An ATED late-filing penalty notice triggers a 30-day clock under TMA 1970 s.31A. The clock runs from the date of the penalty notice and is non-negotiable. Within that window, the appellant must take one of three steps: appeal direct to the First-tier Tribunal under TMA 1970 s.31A, request HMRC statutory review under TMA 1970 s.49 (which stops the FTT clock pending the review conclusion), or pay the penalty without prejudice and lodge a protective appeal. Doing nothing forfeits the appeal right outside a Martland v HMRC [2018] UKUT 178 (TCC) three-stage late-appeal application, and long delays with thin reasons routinely fail.
The substantive appeal grounds are two independent statutory routes that most popular commentary collapses into a single "reasonable excuse and special circumstances" line. They are not the same test. FA 2009 Schedule 55 paragraph 23 is the reasonable excuse defence, an objective test on which the appellant carries the burden. Per Perrin v HMRC [2018] UKUT 156 (TCC), the Upper Tribunal locked the four-stage framework: (1) facts on the balance of probabilities; (2) which of those facts are relevant; (3) objective test with the appellant's actual knowledge and characteristics; (4) remedy without unreasonable delay once the excuse ceased. FA 2009 Schedule 55 paragraph 16 is the special reduction route, HMRC's discretionary judgment with the FTT exercising supervisory jurisdiction only under paragraph 22, on Wednesbury-equivalent grounds, without power to substitute its own view.
The two routes have different burdens, different tests and different remedies. They should typically be pleaded together: paragraph 23 as primary defence (full discharge if successful); paragraph 16 as fallback (reduction or stay if paragraph 23 fails). This page walks the two-route comparison table, the 30-day appeal mechanics, the Perrin framework applied to a corporate ATED appellant, a regulatory-event special-circumstances example, the late-appeal Martland route, the cumulative penalty exposure for multi-year non-filers and 14 of the most common ATED appeal questions. For the broader ATED penalties and appeals catalogue, see our ATED penalties and appeals page. For upstream prevention, see our avoiding common ATED mistakes page. For the OTM-letter campaign that often triggers cumulative-penalty cases, see our HMRC OTM letters page.
The two routes side by side
The structural distinction between paragraph 23 and paragraph 16 is the single most important thing to understand before drafting any submission. The table below sets out the differences across the eight dimensions that determine appeal strategy.
| Feature | Reasonable excuse (Sch 55 para 23) | Special reduction (Sch 55 para 16) |
|---|---|---|
| Statutory test | Objective: would a reasonable taxpayer in the appellant's position, with the appellant's actual characteristics, have viewed the facts as reasonable excuse? | HMRC subjective: "if HMRC think it right because of special circumstances, they may reduce a penalty" |
| Burden of proof | Appellant must satisfy HMRC or (on appeal) the FTT or Upper Tribunal | HMRC discretion; appellant requests reduction in written submissions |
| FTT review scope | Full original jurisdiction on the facts and the objective test | Supervisory only per Sch 55 para 22: Wednesbury-equivalent grounds; cannot substitute the FTT's own view |
| Statutory exclusions | Three exclusions per para 23(2): insufficient funds unless beyond control; reliance on another person unless reasonable steps taken; failure to remedy once excuse ceased | Two exclusions per para 16(2): inability to pay; revenue loss from one taxpayer offset by overpayments from another |
| Controlling authority | Perrin v HMRC [2018] UKUT 156 (TCC), four-stage test | Sch 55 para 22 supervisory jurisdiction plus general administrative-law principles |
| Remedy if successful | Penalty not chargeable; full discharge per para 23(1) | Penalty reduced (or stayed, or compromised per para 16(3)); HMRC sets the reduced amount |
| Common winning angles | Genuine illness or bereavement at the filing deadline; HMRC system unavailability; third-party event beyond control with prompt remediation | HMRC mis-direction; regulatory event beyond reasonable contemplation (RoE backlog 2022/23); HMRC error in calculating the penalty |
| Common losing angles | "I relied on my accountant" without oversight evidence; "I forgot"; "I was busy with business"; insufficient funds without beyond-control causation | Inability to pay; general hardship; cross-comparison with other taxpayers' positions |
The two routes are independent and not mutually exclusive. Best practice in any ATED appeal is to plead both: paragraph 23 as the primary defence aiming for full discharge; paragraph 16 as the fallback aiming for reduction or stay if paragraph 23 fails at Stage 3 of the Perrin framework. Most reported FTT cases that produce partial-discharge outcomes involve paragraph 23 succeeding on later-month penalties (the £300 at 6 months and £300 at 12 months) where Stage 4 remediation is shown, with the £100 immediate penalty often standing where Stage 3 is not crossed.
