Appealing an ATED Late-Filing Penalty: Reasonable Excuse, Special Circumstances, and the First-tier Tribunal Route

An ATED late-filing penalty notice arrives with three pieces of information that matter: the penalty amount, the chargeable period, and the 30-day window to appeal. The penalty itself is mechanical (Schedule 55 FA 2009 imposes £100 immediately, £200 at three months, £300 or 5% of any tax due at six months, and another £300 or 5% at twelve months, plus daily penalties of £10 from day 91 for some return types). The appeal is where commercial judgement comes in.

Not every penalty is worth appealing, but for high-value or multi-period stacks, the cost of getting the appeal right typically pays back several times over against the penalty itself. This page walks through the statutory test, the leading tribunal authority, the grounds that succeed and fail, the procedural route from HMRC to the First-tier Tax Tribunal, and the decision tree on when to appeal and when to pay and move on. It is the operational companion to our existing page on the ATED late-filing penalty cascade; the cascade is what bites, the appeal is what happens next.

When the Right Move Is to Appeal and When It Isn't

The first question is whether to appeal at all. A reflex appeal that has no real grounds wastes the 30-day window without softening the penalty, and a missed appeal forecloses the route entirely. Three factors drive the decision:

• The size of the penalty. A single £100 first-filing penalty rarely justifies the cost of an appeal. A multi-period stack running into the tens of thousands of pounds (as in Conchri Investments, where the total reached £15,700 across ten chargeable periods) is a different conversation.
• The strength of the underlying ground. A genuine reasonable excuse with documentary support (director's serious illness during the filing window, fundamental IT failure, postal disruption documented by Royal Mail) has a real chance. A reasoning-only argument (ignorance, reliance on accountant) has very limited prospects after Conchri.
• The downside. A failed appeal does not increase the penalty; the company still pays what HMRC originally assessed. The downside is the adviser's fees and the management time, neither of which compounds.

Where the answer is to pay and move on, the discipline is to file the omitted return, pay the penalty, and put a process in place to prevent recurrence. Where the answer is to appeal, the second question is how.

The 30-Day Window and What "In Writing" Means

The appeal must be in writing and received by HMRC within 30 days of the date of the penalty notice. Two practical points sit underneath that requirement.

The 30 days runs from the date on the notice, not from the date the company received it. An overseas-incorporated company receiving the notice by post in week 3 has under 10 days to assemble the appeal. The discipline is to act on the day the notice arrives.

"In writing" means a letter or formal appeal form. Email submissions are not the default ATED appeal route and run the risk of being treated as informal correspondence; the safe form is a letter to the address on the notice (typically HMRC ATED Penalty Appeals, Stamp Taxes, BX9 1HD, United Kingdom), sent by recorded delivery so the date of receipt is documented. Include the penalty reference number, the chargeable period(s), the ground(s) of appeal, the evidence relied on, and a request for the specific outcome (penalty cancellation, reduction under special circumstances, or both).

The Statutory Reasonable-Excuse Test Under Paragraph 23 Schedule 55 FA 2009

The statutory test sits at paragraph 23 Schedule 55 FA 2009. It provides that no penalty is payable where the company satisfies HMRC or the tribunal that there is a reasonable excuse for the failure. The schedule then narrows the test with three express exclusions:

1. An insufficiency of funds is not a reasonable excuse, unless attributable to events outside the company's control.
2. Reliance on a third party is not a reasonable excuse, unless the company took reasonable care to avoid the failure.
3. Where the excuse has ceased, the failure must be remedied without unreasonable delay; continuing the failure after the excuse has ended is not protected.

The case law has read the test as an objective standard. The question is not what this particular taxpayer thought, but what a reasonable taxpayer in the company's position would have done. The bar is therefore higher for non-natural-person taxpayers (companies, partnerships with corporate members, collective investment schemes) than the lay-individual standard often seen in income tax cases, because the reasonable taxpayer comparison is to a non-natural person with access to professional advisers, board governance, and (typically) substantial wealth.

What Conchri Investments Tells You About the Reasonable-Excuse Bar

Conchri Investments Limited v HMRC [2025] UKFTT 600 (TC) is the clearest recent FTT decision on ATED reasonable-excuse appeals and the natural starting point for any argument that ignorance or accountant-reliance grounds suffice.

The facts. Conchri Investments was an overseas company holding a single London dwelling subject to ATED for the chargeable periods 2014/15 to 2023/24. The company filed no ATED returns across the decade. HMRC assessed penalties under Schedule 55 FA 2009 across the ten periods; the late-filing delays ranged from 193 days (the most recent period) to 3,773 days (the earliest). Total penalties: £15,700. The company argued that no underlying tax was due (the property would have qualified for Property Rental Business Relief under section 133 FA 2013 had a Relief Declaration Return been filed), so the failure caused HMRC no loss.

