In Mohammed Salem Kadhem v HMRC [2017] TC05929 director successfully appealed a late filing penalty: there was insufficient evidence to show that HMRC had sent him a notice to file a return and he was unaware that he had any obligations under self assessment.

  • Mr Kadhem became director of a UK limited company in May 2014.
  • His only income was a salary subject to PAYE.
  • HMRC said that he registered as self employed in August 2014, however it did not set up a record until December 2014.
  • HMRC said that it sent him a notice to file a 2014/15 tax return in April 2015.
  • A return was due by 31 January 2016.
  • No return was filed until September 2016

HMRC imposed £1,300 of late filing Schedule 55 FA 2009 penalties

(1) a £100 late filing penalty

(2) a £300 “six month” penalty

(3) “Daily” penalties totalling £900.

  • The taxpayer appealed on the basis that he had a reasonable excuse for late filing: he had not received a notice to file a tax return and he filed a return as soon as he realised that penalties were accruing. Additionally, as he was subject to PAYE he did not realise that any self assessment return was required.
  • HMRC denied the appeal on the basis that as a director he should have registered for self assessment and filed a return, he was required to do so without any prompt or encouragement from HMRC.
  • The taxpayer appealed to the First Tier Tribunal (FTT).

The FTT found that the taxpayer had a reasonable excuse for late filing of his return:

  • HMRC's guidance suggests that all directors should register for self assessment however there is no statutory basis for this. See Should I file a tax return (director's briefing).
  • There was no evidence to show that the taxpayer had received a notice to file a tax return or the first late payment penalty.
  • The taxpayer filed a return as soon as he was aware that he was being penalised.


The reasonable excuse part of this case boils down to whether the taxpayer received a notice to file or not.

The interesting side-debate is as to why HMRC wants returns from all directors. Most accountants and advisers file them automatically for their director clients, and without doublt many directors residing offshore will not be aware of what HMRC requires unless they have a UK tax agent. Surely this issue will go away when HMRC starts to pre-populate returns as in theory HMRC's computers can be programmed to generate a return for every director who then has to simply check the return and press 'submit'.


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