The 30-day window and the three urgent options
The TMA 1970 s.31A 30-day appeal window applies to every Sch 55 penalty notice including the ATED late-filing penalties under items 11A and 11B of the Table at paragraph 1. The clock runs from the date of the penalty notice (the issue date printed on the HMRC letter), not from the date of receipt. The three options within the 30 days are direct FTT appeal, statutory review or pay-without-prejudice plus protective appeal.
Direct FTT appeal lodges the appeal via the Tribunal Service (electronic or paper) within the 30 days. The FTT acknowledges; HMRC files its response within the case-management timetable; the case enters the standard track; hearings are typically scheduled 6 to 9 months later for simple penalty appeals. Costs follow the event under the FTT low-cost default rules for ATED penalty appeals; standard-regime costs apply only where the case is complex or unreasonably conducted by either party.
Statutory review under TMA 1970 s.49 is the appellant requesting an HMRC internal review by a different officer than the original decision-maker. The review request must be made within the same 30-day window. The request stops the FTT clock. HMRC issues a review conclusion notice (typically within 45 days for straightforward ATED cases; longer for complex multi-year structures). On receipt of the conclusion notice, a fresh 30-day FTT appeal window opens. Statutory review is typically the right first step where the underlying facts are evidentiary and HMRC's original decision is templated; the route is cheaper and faster than litigation and preserves the FTT route as a fallback.
Pay-without-prejudice plus protective appeal is the conservative route where penalty enforcement is imminent and the appellant wishes to preserve later remedy. The appellant pays the penalty (which stops further escalation and any payment-driven secondary penalties under Schedule 56), lodges a written appeal stating that payment is without prejudice to the appeal, and continues the appeal to its conclusion. If the appeal succeeds, HMRC refunds with interest.
Example one: Perrin v HMRC four-stage test applied to a corporate appellant
Topaz Holdings Limited (UK ltd-co holding a £2.4m London BTL; let to unconnected commercial tenants throughout; s.133 property-rental-business ATED relief claimed annually for 2020/21 to 2025/26). 2024/25 return missed: company secretary on parental leave April 2024 to October 2024; standing instruction to outsource accountant lapsed; ATED return deadline 30 April 2024 missed; £100 immediate penalty notice received 15 May 2024; £200 penalty at 3 months received 31 July 2024; £300 penalty at 6 months received 31 October 2024. Penalty notices total £600. Topaz wishes to appeal on reasonable excuse.
Per Perrin v HMRC [2018] UKUT 156 (TCC) the four-stage framework runs as follows.
- Stage 1: Facts on the balance of probabilities. Topaz must adduce evidence: parental-leave documentation for the company secretary; the lapsed standing-instruction letter to the outsourced accountant; calendar and email evidence showing no alternative filing arrangement was made; first-action timeline showing remediation (return filed November 2024).
- Stage 2: Which facts are relevant. The relevant facts for the reasonable-excuse defence are (a) the parental-leave gap creating the operational hole; (b) the lapsed agent-instruction (not the agent's failure, which is foreclosed by para 23(2)); (c) whether oversight was attempted; (d) the speed of remediation once the gap was identified.
