Failure to file tax returns: £300,000 of HMRC penalties withdrawn after successful appeal

Case study overview

• Issue: HMRC alleged deliberate failure to file tax returns
• Total penalty saving: £300,000
• Strategy: Tribunal appeals and direct HMRC legal engagement
• Outcome: 100 per cent of penalties withdrawn
• Time to Resolution: Five months from instruction

Our client had filed Self-Assessments throughout their entire time in self-employment, historically submitting them on time.

Due to a period of significant personal difficulty, our client failed to submit their Self-Assessment tax returns over multiple tax years.

After overcoming the challenging time, the outstanding returns were subsequently prepared and submitted by our client’s previous adviser.

However, HMRC concluded that the failures were deliberate and issued substantial penalties.

What did our client do first?

While our client provided reasons why they had a reasonable excuse for not filing the returns on time, the reasons were rejected by HMRC.

HMRC believed that the client had continued their self-employment throughout the period under investigation, meaning there was not a sufficient inability to complete tax obligations.

Having exhausted HMRC’s internal review process without success, our client sought specialist tax dispute support from inTAX.

Aside from the significant financial exposure, our client faced the stress of defending HMRC’s allegations of deliberate wrongdoing.

What penalties did our client face?

HMRC issued penalties totalling approximately £300,000, comprising:

• £170,000 of deliberate penalties for failing to file on time, on the basis that HMRC considered the failures to be deliberate.
• £130,000 of separate late-filing and late-payment penalties.

As the statutory appeal routes had already been pursued unsuccessfully, the only remaining option was to notify an appeal to the First-tier Tax Tribunal.

What was our approach?

We adopted a dual-track strategy to pursue the two linked appeals simultaneously.

Appeal A: £130,000 Late-Filing and Late-Payment Penalties

On the same day the client contacted us, we prepared and filed Tribunal appeal applications.

We then engaged directly with HMRC Solicitor’s Office and made detailed representations challenging the penalties.

Appeal B: £170,000 Deliberate Penalties

A separate appeal was submitted in relation to HMRC’s deliberate penalty assessments.

Representations were made to both HMRC’s penalty specialists and HMRC’s Solicitor’s Office, although the deadline to make this appeal was later.

Across both appeals, we argued that:

• Our client held a reasonable excuse under the principles established in Perrin v HMRC.
• HMRC’s characterisation of the behaviour as deliberate was incorrect.
• The failures arose from genuine difficulties rather than intentional non-compliance.
• HMRC should reconsider both the categorisation of the behaviour and the level of penalties assessed.

Working alongside the Solicitor’s Office, who were open to further information, we provided detailed submissions with supporting evidence.

This included medical documentation demonstrating the progression and impact of our client’s condition during the relevant periods.

We also explained the reasons the client’s circumstances had changed and why they were now able to bring their tax affairs up to date.

What was the outcome?

Appeal A: £130,000 in penalties cancelled in full.

After two rounds of correspondence, HMRC confirmed in writing that all late-filing and late-payment penalties would be withdrawn.

Appeal B: £170,000 in deliberate penalties cancelled in full.

Following a further supplementary submission to HMRC and a request for the reallocation of the case to the same litigator, HMRC also withdrew the deliberate penalty assessments.

As a result, the client was relieved of all £300,000 penalties originally assessed and avoided the need for a substantive Tribunal hearing.

What are the key lessons from this case?

Firstly, key evidence makes all the difference.

Providing comprehensive medical evidence at an early stage was critical in demonstrating the true impact of our client’s condition and securing the desired outcome.

A Multi-Track Strategy Can Be Highly Effective.

Running Tribunal proceedings alongside direct engagement with HMRC’s legal team ensured all available avenues remained open and encouraged a holistic review of the dispute.

Working constructively with HMRC delivers results.

While robustly defending our client’s position, we worked collaboratively with HMRC throughout the process.

Maintaining a professional and evidence-led dialogue helped achieve the correct outcome without the need for a contested hearing.

Acting quickly can improve the chances of success.

The first penalties were withdrawn within four months of our appointment, with the entire matter resolved within five months.

Early specialist intervention played an important role in achieving a successful outcome.

Why was specialist dispute advice so important?

While the client’s previous advisers had made genuine efforts to resolve the matter, they were unable to persuade HMRC to alter its position.

Our experience as former HMRC officers and specialist tax dispute advisers enabled us to understand the evidential threshold required.

In addition, we were able to present the case in a manner that addressed HMRC’s concerns directly.

This specialist approach ultimately secured the withdrawal of all penalties and relieved the client of the anguish of a lengthy tribunal hearing.

You can get in touch with our friendly and experienced team on: 0203 675 8122 or email info@intaxltd.com.

inTAX is a specialist tax disputes firm. We deal with disclosures, investigations, and tax enquiries of all descriptions, including COP9, fraud investigations, VAT fraud, tax avoidance, let property disclosures and tribunal appeals. However, we don’t just deal with the serious end of tax investigations; we are also happy to handle smaller enquiries, disputes and problems that can be equally as worrying for our clients.