In Tysim Holdings v HMRC [2019] TC7389 the First Tier Tribunal (FTT) upheld late filing and payment penalties for ATED; ignorance of the law was no excuse for a non-resident taxpayer with a UK legal background.
The Annual Tax on Enveloped Dwellings (ATED) applies to enveloped dwellings unless a relief is claimed.
- Initially when introduced on 1 April 2012 this only applied to properties valued at more than £2 million. From 1 April 2015 the threshold was reduced to £1 million and further reduced to £500,000 from 1 April 2016.
- An annual ATED return must be filed in advance by 30 April each year with payment due by the same date.
Tysim Holdings Limited purchased a flat in London prior to the introduction of ATED. The company directors were non-UK resident. The chairman was a retired barrister qualified under UK law and an associate of 'the Institute of Taxation'.
- The flat was valued at £1,100,000 on 1 April 2012 so fell within the scope of ATED.
- Tysim was late both in filing their ATED return and paying the ATED charge for three consecutive tax years and incurred penalties accordingly.
- The penalties were appealed on the grounds of reasonable excuse and ignorance of the law as the taxpayer was non-resident. Tysim also claimed the penalties should be reduced for special circumstances and were disproportionate.
The FTT dismissed the appeal saying consideration of whether ignorance of the law has given rise to a reasonable excuse requires a detailed consideration of the relevant facts, considering all the circumstances of the taxpayer, as well as the nature and complexity of the tax requirement.
The judge said they would expect a reasonably prudent person holding a dwelling in another country to check the local requirements, at least annually, through a local advisor, and this was particularly true here as the chairman’s background meant they would expect him to have a particular awareness of the frequency of tax changes.
The returns were filed over 3.5 years after the ATED threshold change and there was no evidence that Tysim had tried to check the law during that period.
Specifically on ATED the judge pointed out that the obligation to file the ATED returns and pay the charge is not tucked away in a remote and inaccessible part of highly complex legislation, and should be something which would be immediately identified as applicable by anyone with familiarity with the UK tax system.
The FTT also dismissed the claim for a reduction for special circumstances as there was nothing exceptional, abnormal or unusual to justify such a reduction although Tysim acted quickly once aware of it’s ATED obligations.
Links to our guides:
Annual Tax on Enveloped Dwellings (ATED)
Grounds for Appeal: Reasonable excuse
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