Priory London Limited v The Commissioners for HMRC

Paragraph 4(3) of Schedule 55 to the Finance Act 2009 permits HMRC to specify a date before the date of its notice under paragraph 4(1)(c). A daily-penalty notice may therefore be given retrospectively, including where HMRC could not know that a return was due until it was filed.

The notice has a warning function where HMRC knows in advance that a return is required. That is not its sole purpose and does not qualify the clear statutory power to backdate the specified date. The limitation period in paragraph 19 prevents an open-ended power to assess penalties.

These conjoined appeals concerned daily penalties for late Annual Tax on Enveloped Dwellings returns. In each case, no tax was due. HMRC's initial penalty notice specified a date from which daily penalties would run, although that date preceded the notice.

In Priory London Limited, the First-tier Tribunal dismissed the taxpayer's appeal: [2021] UKFTT 0282 (TC). In Jocoguma Properties Ltd, the First-tier Tribunal allowed the appeal against the £900 daily penalties but upheld a separate £300 penalty: [2021] UKFTT 0020 (TC).

The common issue was whether the date specified in a notice under paragraph 4(1)(c) of Schedule 55 to the Finance Act 2009 could pre-date the notice.

1. Priory's appeal was dismissed and HMRC's appeal in Jocoguma was allowed. The Upper Tribunal set aside the First-tier Tribunal's decision in Jocoguma and remade it by dismissing Jocoguma's appeal against the £900 daily penalties.
2. Paragraph 4(1)(c) had to be construed with paragraph 4(3) of Schedule 55 to the Finance Act 2009. Paragraph 4(3) clearly and unambiguously permits the date specified in a daily-penalty notice to be earlier than the notice. It therefore permits retrospective notice. The provision applies in all cases and is not confined to exceptional cases or to taxes for which HMRC cannot know in advance that a return is due.
3. The warning identified in Revenue and Customs Commissioners v Donaldson as a purpose of a paragraph 4(1)(c) notice was at least one purpose in the context of taxes where HMRC has advance knowledge of the filing obligation. It was not the sole purpose. In cases such as ATED, a retrospective notice may instead notify the taxpayer of the penalty and the date from which it is levied.
4. The First-tier Tribunal decisions in Heacham Holidays Limited v HMRC, Advantage Business Finance Ltd, and D&G Thames Ditton Limited v HMRC were wrongly decided insofar as they required advance notice. Their construction failed to give effect to paragraph 4(3).
5. The Tribunal also held that paragraph 19 imposed a limitation period of one year from ascertainment that the liability which would have appeared on the return was nil. Priory's late attempt to raise additional grounds was refused; it had not first sought permission from the First-tier Tribunal and allowing it would have required an adjournment.

• Upper Tribunal (Tax and Chancery Chamber): Priory's appeal was dismissed. HMRC's appeal in Jocoguma was allowed; the First-tier Tribunal's decision was set aside and Jocoguma's appeal against £900 daily penalties was dismissed.
• First-tier Tribunal: In Priory, the appeal was dismissed: [2021] UKFTT 0282 (TC).
• First-tier Tribunal: In Jocoguma, the appeal against £900 daily penalties was allowed, but the appeal against a £300 six-month late-filing penalty was dismissed: [2021] UKFTT 0020 (TC).