Generally speaking, where an ATED return is filed late and there is no tax to pay (i.e. the property qualifies for a relief), the penalty position is:
£100 for missing the filing deadline;
£10 per day for up to 90 days (£900 maximum) if the return is over three months late;
£300 if the return is over six months late; and
£300 if the return is over 12 months late.
As a result, the cost for filing a nil late return adds up (especially if a number of ATED years have been missed).
There has been a string of cases in the FTT considering HMRC’s ability to charge the £10 daily penalties after the event. In order to charge these penalties, HMRC needs to issue a penalty notice – and the key question in each case is whether HMRC needs to issue this prospectively (so the notice acts as a deterrent) or whether it can issue this retrospectively with an earlier date (so there is no deterrent effect, as the return will by then have usually been submitted).
Some cases (Heacham Holidays Ltd v HMRC [2020] UKFTT 406 (Heacham) and Advantage Business Finance Ltd [2019] UKFTT 30 (ABF)) have found for the taxpayer and decided that the relevant legislation only allows HMRC to give a prospective notice that daily penalties will be charged if the taxpayer fails to file a return after the penalty notice is issued. As HMRC was not aware of the ATED filing obligation until it received the late returns, it was unable to issue a prospective penalty notice in these cases.
In Priory London Ltd v HMRC [2021] UKFTT 282, decided in August 2021, the FTT found for HMRC on the same point; while in January 2021, in Jocuguma Properties Ltd v HMRC [2021] UKFTT 20, the FTT found for the taxpayer. In short, the position here was unhelpfully uncertain.
Helpfully, the Priory London Ltd and Jocuguma Properties Ltd cases were appealed to the Upper Tribunal (UT) and heard together. In its judgment ([2022] UKUT 225 (TCC)), the UT found for HMRC in relation to the ability to charge daily penalties retrospectively, and it found that Heacham, ABF and another FTT decision on the same point (D&G Thames Ditton Ltd v HMRC [2020] UKFTT 489) were all wrongly decided.
The UT’s finding is that HMRC is able to issue a penalty notice for daily penalties retrospectively by reference to an earlier date in relation to ATED. This is on the basis that the relevant legislation expressly provides for the penalty date to be a date earlier than the date of the notice itself and for ATED (as distinct from income tax) HMRC will not usually have advance notice of the taxpayer’s obligation to file a return.
While the UT’s decision is obviously not in favour of the taxpayer, it should give taxpayers some certainty and put an end to the lottery of decisions in the FTT on this point.
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Priory London: ATED late filing penalties
Generally speaking, where an ATED return is filed late and there is no tax to pay (i.e. the property qualifies for a relief), the penalty position is:
£100 for missing the filing deadline;
£10 per day for up to 90 days (£900 maximum) if the return is over three months late;
£300 if the return is over six months late; and
£300 if the return is over 12 months late.
As a result, the cost for filing a nil late return adds up (especially if a number of ATED years have been missed).
There has been a string of cases in the FTT considering HMRC’s ability to charge the £10 daily penalties after the event. In order to charge these penalties, HMRC needs to issue a penalty notice – and the key question in each case is whether HMRC needs to issue this prospectively (so the notice acts as a deterrent) or whether it can issue this retrospectively with an earlier date (so there is no deterrent effect, as the return will by then have usually been submitted).
Some cases (Heacham Holidays Ltd v HMRC [2020] UKFTT 406 (Heacham) and Advantage Business Finance Ltd [2019] UKFTT 30 (ABF)) have found for the taxpayer and decided that the relevant legislation only allows HMRC to give a prospective notice that daily penalties will be charged if the taxpayer fails to file a return after the penalty notice is issued. As HMRC was not aware of the ATED filing obligation until it received the late returns, it was unable to issue a prospective penalty notice in these cases.
In Priory London Ltd v HMRC [2021] UKFTT 282, decided in August 2021, the FTT found for HMRC on the same point; while in January 2021, in Jocuguma Properties Ltd v HMRC [2021] UKFTT 20, the FTT found for the taxpayer. In short, the position here was unhelpfully uncertain.
Helpfully, the Priory London Ltd and Jocuguma Properties Ltd cases were appealed to the Upper Tribunal (UT) and heard together. In its judgment ([2022] UKUT 225 (TCC)), the UT found for HMRC in relation to the ability to charge daily penalties retrospectively, and it found that Heacham, ABF and another FTT decision on the same point (D&G Thames Ditton Ltd v HMRC [2020] UKFTT 489) were all wrongly decided.
The UT’s finding is that HMRC is able to issue a penalty notice for daily penalties retrospectively by reference to an earlier date in relation to ATED. This is on the basis that the relevant legislation expressly provides for the penalty date to be a date earlier than the date of the notice itself and for ATED (as distinct from income tax) HMRC will not usually have advance notice of the taxpayer’s obligation to file a return.
While the UT’s decision is obviously not in favour of the taxpayer, it should give taxpayers some certainty and put an end to the lottery of decisions in the FTT on this point.
