Bradshaw – Tribunal confirms ignorance of the law is a reasonable excuse and cancels  penalties

09 August 2018. Published by Michelle Sloane, Partner

In Bradshaw v HMRC [2018] UKFTT 0368 (TC), the First-tier Tribunal (FTT) has held that a taxpayer's ignorance of the law is a reasonable excuse in relation to the late filing of a non-resident CGT return (NRCGT return).


Mr Richard Bradshaw and his wife (the taxpayers), emigrated to Canada in 2004. The taxpayers were resident in Canada at the time they disposed of a UK property on 29 June 2015. 

On 20 October 2016, the taxpayers each delivered an NRCGT return to HMRC in electronic form.  The NRCGT returns claimed private residence relief until 20 July 2004 and showed no gain or loss.  As such, they declared no CGT liability. 


On 2 and 5 December 2016, HMRC wrote to the taxpayers issuing each with a notice of assessment for a late filing penalty.  The penalties were issued by HMRC on the basis that the NRCGT returns were not filed within 30 days of the disposal of the UK property, as required by section 12ZB, Taxes Management Act 1970. The 30 day time limit was introduced by paragraph 43, Schedule 7, Finance Act 2015, in relation to disposals made on or after 6 April 2015 (the New Law). 


The taxpayers appealed the late filing penalty assessments on 15 December 2016 and requested an internal review by HMRC.  The decision to issue the penalty assessments was upheld on review.


The taxpayers appealed.

FTT's decision 

The appeals were allowed and the penalties cancelled.


The taxpayers contended that their ignorance of the law was a reasonable excuse as HMRC had failed to publicise the introduction of the New Law and as soon as they became aware of the New Law they submitted NRCGT returns.  The taxpayers further argued that they had relied on a third party, their solicitor and had already returned the disposal on their Canadian tax returns.


HMRC contended that ignorance of the law was not a reasonable excuse and nor was reliance on a third party. 

Following a number of recent cases and in particular Perrin v HMRC [2018] UKUT 156 (TC), the FTT held that ignorance of the law can be a reasonable excuse for the late filing of a NRCGT return.  Similarly, in the view of the FTT, the taxpayers' reliance on their conveyancing solicitor, who did not know about the New Law, was wholly reasonable.


The FTT also considered the UK/Canada double taxation agreement and concluded that this was of no assistance to the  taxpayers. A resident of Canada who derives gains from a disposal of property in the UK may be taxed in the UK.  If both Canada and the UK tax the gain, then Canada would give credit for any UK tax due.  Additionally, there is no legislation which prevents the UK from imposing reporting obligations on non-residents disposing of UK property.



This decision is the third recent FTT decision (following McGreevy v HMRC [2017] UKFTT 690 and Scowcroft v HMRC [2018] UKFTT 295) which has confirmed that a taxpayer's ignorance of the law in relation to NRCGT returns constitutes a reasonable excuse and that taxpayers can rely on the advice of a third party. 


This, and the above cases, confirm that the concept of "reasonable excuse" is wider than HMRC's suggestion of an "unforeseeable or inescapable" event. 


HMRC should, at the very least, sufficiently publicise its guidance when new legislation is introduced which changes the previous position. 


A copy of the decision can be viewed here.

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