressed was as follows: Our initial concern is that in June 2012, Mr McBean submitted an application to deregister for VAT purposes. On 12/6/12, Mr McBean received a telephone call from HMRC, and on the basis of that conversation he was verbally informed that the deregistration would be authorised. However no written confirmation of the deregistration, the date from which the deregistration would be effective, nor was he informed that a final return should be submitted. We submit that on the basis of the aforementioned information, that as Mr McBean was not properly served with the required Notice of Deregistration, he must therefore legally remain registered for VAT purposes., albeit that he could not , because access his VAT account to submit VAT returns was “blocked/closed”. Therefore, we submit that as Mr McBean was not formally and properly deregistered, the VAT assessment for the period 1/10/13 to 27/7/20, in the sum of £47748.45, is: 1. Overstated, and 2. Assessed for a period exceeding 4 years. We estimate that the VAT due for a maximum of 4 years should be in the region of £21000.(10) On 9 January 2023, a notice of penalty assessment in the sum of £9,236.80 was generated, stating it was being charged under Schedule 41 in respect of the failure to notify, and the penalty was being assessed by reference to the period 1 October 2013 to 11 March 2020.(11) On 31 January 2023, HMRC issued a review conclusion letter, upholding its decision. Although the actual letter was not in the Hearing Bundle, both the Notice of Appeal and HMRC’s statement of case refer to 31 January 2023 as being the date of review.(12) On 28 March 2023, the Appellant submitted his notice of appeal. The grounds of appeal stated: There has been a total misunderstanding by all parties relating to deregistration notification, in 2013. A final VAT return was not made available to him to complete. He was not able to access his VAT account held by HMRC & submit VAT returns as HMRC closed his account. We would submit that the appellant was not properly deregistered, and therefore legally remained VAT registered, Thus, any assessment is limited to a 4 year limit.(13) On 28 April 2023, HMRC sent a letter in respect of the penalty, stating that its letter of 9 January 2023 had been generated, but that it was “not centrally printed and referred for your attention”, and enclosing the 9 January 2023 notice of the Penalty, further stating that “To ensure your right to review or appeal is not impeded, I will extend the appeal period for 30 days from the date of this correspondence.”(14) On 14 April 2023, the Tribunal wrote to the Appellant, and stated that the Tribunal had no jurisdiction to consider the appeal against the VAT assessments.(15) On 9 May 2023, the Appellant wrote attaching the correspondence of HMRC of 28 April 2023 and penalty notice, and applying that the appeal be amended to include appeal against the Penalty.(16) On 17 July 2023, the Tribunal confirmed that the matters in the appeal were the VAT registration and Penalty.(17) On 3 April 2024, HMRC served its Amended Statement of Case, the amendment following the Tribunal’s direction of 20 March 2024 that it particularise HMRC’s case as regards the Penalty.

The issues in the appeal

[22]There are two issues in this appeal. First, the Registration Decision, i.e. was the Appellant liable to registered for VAT by HMRC as of 1 October 2013. Second, the Penalty. We address these issues in turn below.[23]The Assessments themselves cannot be appealed, owing to no VAT returns having been submitted for the periods. At one point, Mr Rashleigh sought to argue that the Appellant had not been given the opportunity to submit VAT returns and so the process was unfair. In the event, however, we do not need to address this submission, as he properly retracted it after being pointed to the text of HMRC’s letter of 6 November 2022 set out at paragraph 21(6) above.[24]Further, no objection was made by HMRC as regards the lateness of the appeal against the Registration Decision, and in all the circumstances, including the fact that the Penalty of 9 January 2023 was not actually sent to the Appellant until 28 April 2023, we consider it fair and just to allow the appeal to proceed.

