Wals v HMRC [2025] UKFTT 1331 (TC)

A taxpayer whose accountant died without ever filing his returns escaped years of late filing penalties on a simple, powerful point: HMRC could not prove it had ever validly told him to file in the first place.

Why This Case Matters

Wals is a fresh, practically important application of the notice-to-file defence first established in Donaldson v HMRC [2016] EWCA Civ 761, and it confirms the defence remains very much alive nearly a decade later. It also gives useful, realistic guidance on a question that comes up constantly in practice: how long does reliance on a professional adviser continue to provide a reasonable excuse once something has visibly gone wrong? The Tribunal's answer, that the excuse ends once the taxpayer actually becomes aware of the failure rather than continuing indefinitely, is a point every adviser handling a similar penalty dispute needs to know.

The Facts

Mr Wals, a taxpayer based in the Netherlands, instructed a UK chartered accountant to prepare and file his self-assessment returns. The accountant failed to file the returns for several tax years and subsequently died without the position having been corrected. HMRC issued daily and other late filing penalties under Schedule 55 FA 2009 across multiple years on the basis that returns had been filed late in response to notices to file that HMRC said had been validly served. Mr Wals appealed, disputing both that valid notices to file had ever been served for some of the years in question, and that any resulting penalties were in any event covered by a reasonable excuse arising from his reliance on his accountant.

Procedural History

• First-tier Tribunal (original decision, 11 November 2025): allowed the appeal in part, finding no valid notice to file had been established for some years, and that reasonable excuse applied to the earliest year but ended once the taxpayer became aware of his accountant's failure.
• First-tier Tribunal (revised decision, 23 April 2026): reissued following a Rule 41 review, confirming the substance of the original findings.

The Issue

Whether HMRC had discharged its burden of proving that valid notices to file under section 8 TMA 1970 had been served for each of the years in which late filing penalties were charged, and, separately, for how long the taxpayer's reliance on his chartered accountant provided a reasonable excuse for delay once it became apparent that the accountant had not, in fact, been filing the returns as instructed.

The Ratio Decidendi

The Tribunal's treatment of the evidential burden is significant in its own right. It did not simply accept HMRC's assertion that notices had been issued in the normal course; it required HMRC to produce evidence capable of establishing service for the specific years in dispute, and where that evidence was inadequate, found in the taxpayer's favour on that ground alone, independently of the reasonable excuse analysis.

Where Reasonable Excuse Ended

The Tribunal accepted that instructing and relying on a chartered accountant to handle a taxpayer's filing obligations is capable of providing a reasonable excuse for delay, consistent with the general approach in Perrin v HMRC [2018] UKUT 156 (TCC). But it drew a clear factual line in this case: the excuse held up to the point Mr Wals telephoned HMRC in May 2013 to discuss daily penalties for the 2011–12 return. From that point, the Tribunal found, he clearly knew that his accountant had failed him, and continued reliance on the accountant could no longer be treated as reasonable. The appeal succeeded for the earliest year but was dismissed for later years on this basis.

• Reliance on a professional adviser can found a reasonable excuse, but the excuse tracks the taxpayer's actual or constructive knowledge of the adviser's failure, not the adviser's ongoing engagement.
• A single trigger event, here a phone call about daily penalties, can be enough to end the excuse from that point forward, even where the taxpayer's underlying reliance on the adviser might otherwise have continued.
• The notice-to-file point and the reasonable excuse point are independent; a taxpayer can succeed on one without needing the other, and each should be pleaded and evidenced separately.

Practitioner Application

• Always test whether HMRC can actually prove service of a valid notice to file before accepting a Schedule 55 penalty is properly charged, particularly for older years where HMRC's records may be thin; this remains a live and frequently successful ground of challenge following Donaldson and now Wals.
• Pinpoint the exact moment a client became aware of an adviser's failure when building a reasonable excuse case; the excuse is time-limited to genuine reliance, not to the length of the professional relationship.
• Run the notice-to-file and reasonable excuse arguments separately, year by year, since the outcome, as in Wals itself, can differ across different tax years on the same facts.
• Cite the revised 2026 decision, not the original November 2025 release, and check for any further review before relying on the case in a live appeal.

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