Tax Review Compliance & Appeal Validity: Revenue Scotland v Classic Land

The Upper Tribunal (UT) for Scotland has clarified an important principle in relation to procedural failures by Revenue Scotland when handling penalty disputes. In Revenue Scotland v Classic Land and Property Limited, the UT allowed Revenue Scotland's appeal against a First-tier Tribunal (FTT) decision that had discharged Land and Buildings Transaction Tax (LBTT) penalties on the ground that procedural shortcomings in the review process did not, in themselves, invalidate the penalty determinations or prevent enforcement. 

Classic Land and Property Limited (the “Taxpayer”) purchased a property in Renfrewshire for £41,000, for which the LBTT return was required to be made not later than 3 May 2015. No tax was chargeable given the value of the transaction. However, the Taxpayer’s solicitors prepared the return and sent it for signature, but it remained on their file unsubmitted for some months. The return was eventually submitted 290 days late on 17 February 2016. Revenue Scotland issued two penalty notices dated 6 April 2016, comprising an initial fixed penalty of £100 and a further penalty of £900 for failure to file for a period exceeding three months, totalling £1,000. 

The Taxpayer’s solicitors requested a review of the penalties. When Revenue Scotland completed the review and confirmed its decision to uphold the penalties, both the penalty notices and the review conclusion notice were sent exclusively to the Taxpayer’s solicitors and not to the company itself. The Taxpayer then appealed to the FTT, arguing exceptional circumstances amounting to reasonable excuse for the late filing. The FTT  held that although the Taxpayer had no reasonable excuse and the penalties were not disproportionate, it allowed the appeal solely on the basis that Revenue Scotland had failed to notify the Taxpayer personally of its review conclusions as required by sections 237 and 239 of the Revenue Scotland and Tax Powers Act 2014 (the “Act”). The FTT concluded that this procedural failure vitiated all subsequent procedure and prevented enforcement of the penalties. 

Revenue Scotland appealed to the UT on the grounds that the FTT had erred in applying a blanket principle that procedural failures necessarily invalidate penalties. The UT allowed the appeal. It held that the FTT had failed to apply the statutory provisions in Part 11 of the Act correctly by reference to the specific facts of the case. The penalty notices themselves had been issued before any procedural defect occurred during the review process, and their validity was therefore unaffected by subsequent notification errors. More importantly, the UT held that a review can be treated as properly concluded within the meaning of section 241 of  the Act where Revenue Scotland has completed the substantive work and the taxpayer's agent has been notified of the conclusions, even if the taxpayer itself has not been personally notified as the statute contemplates. This approach prevents a taxpayer from being left in limbo, unable to pursue an appeal pending Revenue Scotland's compliance with its notification obligations. 

The case demonstrates that procedural compliance by Revenue Scotland is important but not automatically fatal to a penalty determination. What matters is whether the taxpayer has been able to access the outcome of a review and pursue an appeal, not whether every step of the procedure has been followed with technical precision. The substantive validity of penalties imposed under the LBTT regime turns on reasonable excuse and proportionality, not on whether administrative procedures have been executed in strict accordance with statute.  

Read the full decision of Revenue Scotland v Classic Land and Property Limited [2019] UT 5 .