The Registration Decision

[25]The Appellant’s written case in respect of the Registration Decision was in essence that the Appellant was never properly registered and therefore legally remained VAT registered throughout. This argument provided the basis for the contention that the Assessments were excessive because any assessment was limited to a four-year time limit, rather than 20 years in the event of a failure to notify of liability to registration as per s.77(4), (4A) and (4C) discussed at paragraph 8 above.[26]In the hearing, however, Mr Rashleigh sensibly did not pursue this contention. The Appellant’s clear evidence was that he was told by HMRC that he was to be de-registered as of 13 June 2012, and that he considered himself de-registered from that point after. Although he could not recall having been given written confirmation of de-registration, he did not deny the possibility. However that would not take matters any further anyway: Schedule 1 para 13(2) provides that the Commissioners, if they are satisfied that a registered person has ceased to be registrable, may cancel his registration from that date or such later date as may be agreed, but does not make any provision of a notification requirement before such cancellation is effective. Further we have found as a fact that the Commissioners did cancel his VAT registration as of 13 June 2012.[27]Given the above, at the hearing the Appellant did not in fact advance any contention as to why the Registration Decision was wrong. Mr Rashleigh accepted that the value of the Appellant’s taxable supplies in the year to end of August 2013 were in excess of the statutory threshold, and that meant that he must be registered. Mr Rashleigh correctly conceded that the fact that the Appellant had misunderstood what the statutory threshold related to (i.e. turnover rather than profit) did not change the position as to his liability to register in law.

