How to appeal a tax penalty: if HM Revenue & Customs (HMRC) have assessed you for a tax penalty you may appeal against the penalty.

If you are subscriber to this website click here for the adviser (detailed) practical guide to appeals.

The grounds for making an appeal will depend entirely on the nature of the penalty and circumstances.

  • Both the penalty and the size of penalty may be appealed.
  • In the case of penalties for error or mistake you may additionally lodge an appeal if HMRC fails to suspend a penalty.

A penalty for late filing of return may be appealed on the grounds that the taxpayer has a reasonable excuse for having to file the return late. For example (these examples are not exhaustive):

  • No return was actually due
  • No notice to file a return was ever received
  • HMRC gave the wrong advice about filing deadlines or filing online
  • in the case of direct tax, that the taxpayer relied on third party who did not file the return
  • The taxpayer thought that online filing had worked and it transpired that it did not/Internet failure
  • The taxpayer posted a return on time
  • The taxpayer was ill, or had an accident, or something happened in the family
  • etc...

A late payment penalty may be appealed on the grounds that the taxpayer has a reasonable excuse for making payment late. For example (these examples are not exhaustive):

  • No internet or IT failure
  • Illness
  • Bank error
  • HMRC not logging post
  • Postal delay
  • etc...

For a reasonable excuse to be made out there are only two requirements:

  • The taxpayer in making an appeal ("the appellant") must put forward an excuse.
  • It must be decided whether, when viewed objectively, that excuse is reasonable in the context of the delay that has triggered the penalty.

A penalty for  errors in returns and documents causing an understatement of tax, or the over claiming of a loss or relief may be appealed on the basis that the taxpayer took reasonable care.

This type of penalty may be removed, reduced or suspended.

Top tip: it is always worth requesting suspension. If you don't ask you won't get!

Grounds for appeal (this list is not exhaustive):

  • the error was accidental, a one off and should be suspended because the taxpayer had taken reasonable care over his affairs
  • the error was caused by a third party (including HMRC), and it was reasonable the taxpayer in those circumstances to place total reliance on the third party
  • the penalty is excessive, or miscalculated in some way which does not allow for correct abatement
  • the penalty should be reduced to 0% because the taxpayer took reasonable care.

When a penalty notice is received the taxpayer should follow the instructions given and write to HMRC, making an appeal, as necessary.

HMRC should offer a review of any penalty decision. If the penalty still applies following the review, the taxpayer should make an appeal to the First Tier Tax Tribunal on the appropriate form:

Notice of appeal by post

Guidance notes

Guidance notes on making an appeal

Directions

The tribunal works according to strict rules (which are all available online) however in the majority of minor tax penalty appeals taxpayers will just need to follow the directions made.

The judge will issue directions which must be followed, these will include providing details about dates, representation and may require written representations from the parties. They will also include instructions on the bundle, case authorities and evidence.

  • The tribunals view any contempt of the legal process as abhorrent. In a 2014 case taxpayer ended up paying HMRC's costs after he or his representative withheld evidence and failed to notify the tribunal as to a change of representative.

The bundle

  • The size and contents of the bundle depend on the case, but will include all correspondence between the parties, including penalty notices from HMRC. 
  • The bundle should set out the legislation and if appropriate, relevant case law.

During an appeal a taxpayer "the appellant" or their representative will be required to present the case and then present their evidence to the Tribunal, calling witnesses as necessary.

  • The quality of the evidence provided is often what will "make or break" the case. Some taxpayers turn up without any evidence which reading between the lines of case decisions does not assist their appeal.
  • The type of evidence required to make your case varies. Ideally you need a third party to back up your evidence, for example, if a taxpayer is appealing a late filing penalty because he was ill and unable to submit he return, then he possibly needs only to bring a doctor's certificate to the tribunal. He could have a third party witness confirm he was ill, or perhaps a sick note which he created and presented to work, it would be then useful if his boss would corroborate. 

A decision of the FTT may be appealed in certain circumstances to the UTT. A case which features difficult technical argument may be appealed straight to the UTT.

More guides

Click here for the adviser (detailed) practical guide to appeals

See Reasonable care and tax penalties

See Tax penalties: grounds for appeal

Assistance in making an appeal?

Contact Virtual Tax Partner support

External guidance

Tax Tribunal Guidance

First Tier Tax Tribunal decisions