The decision of the First-tier Tribunal (FTT) in G Wals v HMRC [2025] UKFTT 1331 (TC) is wrong. Not morally wrong, not wrong ‘in my opinion’ – just wrong.
That’s not to say that HMRC were wrong to take the case. Just that the FTT decision is wrong. Well, we all make mistakes.
How so?
HMRC said that they had over many years sent Mr Wals notices to file tax returns. For reasons which we don’t need to consider here he hadn’t filed returns at the proper time. HMRC charged penalties of over £4,000. Mr Wals appealed.
One of the submissions made on behalf of Mr Wals was that HMRC had not established that valid notices to file had been served on him.
As regards the service of valid notices to file, the FTT did not think (at [13]) that the evidence presented by HMRC came ‘anywhere close to establishing that such valid notices were served on the appellant’. HMRC have only themselves to blame for that. It appears that the only evidence proffered as to the issue of the notices to file tax returns was ‘the fact that those tax returns were ultimately filed and noted as received on HMRC’s computer’. That was, in the FTT’s view, ‘wholly insufficient’ as evidence that notices had been issued.
The FTT went on to note that ‘unfortunately for the appellant’ the law was changed by FA 2019 to the effect that a return is treated as having been made in response to a valid notice to file even if no notice to file was in fact issued. All perfectly true so far.
What is not true is what the FTT said next (at [16]): ‘the fact that HMRC have not established that valid notices to file were served on the appellant does not invalidate any penalties which are visited on the appellant as a result of the late filing of a tax return.’ In fact, it absolutely does invalidate the penalties.
The law (TMA 1970 s 12D) does indeed provide that where a ‘purported return’ is delivered where no notice to file has been issued, it is to be treated as if it had been delivered in pursuance of a notice. The FTT correctly recognised (at [5]) that the deemed notice is treated as having been given ‘on the same date as the return was received by HMRC’. But where the FTT went wrong was in overlooking the fact that the law always allows you a minimum of at least three months from the date of issue to comply with the notice. It follows that a ‘voluntary’ return (such as Mr Wals was found to have delivered) can never carry a penalty for late submission.
A moment’s thought shows why the legislation is drafted like this. Irrational though it sometimes seems to be, not even the UK’s tax system could be mad enough to penalise me for being ‘late’ in doing something that I am not required to do at all.
Happily, the procedural rules recognise that even the FTT can suffer an aberration, and they make provision for the correction of mistakes without putting the appellant to the trouble and expense of appearing before the Upper Tribunal. Procedurally, the remedy appears to be for Mr Wals, when seeking permission to appeal, to invite the FTT to review its decision and issue a corrected version.
Home >Articles > Voluntary returns and impossible penalties
Voluntary returns and impossible penalties
Homer nods – and so does the FTT.
The decision of the First-tier Tribunal (FTT) in G Wals v HMRC [2025] UKFTT 1331 (TC) is wrong. Not morally wrong, not wrong ‘in my opinion’ – just wrong.
That’s not to say that HMRC were wrong to take the case. Just that the FTT decision is wrong. Well, we all make mistakes.
How so?
HMRC said that they had over many years sent Mr Wals notices to file tax returns. For reasons which we don’t need to consider here he hadn’t filed returns at the proper time. HMRC charged penalties of over £4,000. Mr Wals appealed.
One of the submissions made on behalf of Mr Wals was that HMRC had not established that valid notices to file had been served on him.
As regards the service of valid notices to file, the FTT did not think (at [13]) that the evidence presented by HMRC came ‘anywhere close to establishing that such valid notices were served on the appellant’. HMRC have only themselves to blame for that. It appears that the only evidence proffered as to the issue of the notices to file tax returns was ‘the fact that those tax returns were ultimately filed and noted as received on HMRC’s computer’. That was, in the FTT’s view, ‘wholly insufficient’ as evidence that notices had been issued.
The FTT went on to note that ‘unfortunately for the appellant’ the law was changed by FA 2019 to the effect that a return is treated as having been made in response to a valid notice to file even if no notice to file was in fact issued. All perfectly true so far.
What is not true is what the FTT said next (at [16]): ‘the fact that HMRC have not established that valid notices to file were served on the appellant does not invalidate any penalties which are visited on the appellant as a result of the late filing of a tax return.’ In fact, it absolutely does invalidate the penalties.
The law (TMA 1970 s 12D) does indeed provide that where a ‘purported return’ is delivered where no notice to file has been issued, it is to be treated as if it had been delivered in pursuance of a notice. The FTT correctly recognised (at [5]) that the deemed notice is treated as having been given ‘on the same date as the return was received by HMRC’. But where the FTT went wrong was in overlooking the fact that the law always allows you a minimum of at least three months from the date of issue to comply with the notice. It follows that a ‘voluntary’ return (such as Mr Wals was found to have delivered) can never carry a penalty for late submission.
A moment’s thought shows why the legislation is drafted like this. Irrational though it sometimes seems to be, not even the UK’s tax system could be mad enough to penalise me for being ‘late’ in doing something that I am not required to do at all.
Happily, the procedural rules recognise that even the FTT can suffer an aberration, and they make provision for the correction of mistakes without putting the appellant to the trouble and expense of appearing before the Upper Tribunal. Procedurally, the remedy appears to be for Mr Wals, when seeking permission to appeal, to invite the FTT to review its decision and issue a corrected version.
