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Student cruises to reasonable excuse victory

Ryan Solomon was signed up to self assessment while he was out of the country, which resulted in a pile of late filing penalties. HMRC wouldn’t accept he had a reasonable excuse for late completion of forms he knew nothing about, but the tax tribunal disagreed.

13th Sep 2019
Tax writer
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While in the final year of his degree in 2016, Ryan Solomon (TC07133) worked as an agency-provided teaching assistant. On graduation, he took a full-time job overseas with the Royal Caribbean cruise line. He was out of the UK between November 2016 and May 2018.

On 6 March 2017, HMRC received an electronic form SA1 (registering for self assessment and getting a tax return) declaring him to have become a director of a limited company, Ryan Solomon 7136 Ltd, on 31 October 2016. In response, HMRC issued a notice to file a 2016/17 tax return, which would need to be filed no later than 31 January 2018.

A £100 fixed penalty notice for an overdue tax return was issued on 13 February 2018.

In August 2018, HMRC issued further penalty notices, for £900 (three months overdue) and £300 (six months overdue) by electronic means.

On 13 August, Solomon (now back in the UK) appealed against all the penalties, and on 23 August he filed the 2016/17 tax return.

Small income

Solomon’s 2016/17 tax return showed two entries for income:

  • J D Weatherspoon: income £1,765, no tax deducted;
  • Ryan Solomon 7136 Ltd: income £1,475, tax deducted £78.

From this, Judge Richard Thomas was able to deduce that Solomon worked as a barman for a short period, then worked for about a month “for” Ryan Solomon 7136 Ltd. But what was this mysterious company?

Ryan Solomon 7136 Ltd

In order to cast some more light on the situation, the judge asked HMRC a number of quite pointed questions, including:

What evidence does HMRC have that it was the appellant who completed the SA1 online and transmitted it to HMRC? Is there any means HMRC has for checking whether the person transmitting it is either the person whose details are given or is authorised to give them?

Despite restating and expanding the question, Judge Thomas did not receive any reassurance from HMRC that it had any way of knowing (or caring) who actually submitted the SA1, which was highly relevant since it was submitted at a time when Solomon was on a cruise liner in the Caribbean.

The judge also asked:

What significance does HMRC attach to the fact that the company employing the appellant was called Ryan Solomon 7136 Ltd?

It was clear to Judge Thomas that this was a service company set up by the agency which obtained the teaching assistant job for Solomon. The suffix number is a giveaway, and it is highly probable that the SA1 was submitted by the agency. HMRC’s reply was either downright evasive or a masterpiece of naïve imbecility:

The company name Ryan Solomon 7136 Ltd would suggest the appellant Ryan Solomon had involvement with the company as a director.

Judge Thomas found as a fact that the form SA1 was not submitted by Ryan Solomon but by the agency, and without Solomon’s knowledge.

Legal points

  1. Was the notice to file a tax return “validly required for the purposes in s 8 TMA?”

Yes it was. Solomon had been identified as a company director, and it was legitimate for HMRC to call for a tax return.

  1. Was the notice properly issued?

Yes. It was sent to Solomon’s last known address, and no suggestion had been made that it was undelivered.

  1. Should Solomon, as a reasonable taxpayer, have made arrangements for post (especially post from HMRC) to be monitored while he was outside the UK?

No. Someone only needs to have their post from HMRC monitored if they have reason to expect to receive any.

The judge referred to his decision in Alexander Steele, a taxpayer whose only contact with HMRC had been through PAYE and who had no reason to believe that this would not continue to be the case. He was under no obligation to make special arrangements on the off-chance that HMRC might write to him.

  1. Did Solomon have a reasonable excuse?

Yes. Because he was unaware he was registered for self assessment, he would have no reason to expect a filing notice. The initial £100 penalty was cancelled.

  1. Did the reasonable excuse continue?

Only as far as April 2018. Solomon did not file his 2016/17 return within a reasonably short time thereafter, so the £900 and £300 penalties are not covered by reasonable excuse.

  1. What about the £900 penalty?

The judge referred to the judgment in Anne Duncan (TC05817), which focused on the condition set by paragraph 4(1)(c) of Schedule 55 FA 2009. HMRC had either failed to give a notice specifying the dates between which these daily penalties were accruing, or had not provided evidence to show that they had given such a notice. The penalty was cancelled.

  1. What about the £300 penalty?

The judge referred to his own judgment in Duncan Hansard TC06522, that such a penalty issued before the return was submitted can only be valid if made by an officer of HMRC acting to the best of his or her knowledge of the likely tax liability. Since this penalty had been issued automatically by the computer, the judge held it was invalid.

In any event, following his own judgment in Hannah Armstrong (TC06606) he held that there was no ground for believing Solomon had given consent to penalty notices being delivered to him digitally: that would also justify cancelling the penalties.


This is yet another case where Judge Richard Thomas focused on HMRC shortcomings. In particular, the all-too-frequent failure to provide an adequate audit trail of its compliance with statutory obligations.

By his questions, he gave HMRC numerous clues that Solomon had a reasonable excuse, but HMRC declined to take the hint. The department’s answers to the judge’s questions provide a tantalising insight into the bureaucratic mind.

Replies (1)

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By Justin Bryant
13th Sep 2019 17:09

A great shame this great judge has retired.

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