The company ran three reasonable-excuse arguments at FTT:

1. Ignorance: it did not know about the ATED obligation.
2. Reliance: its accountants had not flagged ATED.
3. Notification duty: HMRC had not written to alert the company to the obligation.

The FTT rejected all three. The tribunal held that ignorance of the law does not amount to a reasonable excuse, particularly given HMRC's clear and extensive website guidance and the public nature of the ATED regime since 2013. It confirmed that reliance on professional advisers is insufficient as a defence where the company has not itself taken reasonable care, and it confirmed that HMRC has no statutory duty to notify taxpayers of their filing responsibilities. On the special-circumstances argument, the tribunal held that the absence of underlying tax due was not a special circumstance because the Relief Declaration Return obligation is distinct from the tax-payment obligation; the relief did not displace the duty to file.

The practical impact of Conchri is to close the most commonly attempted reasonable-excuse grounds for ATED non-compliance. The decision sets the floor; arguments that do not improve on the Conchri facts (deeper documentary support, more specific causation, a genuine non-ignorance ground) have low prospects on appeal.

The Four Grounds HMRC Lists and How Each Performs at FTT

HMRC's published guidance identifies four broad categories of fact that may amount to a reasonable excuse. The realistic FTT success rate for each, after Conchri, is different.

Ground	HMRC stance	Realistic FTT outcome
Bereavement (death of a close relative or director shortly before the deadline)	Accepted in genuine cases	Usually succeeds where the death is documented and the timing is close to the deadline
Hospitalisation (unexpected hospital stay during the filing window)	Accepted in genuine cases	Usually succeeds with medical records and the timing aligned to the deadline
Serious or life-threatening illness (during the period)	Accepted in genuine cases	Succeeds with medical records and where the illness prevented the company's officer from acting
Misunderstanding of legal obligation	Marginal acceptance	Usually fails after Conchri; misunderstanding is a soft form of ignorance

Three additional grounds appear in the case law beyond the HMRC list:

• HMRC system failure or HMRC error (where HMRC's own online filing service was unavailable or HMRC misdirected the company). These usually succeed if the company has documentary evidence of the failure.
• Postal disruption or evidence-of-posting failure (Royal Mail strike, lost certified post). These succeed where the disruption is documented externally.
• Force majeure events beyond the company's control (natural disaster, IT infrastructure failure of the building or office, where the failure prevents access to records). These succeed where there is a clear causal chain.

The pattern: reasonable excuse succeeds where it is grounded in something external to the company and documented contemporaneously. It fails where it is grounded in something internal (ignorance, error, oversight, reliance on advisers).

Special Circumstances Reduction Under Paragraph 16

Special circumstances are a separate ground from reasonable excuse. They sit at paragraph 16 Schedule 55 FA 2009 and provide a discretion (HMRC's at the appeal stage, the tribunal's on review) to reduce a penalty where special circumstances apply.

Special circumstances are not defined statutorily. The case law (across Schedule 55 generally, not ATED-specific) treats them as something out of the ordinary, more than the company's usual difficulties. Insufficiency of funds is expressly excluded by paragraph 16(3); the test for special circumstances does not embrace ability-to-pay arguments.

Examples that have succeeded as special circumstances in other Schedule 55 contexts include: HMRC's own previous incorrect advice to the same taxpayer about the obligation; long-running unresolved disputes with HMRC that genuinely affected the filing timeline; statutory ambiguity later resolved against HMRC's then-stated position. Examples that have failed: small absolute penalties on small absolute amounts; novelty of the regime to the taxpayer; the absence of any underlying tax due (the Conchri point).

In practice, special circumstances is a residual ground that may marginally reduce a penalty even where reasonable excuse fails. It is rarely the sole route to a successful appeal.

The HMRC Review Route Before the Tribunal

Where the original appeal to HMRC is refused, the company has 30 days to either request an HMRC internal review or notify the appeal to the FTT. The internal review is a fresh look by a different HMRC officer (not the officer who issued the original refusal) and is free of charge.

The review route has three practical advantages. It is free, it sometimes produces a different outcome, and it preserves the FTT route if the review also refuses. The disadvantages are time (the review typically takes 45 days or longer) and that the review officer is bound by the same statutory framework, so a refusal that turns on a hard legal point is unlikely to change.

