In Hughes Property Partners Limited v HMRC  TC08829, the First Tier Tribunal (FTT) found that a tax agent’s lack of knowledge of Annual Tax on Enveloped Dwellings (ATED) law did not amount to a reasonable excuse for a return filed late.
- Hughes Property Partners Limited (HPPL) purchased a property in August 2020 which fell within the Annual Tax on Enveloped Dwellings (ATED) regime.
- HPPL was entitled to an exemption from the ATED charge on the property, due to it carrying on a property development business.
- This exemption had to be claimed by 16 September 2020 in a Relief Declaration Return.
- In August or September 2020, HPPL’s tax agent telephoned HMRC for guidance, as it was the first time that the agent had encountered ATED.
- HMRC had told the agent that they were working from home, were very busy and were unable to give advice.
- The agent could not recall if they had looked at the HMRC website.
- HPPL’s ATED return was eventually filed on 12 May 2021, 238 days late.
- HMRC charged Late filing penalties under Schedule 55 Finance Act 2009.
- HPPL Appealed to the First Tier Tribunal (FTT).
The FTT found that:
- The responsibility for filing an ATED return on time rests squarely with the taxpayer. There was no obligation on HMRC to issue a notice to file.
- HPPL had no Reasonable excuse for the late filing.
- The explanations given related to the agent’s problems; primarily a lack of knowledge of ATED law and COVID-19 pressures.
- As established in HMRC v Katib  UKUT 189, Reliance on an accountant who fails the taxpayer cannot assist where a statutory time limit is missed.
- HMRC’s website provides clear and extensive information as to when and how an ATED return must be filed.
- The fact that HPPL had an otherwise good compliance record could not assist.
- HMRC had considered whether to apply a special reduction but had found nothing that was exceptional, abnormal or unusual to justify it. The FTT could only displace this decision if it were ‘flawed’.
- There was no clear nexus or connection between COVID-19 and the failure to file the ATED return on time.
- While the agents had been busy, this was not a special circumstance in relation to the ATED return. It was effectively prioritising other issues over finding out the law on ATED returns.
- HMRC’s decision was not flawed.
- The FTT had no statutory power to discharge, or adjust, a penalty because of a perception that it is unfair.
HPPL's appeal was dismissed.
Useful guides on this topic
Annual Tax on Enveloped Dwellings (ATED)
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Penalties: Annual Tax on Enveloped Dwellings (ATED)
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Grounds for Appeal: Reasonable excuse
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