In Calder Hairdressing Ltd v Revenue Scotland [2024] FTSTC 8, the First Tier Tribunal (FTT) found that unawareness of the requirement to lodge an LBTT 3-year lease return was not a reasonable excuse for late submission.
Calder Hairdressing Ltd (CHL) failed to submit a Land and Buildings Transaction Tax (LBTT) lease review return on the third anniversary of the grant of a lease. HMRC issued the relevant penalties for late submission of the return, CHL appealed based on the fact they were unaware of the requirement to file.
- CHL leased a commercial property in Edinburgh.
- A land and buildings transaction tax return was submitted as required by Revenue Scotland on the grant of the lease.
- Revenue Scotland issued a ‘reminder letter’ advising of the requirements to complete a return and outlining the penalties for a late return. The letter was not addressed to CHL and was sent to an incorrect address.
- CHL failed to submit the return which resulted in a penalty notice being issued. This correspondence was issued to the correct address and outlined the penalties which had arisen.
- CHL submitted a Notice to Appeal to the tribunal.
Penalties for late submission of a 3-year lease review are:
- Initial late submission - £100.
- 3 months late - £10 per day, up to £900.
- 6 months late - £300 or 5% of the tax due, whichever is greater.
- 12 months late - £300 or 5% of the tax due, whichever is greater.
CHL‘s return was due by 21 August 2022 but was not submitted until almost two years later on 3 July 2024. No tax was due.
CHL argued:
- That they were unaware of the requirements to lodge a 3-year return.
- Their lack of awareness stemmed from Revenue Scotland failing to check the address on the reminder letter.
- Correspondence regarding the return and the penalties did not arrive until after the due date had passed.
- It was unfair that Revenue Scotland waited until the full second penalty was due before they issued their penalty notice, arguing that the aim of the second penalty is to encourage timely submission or returns.
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'It was unfair that Revenue Scotland managed to obtain the correct address from Companies House to issue the Penalties, but had failed to check the correct address when issuing the Reminder Letter...'
No dispute arose regarding the due date of the return, both parties agreed it was due by 21 August 2022.
Revenue Scotland argued that there was no ‘Reasonable Excuse’ or ‘special circumstances’ that could be applied in this case, pointing out that LBTT is a self-assessed tax and therefore there is no obligation for Revenue Scotland to notify taxpayers of their requirement to submit a return.
The tribunal found:
- Ignorance of the law is not a reasonable excuse for late submission of the return.
- Lack of awareness is not a special circumstance.
- They agreed that Revenue Scotland are not required to notify taxpayers of their requirements to submit a return.
- Since there is no requirement to notify, the incorrect address on the reminder letter becomes irrelevant.
- Consideration was given surrounding the fact Revenue Scotland did not issue the penalty notices in a timely manner, but it does not deflect from the fact the return was late.
The appeal was dismissed.
Useful guides on this topic
LBTT: Land and Buildings Transaction Tax
What is Land and Buildings Transaction Tax (LBTT)? What are the rules?
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?
Grounds for Appeal: Reasonable Excuse
What is considered to be a 'reasonable excuse' when a taxpayer makes an appeal against a tax compliance failure?
Adviser's Tax Penalty Planner
A guide to the key direct and indirect tax penalty regimes for returns and payments, excluding VAT.
External Link
Calder Hairdressing Ltd v Revenue Scotland [2024] FTSTC 8