- Stage 3: Objective test with actual characteristics. Topaz's actual characteristics include that it is a corporate ATED filer with 4 prior years of claim-only filing experience (the deadline obligation is well-established); the director-shareholder is the natural-person principal; the company secretary is on parental leave with no automatic substitute; no calendar reminder fired for the April 2024 deadline. A reasonable corporate taxpayer in this position, with this knowledge and these characteristics, would arguably have implemented a substitute filing protocol before the company secretary's leave began. Stage 3 is the hardest stage to overcome here. The objective-with-actual-characteristics test is not subjective and does not relax for corporate appellants.
- Stage 4: Remedy without unreasonable delay once excuse ceased. The excuse (the parental-leave gap) ceased when the company secretary returned in October 2024. The return was filed in November 2024, which is prompt remediation. Stage 4 PASSES.
Likely FTT view: Stages 1, 2 and 4 are satisfied; Stage 3 is the question. Topaz's strongest argument is that the absence of a substitute filing protocol was a foreseeable failure but that the lapsed-agent angle is foreclosed by para 23(2). The most plausible outcome is partial success: a tribunal might discharge the £200 (3-month) and £300 (6-month) penalties on the basis that once the parental-leave gap was identified, remediation was prompt; the £100 (immediate) penalty might stand on the basis that initial-deadline filing was within the company's reasonable control via substitute protocol. Specialist representation is essential.
The paragraph 23(2) "reliance on another person" trap deserves explicit attention. Topaz should not plead "we relied on our accountant who failed to file". That is foreclosed by para 23(2)(b) unless Topaz can show reasonable steps were taken to prevent the failure: a positive instruction with deadline reminder; confirmation request; no-response follow-up; substitute filing protocol if the agent is unresponsive. Mere delegation is not reasonable steps. ATED corporate filers have particular exposure here because corporate delegation is routine; the oversight evidence must be adduced explicitly.
Example two: Special circumstances applied to a regulatory-event appellant
Cordoba Holdings Cayman Limited (Cayman company holding a £4.8m London penthouse; ATED relief not claimed because the property is used by the ultimate beneficial owner family seasonally; full ATED 2022/23 charge of £30,650 and 30-day filing deadline). The Cayman company registered with the UK Register of Overseas Entities under ECTEA 2022 in early March 2023 (deadline 31 January 2023; missed by 6 weeks due to Companies House RoE backlog plus delays in the Cayman corporate-services agent providing the verification). RoE registration completed 14 March 2023. ATED 2022/23 return and payment of £30,650 were made on 22 March 2023, 35 days late versus the original 1 March 2023 deadline calculated from the 30-day rule running from earlier April 2022 chargeability. £100 immediate penalty notice received 18 March 2023. Cordoba wishes to argue paragraph 16 special circumstances (the paragraph 23 reasonable-excuse route is also available but paragraph 16 has stronger headline given the regulatory-event framing).
The special-circumstances framing rests on three pillars. First, the late RoE registration was caused by Companies House backlog plus Cayman agent delays, both substantially beyond Cordoba's reasonable contemplation. Second, the RoE blockage on Land Registry dispositions also created indirect blockage on certain ATED-relevant evidence (updated UBO information needed for the return). Third, the 2022/23 transitional year saw widespread RoE backlogs; FTT awareness of the regulatory event is demonstrable through HMRC and Companies House contemporaneous publications.
The paragraph 16(2) exclusions check: (a) inability to pay is not cited (Cordoba paid the £30,650 promptly on filing); (b) cross-taxpayer balancing is not cited. Both exclusions are cleared. Cordoba's HMRC submission under paragraph 16 should cite the specific RoE-backlog context with timeline documentation, demonstrate prompt filing once the regulatory gap was resolved, cite (if available) HMRC's own published acknowledgement of the 2022/23 RoE transition friction, and argue that the £100 penalty should be discharged or reduced to nil because the underlying late-filing event was caused by a regulatory event beyond Cordoba's reasonable contemplation.
