Tax returns – ignorance is no excuse

Posted by RM2 at 16:45 on 31 Jan 2018


A recent First Tier Tax Tribunal judge has confirmed that ignorance of the law is no excuse when it comes to reporting tax liabilities (Hesketh v HMRC [2017] UKFTT 871(TC).

In particular, the judge noted that ignorance of a filing deadline was not a reasonable excuse, because that ignorance arose out of a failure by the taxpayers to investigate the matter. They could have asked for advice from a professional adviser or they should have kept abreast of the law themselves. The fact that the filing did not include any payment of tax did not make the penalties disproportionate – it is perfectly reasonable of HMRC to penalise late returns, even if there is no tax to pay.

Companies that issue “employment related securities” are obliged to file a return each year by 6 July. This does not just include “formal” share plans such as Enterprise Management Incentives or Share Incentive Plan, but will extend to non-formal arrangements – for example, the grant of a non tax advantaged share option to a senior executive. Companies must file a nil return even if there is no activity relating to the share plan during the previous tax years. If a trust is involved, additional returns must usually be completed by 31 January each year.

If you are unsure about your filing obligations in connection with employee share plans, contact a member of our Operations team on 0208 949 5522 or by email