JurisdictionUK Non-devolved
CourtFirst Tier Tribunal (Tax Chamber)
Judgment Date17 November 2017
Date17 November 2017

Judge Rupert Jones


Keith Gordon and Ximena Montes Manzano Counsel appeared for the appellant instructed by Jefferies Law LLP

Aparna Nathan, Counsel instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents

Income tax – Understated partner tax – Accelerated partner payment – Partner payment notice (PPN) – Appeal against penalty under FA 2014, s. 226 and Sch. 32, para. 7 for late payment of sum under the PPN – Jurisdiction to consider validity of PPN and amount on appeal against penalty – Procedural Validity of PPN & Penalty notice – Reasonable Excuse and Special Circumstances under FA 2009, Sch. 56 – Appeal dismissed.

The First-tier Tribunal (FTT) dismissed a taxpayer's appeal against a penalty for the late payment of a sum due under a partner payment notice (PPN).


Mr Beadle (the appellant) was a participant in a marketed tax avoidance scheme involving a partnership. Under the scheme he claimed to carry back his share of the partnership's purported trading loss to obtain a repayment of income tax of an earlier year. HMRC enquired into the partnership's tax return and subsequently issued a closure notice reducing the partnership's trading loss to nil. HMRC served a PPN on the appellant requiring a payment in relation to his involvement in the scheme.

The appellant filed a claim against HMRC claiming to have suffered a loss for the purposes of income tax and at the time of this appeal the claim was yet to be heard by the High Court. The appellant also made representations against the validity of the PPN and HMRC rejected the representations. As the appellant failed to pay the sum due within 30 days of the confirmation of the PPN as required by FA 2014, Sch. 32, para. 6(5)(b)(ii) HMRC issued a 5% non-payment penalty under FA 2014, s. 226(2). The appellant appealed the penalty on the ground that he had a reasonable excuse for the late payment. After HMRC rejected his appeal against that penalty, he appealed to the FTT.

In an earlier preliminary hearing (Beadle [2017] TC 05993), the judge concluded that the tribunal had no jurisdiction in such a penalty appeal to determine whether the amount of understated partner tax stated on the PPN was correct, and if not, what the correct figure was.

In this appeal the tribunal rejected the appellant's submissions that:

  • he had a reasonable excuse for late payment of the amount sought by the PPN FA 2009, (Sch. 56, para. 16) because:the appellant believed that the PPN sought payment of an excessive amount; andthat belief was both objectively and subjectively reasonable: (i) objectively, because the amount could not, given the facts, be justified on the statute; and (ii) subjectively, because it was consistent with actions being taken by the appellant elsewhere (in the form of the High Court proceedings); and/or
  • there were special circumstances which justified a reduction of the penalty (FA 2009, Sch. 56, para. 9); and
  • the procedural conditions required for a penalty to be issued had not been met because of various inaccuracies in and omissions from the PPN.

Although these issues were not raised by the appellant, the FTT also decided that both a procedurally valid PPN and penalty notice had been issued by HMRC. Any possible defects in the PPN and penalty notice, particularly regarding payment dates, caused no prejudice to the appellant and would have been capable of being cured under TMA 1970, s. 114.

On the issue of reasonable excuse, the tribunal found that it had no jurisdiction in a penalty appeal to hear a challenge to the lawfulness and calculation of the underlying understated partner tax liability and accelerated partner payment set out the PPN for the reasons set out within the previous preliminary decision. It also said that it would not embark on an exercise of examining the reasonableness of the appellant's belief that the sum set out in the PPN was not payable in law, the lawfulness of the tax avoidance scheme or any other legal argument. And even if the appellant had a reasonable belief, subjectively, objectively or both, and based upon professional advice, that he was not liable to pay the underlying understated partner tax liability, this could not form a reasonable excuse for failure to pay the PPN within the payment period.

The FTT accordingly dismissed the appellant's appeal.


The FTT found that: the appelllant did not have a reasonable excuse for failing to pay the amount specificed in the PPN; HMRC's view that the appellant's circumstances did not constitute special circumstances was not flawed; and the PPN and penalty notice were valid.


[1] The appellant, David Beadle, appeals against a penalty issued against him by HMRC on 16 July 2015. The penalty was for late payment of a sum due under a partner payment notice (“PPN”) issued to him on 17 October 2014 and confirmed on 14 May 2015. Payment of the sum was due 30 days after notification of the confirmation of the PPN (ie. by mid-June 2015) but not made by the appellant until shortly after the penalty was issued on 16 July 2015.

