Lack of knowledge not reasonable excuse for late ATED

In Hughes Property Partners Limited v HMRC [2023] 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 [2019] 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)
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? 

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

Grounds for Appeal: Reliance on an adviser or third party
When can a taxpayer appeal a penalty for late filing, late payment or for error or mistake? What are the grounds on which they can appeal?

External link

Hughes Property Partners Limited v HMRC [2023] TC08829