Matthew Harrison v The Commissioners for Her Majesty’s Revenue and Customs

For a late-filing penalty under Finance Act 2009, Schedule 55, the reasonable-excuse inquiry and the question whether a failure was remedied without unreasonable delay are distinct statutory questions. The Christine Perrin v HMRC approach is helpful guidance, not a mandatory straitjacket. A reasonable excuse must relate to circumstances existing at the filing date, although later circumstances may bear on unreasonable delay. Mental illness and difficult personal circumstances may constitute a reasonable excuse, but the outcome depends on the evidence and the taxpayer’s circumstances. “Special circumstances” requires no additional gloss. An appellate tribunal should interfere only for a material error of law. The FTT was entitled to find that the taxpayer deliberately withheld information where he knew of the outstanding return, could file it, and prioritised other matters.

Matthew Harrison appealed against a First-tier Tribunal decision issued on 15 May 2021. The FTT had upheld a tax-geared penalty of £42,066.09 imposed under Schedule 55 to the Finance Act 2009 for filing his 2014/15 self-assessment return more than 12 months late.

The appeal challenged the FTT’s conclusions that Mr Harrison lacked a reasonable excuse, that HMRC’s decision not to make a special reduction was not flawed, and that he had deliberately withheld information enabling HMRC to assess his liability. The central questions were whether the FTT had applied the statutory tests correctly and whether its factual conclusions disclosed an error of law.

1. Appeal dismissed. The FTT had not erred in law in upholding the penalty.
2. Paragraph 23 of Schedule 55 raises two separate questions: whether there was a reasonable excuse for failing to file by the filing date, and, if the excuse ceased, whether the failure was remedied without unreasonable delay. The Christine Perrin v HMRC four-stage approach is good practice and helpful guidance, but is not a statutory straitjacket. The relevant assessment is objective, while taking account of the taxpayer’s experience, attributes and situation.
3. A reasonable excuse must arise from circumstances existing at the filing date. Later events may provide evidence about earlier circumstances, or may be relevant to whether the failure was remedied without unreasonable delay. The FTT’s reasoning, read fairly as a whole, addressed both aspects of paragraph 23.
4. The FTT was entitled to conclude that, despite depression and serious personal and business difficulties, Mr Harrison retained the capability to deal with his tax affairs and had not filed without unreasonable delay. Continuing to perform demanding business tasks was a relevant factual consideration, although its significance depends on the particular circumstances.
5. Under paragraph 22, the tribunal could alter the special reduction only if HMRC’s decision was flawed in the judicial-review sense. The expression “special circumstances” requires no gloss beyond the statutory word. HMRC’s description of the circumstances as uncommon or exceptional did not materially alter the statutory test. Its reasons were adequate in context.
6. The FTT’s view that the circumstances were not special was, in any event, obiter because HMRC’s decision had not been found flawed. The FTT was entitled to take Mr Harrison’s continuing work, awareness of the outstanding return and ability to file it into account.
7. The FTT was also entitled to infer deliberate withholding. By September 2017 Mr Harrison knew the return was outstanding, understood its contents, knew it had to be filed and prioritised other matters. Uncontroverted evidence remained for the tribunal to assess in the context of all the evidence.
8. Any possible failure to distinguish expressly between the reasonable excuse and unreasonable-delay questions would not have been material. Applying Degorce v HMRC, the outcome would have been the same.

• Upper Tribunal (Tax and Chancery Chamber): appeal against the FTT decision dismissed.
• First-tier Tribunal (Tax Chamber): decision issued on 15 May 2021, upholding the tax-geared penalty.