[2] The penalty was in the amount of £5,002.74, calculated at 5% of the tax due of £100,054.80 for the year ending 5 April 2005.

Preliminary issue decision

[3] This decision cannot be read in isolation but is to be read together with the Preliminary Issue Decision of Judge Jonathan Richards dated 5 July 2017 – Beadle [2017] TC 05993. For the reasons set out within that decision, the Judge concluded at a preliminary hearing that the Tribunal has no jurisdiction in this penalty appeal to determine whether the figure of understated partner tax stated on the PPN is the lawful figure, and if not, what is the lawful figure.


[4] The Tribunal received three Lever Arch files of documents for the hearing: two from HMRC and one from the appellant.

[5] The appellant produced a witness statement in support of the appeal, signed and dated 18 September 2017, served on 20 September 2017.

The appellant's witness statement

[6] Material parts of the appellant's statement provide as follows:

  • (2) I received a partner payment notice dated 17 October 2014 (PPN) that showed an amount payable of £l00,054.80. I made representations to HMRC dated 5 January 2015. HMRC responded to those representations in a letter dated 14 May 2015. HMRC's letter informed me that if I did not make the payment within a period of 30 days of the date of the letter (14 May 2015) then penalties would be charged. I have been told (by New Dawn Tax Partnership) that the law says penalties will be charged if a payment is not made within a 30 day period beginning with the day on which I was notified under paragraph 5 to Schedule 32 of HMRC's determination. I am told (by New Dawn Tax Partnership) that the day I was notified may not be the same date as the date of the letter so I am not sure what the actual correct due date was to avoid a penalty although the penalty assessment (dated 16 July 2015) itself states the payment was due on 12 June 2015.
  • (3) My representations of 5 January 2015 (that New Dawn Tax Partnership drafted for me) included in Ground 3 confirmation that by that time I was a claimant in a civil action against HMRC. I gave the case reference as Knibbs v R & C Commrs LHC-2014-0016561. I referred to particulars of the claim that I understood HMRC had in their possession. I had seen those particulars before I instructed Jefferies Essex LLP to instigate my claim against HMRC. I noted that David Ewart QC was instructed in my civil claim and I was aware of that before I instructed Jefferies Essex LLP to instigate my claim against HMRC. As I noted in my letter, I believed the lawful amount shown in the PPN should be zero.
  • (4) I sent HMRC a letter before claim dated 28 May 2015. HMRC responded in a letter dated 15 June 2015.
  • (5) I did not in fact make the payment of £100,054.80 until a short time after I had received the penalty notice dated 16 July 2015.
  • (6) My letters to HMRC dated 23 August 2015 and 12 November 2015 (both of which were drafted for me by New Dawn Tax Partnership) set out why I did not make payment before the due date.

[7] Service of this statement, 12 days before the hearing, was said by HMRC to be in breach of the Tribunal's directions dated 18 August 2017 which were in the following terms:

  • (4) Mr Beadle may, no more than 28 days prior to the substantive hearing, send HMRC (with a copy to the Tribunal) a statement of what he considers to be relevant facts relating to his underlying tax position and that of Ingenious Film Partners LLP that, in his view, demonstrate that HMRC calculated the amount of accelerated partner payment due from him incorrectly.
  • (5) Given the Tribunal's conclusion as to its jurisdiction set out in its decision of 6 July 2017, the Tribunal will not discharge Mr Beadle's penalty on the grounds that HMRC calculated the accelerated partner payment incorrectly. However, the Tribunal will, at the hearing, hear submissions as to what, if any, findings of fact it should make on matters referred to in Direction 4 in case its conclusion on the scope of its jurisdiction is reversed on appeal. HMRC should, therefore, at the hearing, be in a position to explain to the Tribunal which matters on Mr Beadle's statement are agreed and which are not.

[8] The Judge's reasons for these directions were as follows:

  • (3) … However, for reasons set out at [3] of the Interlocutory Decision, I consider that the Upper Tribunal should have the benefit of full findings of fact in Mr Beadle's appeal before it deals with an appeal against my decision on the preliminary issue. That is why, in paragraph [3] and paragraph [56(2)] of the Interlocutory Decision, I extended the deadline for Mr Beadle to apply for permission to appeal in relation to the preliminary issue until after the entirety of his appeal had been determined. Were there to be an appeal to the Upper Tribunal before necessary findings of fact are...

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