‍A recent First-Tier Tribunal case highlights the steep penalties taxpayers may face if they miss their filing deadlines, even if they owe no tax.

Taxpayer, Mohammad Muhsen Yaqoobi, was hit with a whopping £1,600 fine after missing the deadline for his 2020/21 self-assessment return by 375 days. Yaqoobi appealed the penalty, arguing that he was unaware of his obligations due to living abroad and having no tax liability.

Why the appeal was rejected

Yaqoobi's defence was that he was living overseas and had no internet access, so he could not receive or respond to any correspondence from HMRC. He argued that without a tax liability, he believed he was not required to submit a tax return. His appeal was dismissed after HMRC rejected his claims, noting that he had failed to inform them about his abroad status or request any assistance.

The situation escalated when Yaqoobi pursued the matter further, taking it to the First-Tier Tribunal (FTT). Despite his claims of ignorance, the tribunal sided with HMRC, confirming that he had been served a valid notice to file and that a diligent taxpayer would have known about the filing requirements for overseas landlords with UK property.

{{tax-guide}}

Reasonable excuse: Ignorance isn’t enough

The tribunal evaluated whether Yaqoobi’s ignorance could be considered a “reasonable excuse” for missing the filing deadline. In its ruling, the FTT highlighted that Yaqoobi had filed self-assessments in the past, including property income declarations, and could have easily found information on his filing obligations with a simple internet search.

Furthermore, since Yaqoobi had not notified HMRC of his time abroad or his change in employment status, the tribunal found that a responsible taxpayer would have made arrangements to manage their tax affairs before leaving the UK. 

As such, the tribunal ruled that his ignorance did not qualify as a valid excuse.

The financial impact of late filings

This case underscores the often-overlooked penalties that can accrue when taxpayers fail to meet self-assessment deadlines. HMRC’s penalty structure begins with an automatic £100 fine for late filing, followed by additional daily charges of £10 once three months have passed, up to a maximum of £900. After six months, a 5% penalty on any outstanding tax or £300 (whichever is higher) is levied, with a similar charge after a full year.

Although the taxpayer in this case had no tax to pay, the penalties still mounted, with significant financial implications. A freedom of information request revealed that around 95,000 taxpayers in the 2021/22 tax year received penalties for failing to file, even though they owed no tax. Of these, approximately 60,000 penalties were later cancelled.

A reminder for all taxpayers

As the January 31st filing deadline approaches, taxpayers who have not updated HMRC on their circumstances or have no tax liability should remain mindful of the potential consequences of missing the deadline. If you're unsure how to notify HMRC of a change in your circumstances, we recommend you reading our article "How to tell HMRC you no longer need to complete a Self Assessment".

This case serves as a reminder that ignorance of the rules is not a reasonable excuse, and failure to file can lead to hefty fines that may be hard to manage, especially for those with limited means.

At Crunch, we’re here to simplify your accounting and help you stay on top of your obligations. Whether you’re self-employed, a business owner, or a landlord, we make sure you know exactly when and how to file, so you can avoid costly penalties and focus on growing your business.

Interested in hearing more? Book a call with our advisors.