Griffiths – appeal against HMRC penalties allowed as notice to file was invalid

07 November 2018. Published by Alexis Armitage, Senior Associate

In Griffiths v HMRC [2018] UKFTT 0527 (TC), the First-tier Tribunal (FTT) has allowed the taxpayer's appeal against penalties imposed by HMRC as HMRC's notice to file a tax return was invalidly issued and in any event, the taxpayer had a reasonable excuse for failing to submit his return.


On 31 May 2014, HMRC sent to Michael Griffiths (the taxpayer) a PAYE tax calculation for the tax year 2013/14. The calculation showed an overpayment of tax by the taxpayer of £579.80. This was incorrect, as it only took into account one of the taxpayer's two employments.

On 1 June 2014, HMRC issued a payable order in respect of the “overpayment” which was paid to the taxpayer on 3 June 2014. 

On 2 June 2014, before the repayment had been made, HMRC sent a revised PAYE calculation to the taxpayer showing an underpayment of tax of £581.60. In other words, the taxpayer had underpaid tax of £0.80. Shortly after receiving the revised PAYE calculation, the taxpayer telephoned HMRC and was informed that the underpayment would be collected through a change in his PAYE tax code. HMRC claimed to have no record of this telephone call. The taxpayer heard nothing from HMRC for over eight months and assumed the matter had been dealt with.

HMRC accepted that normally such an underpayment would have been “coded out” through the taxpayer's PAYE tax code, but claimed that the taxpayer's income at the time was insufficient to enable HMRC to do this. Instead, on 25 January 2015, HMRC sent the taxpayer an unpaid income tax letter or “voluntary payment letter”. This letter stated that if the taxpayer did not pay, HMRC would consider collecting the amount through the self-assessment system and he would have to fill in a tax return.

On 2 February 2015, the taxpayer telephoned HMRC  again. On this occasion the telephone call was recorded. The taxpayer was assured that the underpaid tax would be collected through an adjustment to his tax code.

A further voluntary payment letter, in the same generic form as the earlier one, was sent to the taxpayer on 19 April 2015. Given the two telephone conversations he had had with HMRC, the taxpayer did not respond to this letter. Nothing happened for ten months, until HMRC sent a further voluntary payment letter to the taxpayer on 1 February 2016. 

HMRC then sent a notice to file a tax return to the taxpayer on 28 July 2016. As this was outside the normal self-assessment cycle, the filing date for both an online and a paper return was 4 November 2016.

The taxpayer took no further action and after he received a letter from HMRC informing him that his tax return was late and penalties were accruing, he instructed an agent in April 2017. The agent submitted the taxpayer's self-assessment tax return for 2013/14, on 8 June 2017.

The taxpayer appealed against the penalties that HMRC imposed under Schedule 55, Finance Act 2009, for his alleged failure to submit his 2013/14 return on time.

FTT decision

The appeal was allowed.

In arriving at its decision, the FTT considered the following two issues:

(1) was HMRC's notice to the taxpayer to file a tax return validly issued pursuant to section 8, Taxes Management Act 1970 (TMA); and

(2) if it was validly issued, did the taxpayer have a reasonable excuse for failing to submit his tax return in time?

In relation to issue (1), the FTT held that the notice to file was not validly issued because it was not issued for the statutory purpose of establishing the taxpayer's liability to income tax, pursuant to section 8, TMA.  HMRC already knew the taxpayer's liability at the time the notice to file was issued. The purpose of issuing the notice to file was simply to create a tax debt. This was ultra vires and accordingly the notice to file was invalid. As the taxpayer had not been validly required to submit a tax return, he had no obligation to do so and had not failed to submit a tax return. It followed that no penalties were due.

In relation to issue (2), the FTT said that even if it had concluded that the notice to file was validly issued, the taxpayer had a reasonable excuse for failing to submit his tax return in time, for the following reasons:

a. the taxpayer's experience and knowledge of the tax system was very limited, having had little interaction with HMRC as he had always paid income tax through the PAYE system;

b. the taxpayer received limited help when he contacted HMRC and was informed on more than one occasion that the underpaid tax would be collected through his notice of coding; and

c. the lengthy delays by HMRC between communications with the taxpayer lead him to believe that everything had been dealt with; he did not appreciate that he needed to complete a tax return.


This decision follows the recent decision of Groves v HMRC in which the taxpayer was also successful in his appeal against penalties issued by HMRC pursuant to Schedule 55, Finance Act 2009, for the late filing of a tax return, as the notice to file, in that case, had not been signed by an "Officer of the Board" and in any event, the notice was invalid as it was not given by HMRC for the purpose set out in section 8, TMA.

A copy of the decision can be viewed here.

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