The Finance Act 2003 requires taxpayers to ensure that stamp duty land tax (SDLT) returns are filed on time. Taxpayers who submit late returns render themselves liable to pay fixed penalties in addition to interest on any tax that is overdue. The amount of the penalty depends on the lateness of the return. Those made within three months of the filing date attract a fixed penalty of £100. The penalty doubles if returns are later than this, and if a return is not filed within 12 months, taxpayers will have to pay a tax-based penalty (which can be up to the full amount of the tax due on the return).
HM Revenue & Customs (HMRC) may agree to waive the penalty if the taxpayer can provide a “reasonable excuse” for the late submission. Ignorance of the requirement to submit a return is not a reasonable excuse and the fact that neither the landlord’s solicitor nor HMRC had made a taxpayer aware of his legal obligations did not excuse his failure to submit a return in Ryan v Commissioners for HM Revenue & Customs [2010] UKFTT 309 (TC).
The Finance Act 2003 requires taxpayers to ensure that stamp duty land tax (SDLT) returns are filed on time. Taxpayers who submit late returns render themselves liable to pay fixed penalties in addition to interest on any tax that is overdue. The amount of the penalty depends on the lateness of the return. Those made within three months of the filing date attract a fixed penalty of £100. The penalty doubles if returns are later than this, and if a return is not filed within 12 months, taxpayers will have to pay a tax-based penalty (which can be up to the full amount of the tax due on the return). HM Revenue & Customs (HMRC) may agree to waive the penalty if the taxpayer can provide a “reasonable excuse” for the late submission. Ignorance of the requirement to submit a return is not a reasonable excuse and the fact that neither the landlord’s solicitor nor HMRC had made a taxpayer aware of his legal obligations did not excuse his failure to submit a return in Ryan v Commissioners for HM Revenue & Customs [2010] UKFTT 309 (TC). What then is the position where a taxpayer’s advisers let her down? In Browne v Commissioners for HM Revenue & Customs [2010] UKFTT 496 (TC); [2010] PLSCS 292 the taxpayer asked to be relieved of liability for a £100 penalty on the ground that she had relied on her solicitor to file her SDLT return. HMRC takes a dim view of delays caused by advisers, but accepts that the death of an adviser or a serious acute illness that prevents an adviser from controlling his affairs would constitute a reasonable excuse. There were no such circumstances in this case, but the Solicitors Regulation Authority had investigated the firm of solicitors that had been instructed to act for the tax payer – and had closed them down. The tribunal noted that the Value Added Tax Act 1994 specifically precludes reliance on a third party from being a reasonable excuse for the purposes of VAT, but that the 2003 Act does not contain any similar provisions with regard to SDLT. Consequently, reliance on a third party can amount to a reasonable excuse for the purposes of SDLT. Was it reasonable for the taxpayer to have relied on her solicitor to submit her SDLT return in view of the difficulties that she had encountered when dealing with it? The tribunal decided that it was and that, in the circumstances, she had a reasonable excuse for the late submission of her return. Consequently, she was relieved of liability for the penalty. The decision shows that negligence on the part of an adviser can constitute a reasonable excuse for the late submission of an SDLT return. However, the closure of the firm of solicitors that had acted for the taxpayer in this transaction probably make this case exceptional. Allyson Colby is a property law consultant
