In Conchri Investments Limited v HMRC [2025] TC09540, the First Tier Tribunal (FTT) found no reasonable excuse or special circumstances to justify reducing £15,700 of penalties charged for late Annual Tax on Enveloped Dwellings (ATED) return filings.
On 30 January 2024, the taxpayer, Conchri Investments Limited, filed Annual Tax on Enveloped Dwellings (ATED) returns covering the period 31 March 2014 through 31 March 2023. The 31 March 2024 ATED return was filed on 10 April 2024.
- HMRC issued Late filing penalties totalling £15,700.
On 23 September 2024, the taxpayer Appealed the penalties.
- The taxpayer claimed that HMRC would have known that the company was entitled to Rental Relief from ATED based on the 2021-22 CT600 and accounts.
- The taxpayer also claimed that during the eleven years, there had been no communication from HMRC about late filing.
On 15 October 2024, HMRC upheld the penalties.
- Conchri Investments was advised, via a leaflet, that it could request a review or appeal to the tribunal within 30 days.
On 11 November 2024, the taxpayer wrote to the tribunal and this letter was treated as a Notice of Appeal.
- The wording of the letter suggested that it was a request for a review rather than an appeal.
- The letter noted that because of the entity’s nature, Self Assessment tax returns were filed from 2013-14 to 2020-21 and the previous accountants did not consider an ATED return to be due*. From 2021-22, Companies House requested that the taxpayer register as an overseas company and file CT600s. ATED returns were only considered at this point.
- The taxpayer also felt the penalties were high, considering no ATED tax was due.
The taxpayer sent a copy of the letter to HMRC on 9 December 2024.
- HMRC treated the letter as a request for a Review and carried one out. They issued a letter on 24 January 2025 upholding the penalties.
The tribunal originally listed the appeal for a video hearing. The taxpayer did not want to pay the costs of being represented.
- On 25 March 2025, HMRC consented to the appeal being determined based on the written submissions provided by the two parties, without a hearing.
- On 3 April 2025, the taxpayer also provided their consent and confirmed they had no further submissions to make.
The FTT released its decision on 17 April 2025 and dismissed the taxpayer’s appeal.
- On 22 April 2025, the taxpayer notified the FTT that a relevant letter concerning the property’s valuation had been omitted.
On 28 April 2025, the Judge set the previous decision aside and allowed the taxpayer and HMRC time to make their representations.
- The taxpayer provided a current valuation of the property and claimed this showed the property’s value was unlikely to have been above the ATED threshold between 2013 and 2015.
The FTT found that:
- There was no Reasonable excuse for the ATED returns to have been filed late.
- The taxpayer was required to complete an ATED tax return for each of the tax years.
- Reliance on a third party is precluded from being a reasonable excuse unless the taxpayer took reasonable care to avoid the failure (Finance Act 2009, par. 23(2)(b)).
- The Judge was also swayed by the Upper Tribunal’s comments in HMRC v Katib [2019] UKUT 189 (TCC) that, “It cannot be the case that a greater degree of adviser incompetence improves one’s chances of an appeal”.
- It was not objectively reasonable for the taxpayer to be unaware of their obligations due to the "clear and extensive information” on HMRC’s website about how and when to file ATED returns.
- HMRC have no obligation to notify a taxpayer of the need to file an ATED return.
- The taxpayer had not provided valuation evidence in support of its assertion that the property value meant ATED returns were not required.
- The taxpayer asked to provide additional documents after the decision, but this was denied.
- Principles laid down by higher courts provide that there should be finality in litigation rather than putting forward arguments post-decision that could have been put forward at the first occasion.
- There were no special circumstances that would allow the FTT to reduce the penalty.
- No tax being due does not constitute a special circumstance.
The taxpayers’ appeals were dismissed, and the penalties confirmed.
*Editorial note: while the taxpayer's letter to the tribunal stated that their previous accountants did not consider an ATED return to be due, evidence of any such advice having been given does not appear to have actually been presented to the tribunal. As those former accountants were no longer acting for the taxpayer, they were unable to make submissions to support or deny the assertion that they gave such advice: we do not know the wording of the engagement letter.
Useful guides on this topic
Annual Tax on Enveloped Dwellings (ATED)
What is the Annual Tax on Enveloped Dwellings (ATED)? Who does ATED apply to? What relief is available and how is it claimed? What are the ATED return filing dates?
Penalties: Annual Tax on Enveloped Dwellings (ATED)
What penalties apply to the Annual Tax on Enveloped Dwellings (ATED) regime? When can they be charged?
How to appeal a tax penalty (subscriber version)
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?
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