The Penalty

[28]As regards the penalty, it fell to HMRC to satisfy us that the necessary components for liability were established. We consider they are for the following reasons, none of which were disputed by the Appellant:(1) The Appellant had failed to notify of his liability to register for VAT as of the end of August 2013, so a penalty is payable under Schedule 1 para 1.(2) The requirements of para 16 were met, namely that the Appellant was notified of the Penalty, and the notice states the period in respect of which the Penalty was assessed, being 01 October 2013 to 11 March 2020.(3) The starting amount for the Penalty was 30%, it not being alleged to have been a deliberate failure, so para 6 is satisfied.(4) Full reduction for disclosure was given by HMRC, to the 20% minimum for prompted disclosure. We agree that the disclosure was prompted, because it followed the opening of a compliance check by HMRC into his self-assessment position in March 2020.(5) The quantification of the Penalty was made by reference to the potential lost revenue. Para 7(7) defines that as being the VAT for which he would be liable in the period from the date on which he was required to be registered (i.e. 1 October 2013) to “the date on which HMRC received notification or, or otherwise became fully aware of, P’s liability to be registered”. As to this end date, it was not explained to us at the hearing or in the documentation why the Penalty had been calculated to 11 March 2020, rather than to 27 July 2020 (which was the date on which his trading as a sole trader ceased). It may be related to the date at which HMRC opened the compliance check. However, the Appellant did not contend that the end date of the period should have been earlier than 11 March 2020, and if anything, taking this as the end date rather than 27 July 2020 is in the Appellant’s favour. We infer that this end date is why the Penalty, at £9,236.80 is less than 20% of the Assessments (20% of £47,748.45 = £9,549.69), because the Assessments were calculated in the period to 27 July 2020, whereas the Penalty has been calculated to a slightly shorter period to 11 March 2020.[29]This being the case, the burden then shifts to the Appellant to establish his case under Schedule 1 para 20 that there was a reasonable excuse for his failure to notify HMRC of his liability to register. As to this, the Appellant’s witness statement set out the following: I believe that I have reasonable grounds for not being registered. These grounds are that: 1. HMRC in 2020 where in full possession of the facts, as they were in 2012. 2. HMRC did not afford any means of submitting VAT returns, even by Making Tax Digital. 3. HMRC claim to have no record of the telephone call instigated by one of their officers in 2012, or of the deregistration. 4. HMRC appears to have offered incorrect advice and failed to afford, that the duty of care to ensure taxpayers records are properly maintained and retained. 5. HMRC has failed to give full, clear and proper advice and outline any possible consequences etc of any actions, or lack thereof (including legal obligations.) 6. Taxpayers have a “reasonable expectation” to be able to rely on any decision given , in this case that I would be deregistered wef 12/6/12[30]These points in fact go largely to a different point, namely the Appellant’s belief that he would be de-registered. As discussed above, on the evidence before us the Appellant was de-registered and understood himself to be so. The fact that he was de-registered provides no reasonable excuse for not re-registering once his taxable sales exceeded the threshold. We would also reject any suggestion, were it implicit in the above, that the Appellant did not have the means to notify HMRC of his liability to register. In our judgment, he did. Rather, he did not register because he did not consider that he met the threshold, because of a misunderstanding as to the nature of that threshold as relating to profit.[31]As to the line “HMRC appears to have offered incorrect advice”, in his oral evidence the Appellant did not articulate what this alleged “incorrect advice” in fact was, and we have found that there was no incorrect advice given by HMRC relating to VAT in the Telephone Call. Mr Rashleigh properly did not pursue a submission premised on an assertion of “incorrect advice” having been given by HMRC.[32]That leaves the Appellant’s case on reasonable excuse as essentially being that the Appellant misunderstood the legal test for registration and that HMRC did not adequately explain it to him on it in the Telephone Call.[33]In the case of Perrin v HMRC [2018] UKUT 156 (TC), the Upper Tribunal set out some principles on “reasonable excuse” defences. At [81], the Tribunal said:
"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."
[34]At [82] it went on:
"82. One situation that can sometimes cause difficulties is when the taxpayer's asserted reasonable excuse is purely that he/she did not know of the particular requirement that has been shown to have been breached. It is a much-cited aphorism that " ignorance of the law is no excuse", and on occasion this has been given as a reason why the defence of reasonable excuse cannot be available in such circumstances. We see no basis for this argument. Some requirements of the law are well-known, simple and straightforward but others are much less so. It will be a matter of judgment for the FTT in each case whether it was objectively reasonable for the particular taxpayer, in the circumstances of the case, to have been ignorant of the requirement in question, and for how long. The Clean Car Co itself provides an example of such a situation."
[35]The reference to The Clean Car Co was to the decision of Judge Medd QC in The Clean Car Co Ltd v C&E Comrs [1991] VATTR 234, from which the Upper Tribunal had earlier at [51] in Perrin cited an extract including the following: “In reaching a conclusion the first question that arises is, can the fact that the taxpayer honestly and genuinely believed that what he did was in accordance with his duty in relation to claiming input tax, by itself provide him with a reasonable excuse. In my view it cannot. It has been said before in cases arising from default surcharges that the test of whether or not there is a reasonable excuse is an objective one. In my judgment it is an objective test in this sense. One must ask oneself: was what the taxpayer did a reasonable thing for a responsible trader conscious of and intending to comply with his obligations regarding tax, but having the experience and other relevant attributes of the taxpayer and placed in the situation that the taxpayer found himself in at the relevant time, a reasonable thing to do?[36]Applying these principles from Perrin we reject the Appellant’s case on reasonable excuse. The Appellant did know that there was a requirement to register for VAT, and this is not a case of a taxpayer being ignorant of some legal requirement. As to the fact that the Appellant appears to have misunderstood the nature of the statutory test for registration for VAT, that is not a reasonable excuse. In our judgment, it is not objectively reasonable for the Appellant to have misunderstood the threshold for register for VAT as relating to profit, rather than value of his taxable sales or turnover, and we find it highly surprising that he did so. He did not give any evidence of seeking to inform himself of the correct position, whether by consulting with an accountant, researching online or otherwise. In short, there was no reasonable excuse for his failure to notify his liability to register.[37]Finally, we address two more arguments that Mr Rashleigh touched upon in the hearing. The first was that he initially said that the Appellant wished to challenge the quantum of the Penalty on the basis that it should be lower because some of the supplies he made were either zero-rated or had a reduced rate, being in relation to energy-saving materials. This was a contention that had not been made in the grounds of appeal, was understandably not addressed in HMRC’s statement of case, and was not addressed in any of the papers before us. On the contrary, the Pearl email of 20 October 2022 had stated that HMRC’s updated assessment was “now in line with the actual operation of the business”. Mr Rashleigh said that Pearl’s statement was ill advised, but in any event, as noted at paragraph 18 above, there was no documentary evidence in the bundle before us upon which we could make any finding as to whether some of the Appellant’s supplies were subject to zero or a reduced rate of VAT rather than standard rated, even were we to have considered it fair for the Appellant to advance this new argument. As it was, therefore, Mr Rashleigh did not take us to any evidence in support of this argument. The Court of Appeal in Sintra found that the burden falls on the Appellant to show that the underlying tax liability is wrong, but even if that were not the case, on the evidence before us we are satisfied that the underlying tax liability as calculated by Mr Twyford is correct.[38]The second point that Mr Rashleigh raised was a complaint that HMRC had not “suspended” the Penalty. However, the exercise of any discretion that HMRC has about the collection of or suspension of the Penalty is not subject to an appeal to this Tribunal. Schedule 41 para 17 limits the Tribunal’s jurisdiction to an appeal against a decision that a penalty is payable and an appeal against the amount of a penalty.

Conclusion

[39]For the above reasons, we dismiss the appeal.

Right to apply for permission to appeal

[40]This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. Release date:28 May 2026