The FTT supervisory check then becomes decisive if HMRC refuses or partially refuses. Per Sch 55 paragraph 22 the FTT can only review HMRC's exercise of discretion on Wednesbury-equivalent grounds: irrationality, failure to consider relevant matters, considering irrelevant matters, procedural unfairness. The FTT cannot substitute its own view on whether special circumstances exist. This is the key procedural difference from paragraph 23 (where the FTT exercises full original jurisdiction). If HMRC considered the RoE-backlog context and explicitly addressed it in the penalty-decision letter, FTT review will fail (HMRC has exercised discretion within reason). If HMRC's penalty-decision letter is templated and shows no engagement with the regulatory context, Cordoba has a procedural angle on review.
Example three: The 30-day decision tree and the Martland late-appeal route
Acer Property Partners LLP (corporate partnership with corporate member; £3.1m London flat; ATED 2024/25 return missed by 4 months; £100 + £200 + £300 = £600 in penalty notices received 5 February 2025). The 30-day appeal window expires 7 March 2025.
Within the 30 days, Acer has three options. First, appeal direct to the FTT under TMA 1970 s.31A. Second, request HMRC statutory review under TMA 1970 s.49; the review request stops the 30-day FTT clock. Third, pay the penalties without prejudice and lodge a protective appeal to preserve later remedy. Doing nothing is not an option; the 30-day clock runs regardless.
The statutory review route under TMA 1970 s.49 operates as follows. Acer requests internal review by 7 March 2025; HMRC issues a review conclusion notice (typically within 45 days, occasionally longer for complex cases); on receipt of the notice, a fresh 30-day FTT appeal window opens. The review route is operationally valuable for cases where HMRC's initial penalty decision is templated and the appellant believes a fresh HMRC officer with the full submission will discharge the penalty without litigation.
Direct FTT appeal: Acer lodges the appeal via the Tribunal Service (electronic or paper) by 7 March 2025; FTT acknowledges; HMRC files response; case enters case-management track; hearing scheduled (typically 6 to 9 months). Costs follow the event under FTT default rules (low-cost regime for simple ATED penalty appeals; standard regime for complex cases).
If Acer misses the 30 days entirely, a late appeal requires application to the FTT for permission under the FTT Rules and the Martland v HMRC [2018] UKUT 178 (TCC) three-stage framework. Stage 1: length of delay. The longer the delay, the harder the application. Stage 2: reason for delay. Genuine illness, late discovery, regulatory blockage may succeed; "I was busy" or "I forgot about the deadline" will not. Stage 3: balancing exercise on prejudice. The FTT weighs the appellant's prejudice (loss of substantive defence) against the prejudice to HMRC and the public interest in finality. Long delays plus thin reasons fail routinely. Specialist representation is essential at the late-appeal application stage; many cases are lost on procedural grounds at this stage that could have succeeded on the merits had the appeal been lodged within 30 days.
The practical recommendation: the statutory-review route via TMA 1970 s.49 is typically the right first step for ATED late-filing appeals where the underlying facts are evidentiary (parental-leave gap; agent failure with reasonable-steps angle; regulatory event). The review route is cheaper, faster, and creates a fresh appeal window if needed. Direct FTT appeal is right where HMRC has already engaged at quality and refused (post-OTM-letter penalty review already conducted internally).
The penalty escalator: what builds and when
The FA 2009 Schedule 55 penalty schedule for ATED returns operates through items 11A (ATED return) and 11B (ATED adjusted chargeable amount return) of the Table at paragraph 1. The escalator runs on three fixed-penalty triggers plus a tax-geared overlay.
