This case examines the scope of the “reasonable excuse” defence when responding to the statutory penalties which were imposed for persistent non-compliance with Annual Tax on Enveloped Dwellings (ATED) filing obligation. Particularly for cases involving long-term non-compliance of ATED liabilities, where taxpayers assert ignorance of their legal obligations, the First-tier Tribunal (FTT) has clarified whether a failure resulting from reliance on a third party can constitute as a “reasonable excuse”.
Background
Conchri Investments Limited (the “Appellant”), an overseas entity holding a single dwelling interest in a London property, was deemed a “chargeable person” under Section 94 of the Finance Act 2013 (FA 2013) for ATED purposes, due to the property's value exceeding the relevant threshold. Between 2014 and 2024, the company consistently failed to file ATED returns on time, with delays ranging from 193 to 3,773 days. For the said reasons, HMRC imposed a total penalty of £15,700 under Schedule 55 of the Finance Act 2009 (FA 2009).
The Appellant argued that the late payment was justified on two grounds: first, that no tax was ultimately owed due to entitlement to rental relief (provided under Section 133 of FA 2013), rendering the penalties disproportionate; and second, that it was unaware of its ATED obligations, having received no advice from its accountants nor any notification from HMRC.
The FTT Decision
The FTT dismissed the appeal, affirming that even where no ATED liability arises due to a valid relief claim, a “Relief Declaration Return” must still be submitted. Ignorance of the law, particularly concerning primary obligations such as ATED filing, does not constitute a reasonable excuse.
Furthermore, reliance on professional advisers or accountants for failing to meet filing obligations is insufficient as a defence. The FTT also confirmed that HMRC has no statutory duty to notify taxpayers of their filing responsibilities; the obligation rests with the taxpayer to ensure compliance.
Implications for Solicitors and Accountants
Solicitors and accountants must adopt proactive, documented, and evidence-based advisory practices to navigate the implications of this case. This is particularly crucial for those with overseas clients who may be unaware that their UK residential property interests exceed the ATED threshold. Given the cumulative nature of ATED penalties, early and accurate compliance is essential.
The FTT made it clear that ignorance of ATED filing obligations does not constitute a reasonable excuse. It emphasized that HMRC’s website provides “clear and extensive” guidance, making it “objectively unreasonable” for taxpayers to be unaware of their responsibilities.
Professionals acting as agents must explicitly inform clients that reliance on third parties, including accountants or solicitors, for reminders does not constitute a reasonable excuse when there is a failure to perform their obligation. Additionally, this also heightens the professionals' exposure to negligence claims if advice gaps cause missed deadlines.
While Professionals must ensure clients file ATED returns on time, irrespective of tax liability. Assertions that properties fall below ATED thresholds require formal valuation evidence. Professionals must document and retain such evidence to defend against penalties.
Comment
This case does not radically reshape landscape of the understanding ATED liabilities, but it does serve as a timely reminder how advisers must be. It highlights the necessity to review internal guidance, update client communications, and be prepared for retrospective scrutiny.
Read the full decision of Conchri Investments Limited v. HMRC [2025] UKFTT 600 (TC) here.
