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In Castlelaw (No 628) Limited and Irene Douglas v HMRC [2020] TC7540, the First Tier Tribunal upheld penalties under the Senior Accounting Officer rules for failures to make notifications about a dormant company. An innocent mistake was not a reasonable excuse.

Qualifying companies must have a Senior Accounting Officer (SAO). The company must make an annual notification to HMRC no later than the deadline for submitting accounts to Companies House. These specify: 

HMRC may assess flat rate penalties of £5,000 where there is a failure to make the notification or where the notification includes a careless or deliberate inaccuracy.

Castlelaw (No 628) Ltd (Castlelaw) was part of a group of over 100 companies. Irene Douglas was the SAO for Castlelaw as well as being the group company secretary and group SAO.

The FTT dismissed the appeal:

The FTT referenced HMRC’s internal guidance which states that the SAO provisions ‘are not about getting returns in on time’, but about ‘ensuring the tax accounting arrangements allow accurate calculation of its tax liabilities’.

The FTT added that in this case their view was that ‘it would be significantly unfair to the taxpayer to bear the whole penalty’. Had the FTT been allowed by law, they would have considered special reductions but they could only consider the facts in the light of the case law on reasonable excuse.

The suggestion being that HMRC could have exercised their discretion here, but chose not to do so.

Links to our guides:

Penalties: Senior Accounting Officers
The Senior Accounting Officer (SAO) of a large company is required under Schedule 46 FA 2009 to ensure the existence of and report on the appropriateness of their tax accounting arrangements. 

How to appeal a tax penalty
How to appeal a tax penalty. What are your rights of appeal if HM Revenue & Customs (HMRC) have assessed you for a tax penalty?

Grounds for Appeal: Reasonable excuse
What is considered to be a 'reasonable excuse' when a taxpayer makes an appeal?

External link:

Castlelaw and Irene Douglas v HMRC [2019] TC7540