Day 1 late (the day after the filing deadline): £100 fixed penalty under paragraph 1. Three months late: £200 fixed penalty (sometimes recorded as £10 daily for 30 days under paragraph 4 where HMRC issues a notice naming the daily-penalty period; in practice for ATED, HMRC typically applies the £200 at 3 months rather than the daily-penalty mechanic). Six months late: greater of £300 or 5% of the tax due under paragraph 5. Twelve months late: greater of £300 or 5% of the tax due under paragraph 6, rising to behaviour-tiered maxima where HMRC determines the failure was deliberate.
Behaviour-tiered tax-geared penalties under paragraphs 5 and 6 apply at 30% (careless), 70% (deliberate but not concealed) and 100% (deliberate and concealed). Mitigation under paragraphs 17 and 18 reduces these maxima for the quality, telling and helping of any subsequent disclosure: prompted disclosure can reduce the maximum by up to 50%; unprompted disclosure can reduce it by up to 100% on the careless tier (subject to a 10% floor on the higher tiers).
For claim-only ATED returns where Property Rental Business Relief, Letting to Employees Relief, Property Developer Relief, Property Trader Relief, Farmhouse Relief or other s.132 to s.150 reliefs fully cover the chargeable period, the tax due is zero and the tax-geared paragraphs 5 and 6 effectively default to the £300 minimum. The fixed escalator £100 + £200 + £300 + £300 still applies in full and is the dominant exposure for relief-covered structures.
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Cumulative exposure for multi-year non-filers
Each chargeable period generates a separate Schedule 55 escalator. A 5-year non-filer for a single £2m-band dwelling faces 5 × (£100 + £200 + £300 + £300) = £4,500 in base penalties plus tax-geared penalties under paragraphs 5 and 6 for each missed year where tax was due. For multi-dwelling structures the arithmetic multiplies by the number of properties. For a 5-year non-filer holding 4 dwellings, the base-penalty exposure alone is £18,000 before tax-geared penalties or interest.
HMRC's One-To-Many (OTM) letter campaign typically triggers such cases. The OTM letter prompts a voluntary disclosure within a specified window (usually 30 to 60 days); if disclosure is made within the window, HMRC treats the disclosure as prompted but with mitigation under paragraphs 17 and 18 reducing the tax-geared maxima. The standard remediation route is HMRC's Digital Disclosure Service (DDS) for ATED-only disclosures or a formal disclosure letter where the position spans multiple regimes (ATED, NRCGT, SDLT additional dwelling). Specialist representation is essential at the OTM-letter response stage; the disclosure quality and timing affect the eventual penalty position materially.
The appeal mechanics post-OTM-letter follow the standard 30-day clock per penalty notice issued. The reasonable-excuse and special-circumstances routes remain available; the underlying-disclosure track is separate from the penalty-appeal track and both can proceed in parallel. Multi-year cumulative penalty appeals typically benefit from a single combined HMRC representation covering all years rather than year-by-year appeals.
The "reliance on another person" carve-out under paragraph 23(2)(b)
Paragraph 23(2)(b) of Schedule 55 reads as follows: where the appellant relies on another person to do anything, that is not a reasonable excuse unless the appellant took reasonable steps to avoid the failure. The carve-out is the most-litigated element of ATED appeals because corporate delegation is the norm.
"Reasonable steps" in the post-Perrin framework requires the following typical evidence pattern. A positive instruction to the agent or person relied on, with the deadline stated explicitly and the consequence of failure noted (the penalty cascade). A deadline reminder communication a reasonable period before the deadline (typically 30 days). A confirmation request to the agent that the filing has been or will be made, with a defined response window. A follow-up if no confirmation is received within the response window. A substitute filing protocol if the agent remains unresponsive, including identifying an alternative compliance route before the deadline lapses.
Mere delegation is not reasonable steps. "I instructed the accountant; they failed; that should be reasonable excuse" fails routinely at HMRC and at FTT. The appellant must adduce the dated paper trail of instruction, reminder, confirmation request, follow-up and (where relevant) substitute action. Where some but not all of the steps were taken, the FTT will weigh the Stage 3 objective-with-actual-characteristics test against the partial-steps evidence; a corporate appellant with prior years of compliance experience will be held to a higher standard than a first-time ATED filer.
