Armstrong: Tribunal cancels late filing penalties

10 September 2018. Published by Robert Waterson, Partner

In Armstrong v HMRC [2018] UKFTT 0404 (TC), the First-tier Tribunal (FTT) has cancelled late filing penalties because the taxpayer had not consented to receive penalty notices electronically.


On 6 April 2016, Ms Hannah Armstrong (the taxpayer) was issued with a notice, pursuant to section 8, Taxes Management Act 1970 (TMA), to deliver a tax return for the tax year 2015/16 (the Notice). HMRC's records indicated that the Notice was issued by electronic communication to a secure mailbox on the self-assessment online account of the taxpayer. The Notice required the taxpayer to deliver her return by 31 October 2016 (if filed in paper form) or 31 January 2017 (if filed electronically).

The taxpayer had ceased to be self-employed in January 2016 and was of the view, wrongly, that she was not required to file a "nil" return. She did eventually file her return late on 13 December 2017.

When the taxpayer failed to file on time, HMRC issued a penalty notice electronically to the taxpayer on 7 February 2017 for £100, pursuant to paragraph 3, Schedule 55, Finance Act 2009. Further penalties were issued by HMRC electronically after three and six months (an additional £1,200 in total).

The taxpayer appealed the last two penalty notices, outside the 30 day statutory time period, on 21 December 2017. HMRC refused to agree that the appeals could be made out of time under section 49, TMA, and informed the taxpayer that her only recourse would be to seek permission from the FTT to submit her appeals out of time.

The taxpayer appealed to the FTT.

FTT decision

The appeal was allowed.

The first issue for the FTT to determine was whether the appeal should be permitted out of time. Applying the test set out in Denton and others v T H White Ltd & others [2014] EWCA Civ 906, the FTT was of the view that the delay was "serious", being three months later than the statutory 30 day time limit. The explanation given for the delay was that the taxpayer had been unaware of the penalty notice. The FTT found that explanation to be plausible and something which weighed against the seriousness of the delay. The FTT concluded that the balance of prejudice weighed in favour of the taxpayer and gave permission for the appeals to be made late.

As HMRC may not use electric communications with a taxpayer unless the taxpayer has consented (this is the effect of regulation 3(1) of the Income and Corporation Taxes (Electronic Communications) Regulations 2003 (SI 2003/282) (the Regulations)), the second issue to be determined by the FTT was whether the taxpayer had agreed to receive penalty notices electronically.

The FTT reviewed in detail the provisions of Schedule 55, Finance Act 2009 and the Regulations, which provide HMRC with the power to communicate with taxpayers through its secure electronic mailbox system.

The burden in showing the extent of the taxpayer's consent rested with HMRC and any such consent had to be "informed consent". On the material before the FTT, HMRC was unable to demonstrate that the taxpayer had done anything more than consent to receiving notices to file tax returns electronically.  Accordingly, the FTT was of the view  that although the taxpayer had consented to use the electronic system for the delivery of notices to file a tax return, that consent did not extend to communications relating to penalties. The penalties were therefore cancelled.


In previous cases where taxpayers have argued that they did not receive a notice that HMRC claims to have issued, the provisions of section 115(2), TMA, and section 7, Interpretation Act 1978, have been raised by HMRC. But those provisions relate to postal service. In this case it was not postal service, but electronic communication, which was relevant. As the FTT commented, that raises different issues entirely.

The FTT expects any consent from a taxpayer to be informed consent, in other words, taxpayers must understand what it is they are consenting to and how precisely they will be informed of important matters that affect their tax liability, or their liability to sanctions, such as interest and penalties. Without such informed consent, notices given to taxpayers electronically, whether to a secure mailbox or an email address, may not be validly made.

A copy of the decision can be viewed here.

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