Failing to file a tax return on time can prove costly—even if no tax is ultimately owed. Two recent First-tier Tribunal decisions, Atkin v HMRC [2024] UKFTT 786 (TC) and Awan v HMRC [2024] UKFTT 891, spotlight how easily penalties can escalate under the UK’s self-assessment system. The judgments offer practical guidance on how HMRC issues notices, how penalties accumulate, and why a taxpayer’s belief that no tax is due is not a free pass from compliance.
The Legal Framework
Under section 8 of the Taxes Management Act 1970 (TMA 1970), HMRC can issue a notice requiring an individual to file a self-assessment tax return. For online returns, the statutory due date is generally 31 January following the end of the tax year. Late filing triggers penalties set out in Schedule 55 of the Finance Act 2009:
- An initial £100 penalty if the return is not filed by the due date.
- Additional daily penalties of £10 per day if the return remains outstanding beyond three months (up to a maximum of 90 days).
- Further penalties—either 5% of the tax due or a fixed amount of £300, whichever is greater—if the delay reaches six and twelve months.
Although the law allows appeals, taxpayers must usually submit those appeals within 30 days. A tribunal may consider a “reasonable excuse” (for instance, a serious, unexpected event) but will apply an objective standard in deciding whether the circumstances justify the delay.
Atkin v HMRC: Uphill Struggle for a Late Appeal
In Atkin, the taxpayer was required to file for the 2021–22 tax year no later than 31 January 2023 but submitted the return long after that deadline. Initially fined £100, he later faced total penalties of £1,200 under Schedule 55.
“The appellant failed to attend the scheduled video hearing,” noted the Tribunal. It also found that he had been notified repeatedly of the need to file. When he appealed, the delay in lodging the appeal itself was substantial, and the Tribunal decided it was in the “interests of justice” to proceed without his participation. Ultimately, the Tribunal refused to grant a late appeal and upheld the penalties because “the appellant provided no valid reason” for missing both the filing deadline and the appeal window.
This case highlights two pitfalls. First, not responding in a timely fashion can cause penalties to mount rapidly. Second, lodging an appeal out of time requires a robust explanation—and even then, the Tribunal may still reject it.
Awan v HMRC: No Tax Owed, but Penalties Still Apply
By contrast, Awan was concerned a taxpayer whose income ultimately fell below the personal allowance. Although no tax was due, she had been brought within the self-assessment regime for previous years and never had her notice to file formally withdrawn by HMRC. She neglected to file by the 31 January 2023 deadline and was 177 days late when she finally did so. That delay resulted in a £100 late-filing penalty plus daily penalties of £880, for a total of £980.
Even though her income was below the threshold, the Tribunal concluded that the penalties were warranted. As Tribunal Judge Susan Turner wrote:
“There is no dispute that the penalties were correctly issued. The self-assessment tax return for the 2021/22 tax year was submitted on 27 July 2023, after the due date, and notice to file had been served to Mrs Awan’s PTA in accordance with s 8 TMA 1970.”
The taxpayer had signed up for paperless communications, yet acknowledged not checking her online account. She also relied on earlier situations in which HMRC withdrew filing requirements for other low-income years, but the Tribunal was clear that each tax year stands on its own. Receiving a notice means the onus is on the taxpayer to confirm whether or not the requirement still applies.
Reasonable Excuse and Special Circumstances
Both tribunals examined whether the taxpayers had a “reasonable excuse” under paragraph 23 of Schedule 55 or if “special circumstances” under paragraph 16 could justify reducing penalties. Neither Atkin nor Awan met these criteria.
- Reasonable Excuse: Under the case law, it must be objectively reasonable for the taxpayer to have delayed filing. Merely forgetting, being busy, or assuming that no tax was due does not suffice.
- Special Circumstances: These must be exceptional factors that justify a reduction or cancellation of the penalty. The Tribunal in Awan noted that “there are no special circumstances” meriting leniency, even when the taxpayer owed no tax.
Key Takeaways
- Notices Matter: Once HMRC has issued a valid notice to file, the taxpayer must either complete the return or contact HMRC to have the notice formally withdrawn if they believe it is no longer needed.
- Delay Is Costly: Daily penalties can accumulate quickly. Prompt action as soon as a taxpayer becomes aware of a filing requirement is critical.
- No Liability ≠ No Penalties: Even if a taxpayer’s income is below the personal allowance, failing to file a return by the deadline can lead to substantial fines.
- Late Appeals Face Hurdles: As shown in Atkin, an appeal lodged out of time without a good explanation is likely to fail, reinforcing the importance of meeting not only HMRC deadlines but also Tribunal deadlines.
Conclusion
The Atkin and Awan decisions underscore how integral punctual compliance is under the self-assessment regime. Ignoring a notice to file, neglecting online accounts, or assuming that no actual tax liability shields one from penalties are strategies with high potential to backfire. Taking steps to clarify one’s filing obligations—especially if income levels fluctuate—can prevent the financial and procedural headaches witnessed in these two Tribunal rulings. Ultimately, the onus remains on taxpayers to stay vigilant and act decisively whenever HMRC calls upon them to file.