Practical drafting points for paragraph 23(2)(b) submissions: lead with the dated instruction document; lead with the confirmation-request communication and the agent's silence or partial response; emphasise the substitute-action timeline once the agent's failure became apparent; address the foreseeability of the agent's failure explicitly (was the agent on prior notice of capacity issues; was there any prior late-filing pattern). The submission should anticipate HMRC's likely Stage 3 objection and address it directly rather than waiting for the FTT hearing.
Procedural notes for the appeal bundle
The HMRC representation or FTT appeal bundle should include the following documentary spine: the penalty notice (each year's notice as a separate exhibit); the underlying ATED return that triggered the late filing (with the filing date and confirmation evidence); the company's corporate record showing the responsible officer at the deadline date; the evidence pack for the Perrin four-stage application (facts; relevance; objective-test characteristics; remedy timeline); the evidence pack for the paragraph 16 special-circumstances submission (regulatory context; HMRC mis-direction if relevant; third-party event documentation); the statutory-review request or FTT appeal form; the cover representation pleading both routes simultaneously.
Where the appellant is a non-UK company or structure with non-UK directors, the bundle should also include UK contact details, a statement of UK address for service, and (where relevant) the RoE registration evidence. Where the ATED filings have been delegated to a UK letting agent rather than a UK-resident accountant, the bundle should include the agent's filing instructions and the agent's contractual scope (the latter often determines whether the paragraph 23(2)(b) reasonable-steps test was met or not).
The FTT's standard track for ATED penalty appeals typically schedules a paper-determination hearing for low-cost-regime cases (no oral hearing; the FTT decides on the bundle). The appellant can request an oral hearing where the evidence requires live testimony (Stage 3 objective-with-actual-characteristics evidence sometimes benefits from oral testimony by the responsible officer). Costs follow the event under FTT default rules; the low-cost regime applies to simple ATED penalty appeals unless the case becomes complex or one party conducts itself unreasonably.
Frequently asked questions
The FAQ list above covers the immediate steps on receipt of a penalty notice, the structural difference between reasonable excuse and special circumstances, the Perrin four-stage framework, the paragraph 23(2)(b) "reliance on another person" carve-out, the paragraph 16(2) "inability to pay" exclusion, what actually counts as special circumstances in practice, the claim-only-return penalty position, the 30-day window mechanics, cumulative exposure for multi-year non-filers, pleading both routes simultaneously, the FTT supervisory limit on paragraph 16 review, the parental-leave-period reasonable-excuse case, the RoE-backlog regulatory-event case, and the statutory-review route under TMA 1970 s.49. For the broader catalogue of ATED penalties and appeals (Schedule 55 plus Schedule 56 plus Schedule 24 inaccuracy plus offshore Category-3 uplift) see our ATED penalties and appeals page. For upstream prevention of common ATED errors that trigger penalty exposure, see our avoiding common ATED mistakes page. For OTM-letter response strategy, see our HMRC OTM letters page.
Next step
If you have received an ATED late-filing penalty notice, the 30-day clock under TMA 1970 s.31A is running and the choice between direct FTT appeal, statutory review under TMA 1970 s.49 and pay-without-prejudice plus protective appeal needs to be made within days of receipt. The substantive appeal grounds (paragraph 23 reasonable excuse plus paragraph 16 special circumstances) should be pleaded together with the appropriate evidence pack to each, drawing on Perrin v HMRC [2018] UKUT 156 (TCC) for the four-stage reasonable-excuse framework and (where the 30-day window has been missed) Martland v HMRC [2018] UKUT 178 (TCC) for the three-stage late-appeal application. Contact us via the form below to discuss the specific facts and the right route.