In Talkative Limited v HMRC [2019] TC07172 the FTT dismissed an appeal against late filing penalties for an employment related securities return; ignorance of the law and reliance on an adviser were not reasonable excuses.

If an employer gives shares to an employee, or sets up a tax advantaged share scheme, the benefit is taxed within the Employment Related Securities (ERS) regime.

  • The employer must register the scheme with HMRC.
  • An online return is required for each registered ERS scheme by 6 July following the end of the tax year, including details of any reportable events in the tax year.
  • S421JC(8) ITEPA provides that there is no penalty for a failure to make a return if the taxpayer satisfies HMRC (or on appeal, a Tribunal) that they had a reasonable excuse for the failure.

Talkative Limited was required to file two returns for 2017/18 in respect of share option schemes.

  • The schemes were registered with HMRC on time but both returns were filed more than 3 months late incurring penalties totalling £800.
  • Talkative appealed on saying neither they nor their agent were aware the returns had to be filed and HMRC had not sent a notice to file a return therefore they had a reasonable excuse for the late filings.

The FTT dismissed the appeal; neither ignorance of the law or reliance on a third party is a reasonable excuse, unless you have taken reasonable care, and it was not objectively reasonable for Talkative to have registered the schemes with HMRC and not considered the ramifications of this.

The judge said the onus was on Talkative to ensure that they properly understood their obligations under the law. She refused to reduce the penalties; the fact that no tax was due did not constitute special circumstances.

Links to our guides:

Employment Related Securities (ERS)

Employment related securities: reporting issues

Grounds for Appeal: Reasonable excuse

Grounds for Appeal: Adviser error

External link

Talkative Limited v HMRC [2019] TC07172