In Michael Breen v HMRC [2022] TC08482, the First Tier Tribunal (FTT) dismissed an appeal against late filing penalties finding that a debilitating fear of making a mistake was not a reasonable excuse for the late filing of tax returns.

  • Mr Breen filed his 2014-15 tax return on 3 March 2019, 27 months late.
  • HMRC raised Late Filing Penalties.
  • The taxpayer Appealed on the basis that he had a Reasonable Excuse for the late filing.
  • The reasonable excuse offered was that the taxpayer's mental health had suffered as a result of HMRC's behaviour. As a result, he had a debilitating fear of making a mistake in his return and did not wish to submit a return until he was sure it was entirely correct.
  • This was caused by what he considered was a campaign of bullying and intimidation by HMRC which included:
    • Enquiries in 2008 surrounding his Non-Domiciled status. This resulted in around £800 of additional tax becoming due.
    • In 2012 he attended an interview under caution which focussed on non-UK assets.
    • In 2013 the criminal investigation ended and was replaced with a civil investigation.
    • A month later he received a Code of Practice 9 enquiry asking him to disclose the tax fraud he had committed.
    • In February 2014 HMRC raised an assessment for the 1994-95 tax year totalling £520,000, issued Schedule 36 Notices and in February 2015 issued a further assessment for nearly £1.1m.
    • Ongoing enquiries into the taxpayer's claim to be domiciled outside the UK are due to be heard at the FTT later in the year.

The FTT dismissed the penalty appeal finding that the taxpayer did not have a reasonable excuse as:

  • While mental health could constitute a reasonable excuse, it would have to have deteriorated to such an extent that the taxpayer could not deal with their affairs, submit or prepare to submit a return.
  • No medical evidence was offered to support the Post Traumatic Stress Disorder claimed.
  • HMRC’s officers had not acted in an improper manner throughout their interactions with the taxpayer.

Useful guides on this topic

Adviser's Tax Penalty Planner
A guide to the key direct and indirect tax penalty regimes for returns and payments, excluding VAT.

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

How to appeal a tax penalty
What are the steps in making an appeal? What should your appeal cover? What does recent case law say on this topic?

Non-domicile status, deemed domicile & tax
Who is non-UK domiciled? What does this mean for UK Income Tax, Capital Gains Tax and Inheritance Tax? What reliefs are available to non-doms?

Sch 36 Information Notices
What is a Schedule 36 Information Notice? When can HMRC issue one? What rights does the taxpayer have when an information notice is issued?

External links

Michael Breen v HMRC [2022] TC08482

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