Special relief granted for excessive tax demand

25 November 2015. Published by Adam Craggs, Partner

In Montshiwa v HMRC[1], the First-Tier Tribunal (FTT) allowed the taxpayer's appeal against HMRC's decision not to grant 'special relief' under Schedule 1AB of the Taxes Management Act 1970 (TMA).


Dr Montshiwa (the Appellant) was born in Botswana and came to the UK to train as a medical doctor. He submitted tax returns for the years 1996-97 to 2004-05, inclusive. On 8 May 2006, the Appellant returned to Botswana. Notices requiring him to submit his 2005-06 and 2006-07 returns were sent to his UK address on or around 6 April 2006 and 2007, respectively, although he did not receive either notice. Penalty notices for 2005-06 and 2006-07 were sent to the same address in 2008.

In or around November 2009, notices imposing surcharges in respect of the 2006-07 return were sent. Following this, determinations under section 28C TMA for the 2005-06 and 2006-07 returns, in the sum of £17,121, were sent to the Appellant on or around 22 September 2009.

The Appellant returned to the UK on 11 September 2011. On 29 September 2011, HMRC wrote to the Appellant indicating, incorrectly, that the time limit for displacing the 2006-07 determination by way of a self-assessment expired on 5 April 2011. It also said that "all penalties for 2006-07 had been cancelled". 

On 10 October 2012, the Appellant wrote to HMRC confirming that he wished to appeal for a reduction in his tax bill. HMRC responded on 12 November 2012 indicating, amongst other things, that there was no right of appeal against the determinations and that the time for submitting a self-assessment tax return for 2005-06 and 2006-07, had passed.

On 14 February 2013, the Appellant's new agent wrote to HMRC enclosing a revised return for 2006-07, indicating that the tax due for 2006-07 was £325.71. A formal claim for special relief was submitted to HMRC on 1 October 2013.

On 3 February 2014, HMRC wrote to the Appellant giving notice of enquiry into the claim for relief.

On 1 May 2014, HMRC wrote to the Appellant informing him that it had concluded its enquiry and enclosing a closure notice. In the opinion of HMRC, the criteria for a claim for special relief had not been met and the Appellant's claim for special relief was rejected.

On 20 May 2014, the Appellant appealed against the decision in the closure notice. Following a review which upheld the original decision, the Appellant appealed to the FTT on 3 September 2014.

The Appellant relied on Condition A in paragraph 3A(4) of Schedule 1AB TMA, namely, whether it would be 'unconscionable' for HMRC to seek to recover the amount of £17,121 it claimed was owed by the Appellant.

The FTT's decision

The FTT allowed the Appellant's appeal against HMRC's decision to deny special relief under Schedule 1AB and upheld HMRC's assessments for penalties.

This had the effect of reducing the Appellant's tax liability to £325.71 and the corresponding surcharge to 10% of that amount. Penalties remained in the sum of £200.

In reaching its decision, the FTT considered that HMRC had not taken into account the information provided by the Appellant's agent when the formal claim for special relief was submitted. The disparity between the estimated tax due of £17,121 was in absolute and relative terms substantially in excess of the actual liability of £325.71. As such, HMRC's decision that Condition A was not satisfied was unreasonable.

With regard to penalties, the FTT did not consider the Appellant to have a reasonable excuse for failing to submit his 2006-07 return. He had not done everything in his power to provide his agent with enough information to file a return and he was aware that his tax would be calculated under the self-assessment regime having filed returns for nine years previously.


The issue of special relief is often before the FTT (see our previous blog: Tribunal considers jurisdiction in relation to 'special relief' and allows taxpayer's appeal). In this case, like the differently constituted FTT in Scott v HMRC[2], the FTT preferred Currie v HMRC[3], to Maxwell v HMRC[4]. Currie determined that the FTT could only decide whether HMRC's refusal to grant special relief was 'Wednesbury' unreasonable, in the judicial review sense[5]. It could not substitute its own view on whether to grant relief. In Currie it was accepted that 'unconscionable' meant 'unreasonably excessive' or 'completely unreasonable'.

In the view of the FTT, once a taxpayer has identified that HMRC's determination is excessive, as in the instant case, HMRC must consider whether that excess is unreasonable. If the excess is large in absolute and relative terms, other factors would have to have considerable impact to displace that excess as the determining factor. In the present case, HMRC's failure to take this significant factor into account made denial of special relief unreasonable. This, together with HMRC's failure to consider the Appellant's representations, rendered the decision 'so outrageous that no reasonable decision-maker could have reached it' and not surprisingly the FTT had little difficulty in allowing the Appellant's appeal.

Interestingly, the FTT also expressed the view that Parliament must have intended that HMRC would explain why, given a numerical disparity, it considered the excess reasonable (in the present case, HMRC had failed to do so). Taxpayers who find themselves in a similar position to the Appellant in this case, should request HMRC to set out in writing why it considers special relief is not available and why it considers its decision to be reasonable.

For the full judgment please click here.


[1] [2015] UKFTT 0544 (TC).

[2] [2015] UKFTT 0420 (TC).

[3] [2014] UKFTT 882 (TC).

[4] [2013] UKFTT 459 (TC).

[5] Associated Provincial Picture Houses Limited v Wednesbury Corporation (1948) 1 KB 223.

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