In Begbies Traynor (Central) LLP v Revenue Scotland [2019] FTSTC 4 the Scottish First tier tribunal allowed an appeal against penalties for a late LBTT return; Revenue Scotland had not met the legal conditions to permit them to charge daily penalties.
A Scottish Land and Building Transaction Tax (LBTT) return must be made before the end of 30 days beginning with the day after the effective date of the transaction.
- If a return is more than 3 months late daily penalties of £10 per day may be charged for up to 90 days if Revenue Scotland so decides and if they give notice specifying the date from which the penalty is payable. (s161 Land and Buildings Transaction Tax (Scotland) Act 2013 which mirrors the penalty regime for other UK taxes at schedule 55 FA09 ).
Begbies submitted a return for a leasehold transaction 274 days late. No tax was due.
- Revenue Scotland issued penalties:
- £100 first penalty for failure to make a return
- £900 penalty for being 3 months late being £10 per day
- £0 6 month penalty
- Begbies appealed the £900 in daily penalties on the grounds that the penalties were discretionary and no tax was due.
The Scottish FTT allowed the appeal and cancelled the £900 in daily penalties:
- Revenue Scotland had not explained whether the charging of daily penalties was a policy decision or a decision consciously taken by a decision maker having considered all of the individual circumstances; they had not ‘decided’ to charge the penalties so s161 was not complied with.
- No warning letters were issued by Revenue Scotland which also failed s161 requirements as well as their own guidance.
The judge referenced the position in late filing penalty cases for Non resident CGT returns which are also not known to be late until a return is filed, meaning that reminders, warnings and notices cannot be issued, that the schedule 55 penalty regime is unsuitable and has resulted in HMRC deciding not to charge daily penalties for those returns.
UPDATE: Revenue Scotland appealed the decision but it was upheld by the Upper tribunal.
Links to our guides:
LBTT: Land and Buildings Transaction Tax (LBTT)
Non -resident CGT: UK property
External link:
Begbies Traynor (Central) LLP v Revenue Scotland [2019] FTSTC 4
Upper Tribunal: Revenue Scotland v Begbies Traynor (Central) LLP [2019] UT35