Where the company elects to skip the review and go directly to the FTT, the notification is made online via the FTT website or by paper notice. The 30-day notification deadline runs from the original HMRC refusal letter.

The FTT Notice of Appeal: What to File and How to File It

The First-tier Tax Tribunal notice of appeal is a structured form (Form T240) that asks for:

1. The appellant's details (company name, address, registered number, UK agent if any).
2. The decision being appealed (penalty notice reference, date of HMRC refusal).
3. The grounds of appeal (reasonable excuse, special circumstances, both).
4. The remedy sought (penalty cancelled, penalty reduced, penalty varied).
5. A statement of the facts and arguments.

The notice is filed within 30 days of the HMRC refusal (or of the review decision where one was sought). The tribunal acknowledges receipt and issues directions: a timetable for the company to file its statement of case, for HMRC to file its response, and for the hearing (in person, by video, or on the papers depending on complexity).

Evidence Pack for an FTT Appeal

The tribunal weights contemporaneous documents heavily. A reconstructed narrative without supporting evidence has low prospects regardless of the underlying merits. The evidence pack for an ATED penalty appeal typically includes:

1. Each penalty notice in scope, with its envelope where retained, to evidence delivery dates.
2. The company's correspondence with HMRC at every stage (original appeal letter, HMRC refusal, review request, review decision).
3. The underlying ATED returns, now filed, with the HMRC reference numbers.
4. The company's communications with its accountants, advisers, or other professionals around the filing periods, showing what was and was not advised. The documents that are absent matter as much as the documents that are present.
5. Any documentary evidence supporting the specific ground relied on: medical records for incapacity, IT-failure records for system breakdown, Royal Mail disruption records for postal failures, board minutes for governance-level decision-making.
6. A chronology pinning each event to a date and to a primary document.

The pack should be assembled before the FTT notice is filed so the statement of case can be drafted against the evidence rather than the other way round.

The Decision Tree: Appeal, Settle, or Pay

The commercial decision on each penalty notice typically follows this sequence:

1. If the penalty is under £500 and the company has no genuine external reasonable excuse, pay and file the underlying return. The adviser cost of appealing exceeds the penalty.
2. If the penalty is £500 to £5,000 and the company has a documented external excuse (medical, IT, postal), appeal in writing within the 30-day window. The HMRC review route is likely sufficient and free.
3. If the penalty is over £5,000 (typically a multi-period stack), or there is a wider compliance picture (multiple penalties, an OTM letter, an enquiry into the underlying return), engage a tax adviser to run the appeal end-to-end. The Conchri-shaped pure-ignorance ground will fail; assess what real ground exists before committing.
4. If the company sits in the Conchri pattern (multi-period unfiled returns with no underlying tax due because of relief), file the omitted Relief Declaration Returns, pay the lower-end Schedule 55 penalties, and treat the position as a clean-up exercise. The OTM-letter response is the right channel; see our sibling page on OTM letters and voluntary compliance.

How This Page Sits Alongside Sibling Pages

• ATED late-filing penalty mechanics for the Schedule 55 FA 2009 cascade itself: what each penalty is, when each bites, and how the stack accumulates.
• ATED return amendment and corrections procedure for the alternative route where the right fix is an amended return rather than a penalty appeal.
• ATED overseas companies and the OTM letters campaign for the recipient-state guidance where the penalty arose from an OTM-triggered late filing.
• ATED 2026/27 complete guide for the wider regime pillar.

Authority Sources

• Schedule 55 FA 2009 (penalties for failure to make returns) for the cascade, the reasonable-excuse test at paragraph 23, and the special-circumstances discretion at paragraph 16.
• Schedule 56 FA 2009 (late-payment penalties) for the parallel late-payment regime.
• First-tier Tax Tribunal decisions (gov.uk) for the searchable database of FTT decisions, including Conchri Investments Limited v HMRC [2025] UKFTT 600 (TC).
• HMRC Compliance Handbook at CH71500 onwards for HMRC's published treatment of reasonable excuse and special circumstances under Schedule 55.
• HMRC ATED Manual for the ATED-specific penalty framework.
• First-tier Tax Tribunal appeal guidance (gov.uk) for the procedural mechanics of filing the notice of appeal.

The reasonable-excuse bar for ATED penalty appeals is set by Schedule 55 and is read tightly by the FTT after Conchri Investments. The route exists for genuine externally-caused failures with documentary support and not for retrospective rationalisation of administrative oversight. The right preparation, the right ground, and the right evidence pack carry an appeal that has real prospects; everything else is an expensive way of paying the penalty twice.