Foreign Nationals and UK Tax Returns

It is important for everyone in the UK to understand and follow UK tax rules, no matter their nationality or previous tax status. A recent case has shown that simply not knowing UK tax laws is not a valid excuse for missing tax filing deadlines. This ruling is significant for non-residents, expatriates, and anyone new to the UK tax system.

Background of the Case

The appellant in this case was a Canadian national who had previously lived and worked in Spain. On 24 January 2022, he registered for paperless communications with HM Revenue & Customs (HMRC). Subsequently, a notice to file a self-assessment tax return for the year ending 5 April 2022 was issued on 6 April 2022, via his personal tax account (PTA) online.

Although the taxpayer logged into his PTA and read the notice, he failed to submit the return by the deadline. HMRC imposed late-filing penalties in accordance with standard procedure.

The Taxpayer’s Arguments

In his appeal against the penalties, the taxpayer claimed he was unfamiliar with the UK tax system and assumed that the requirements were similar to those in Spain. He argued that the complexity of the UK system—especially after the effects of Covid-19 and Brexit—had made it difficult to comply without professional assistance. Financial hardship, caused by the collapse of his freelance tutoring business during the pandemic, meant he could not afford tax advice.

These were put forward as reasons for not submitting the tax return on time.

Tribunal’s Consideration

The First-tier Tribunal (FTT) accepted that the taxpayer faced genuine difficulties. However, it rejected the argument that unfamiliarity with UK tax obligations amounted to a reasonable excuse. The tribunal focused on several key points:

• The taxpayer had access to the notice and was aware of the filing requirement.
• The responsibility to comply with tax laws applies equally to all taxpayers, regardless of their background or previous tax experience.
• Information about filing obligations is readily available to the public, and HMRC provides guidance to those seeking assistance.
• Financial hardship and lack of knowledge are not considered valid grounds for failing to meet a statutory obligation.

The tribunal concluded that the penalties had been correctly applied and upheld HMRC’s decision.

What Constitutes a Reasonable Excuse?

Under UK tax law, a reasonable excuse typically involves an unexpected or unforeseeable event that prevents timely compliance, such as:

• Serious illness or medical emergency
• Unexpected technical failure on the HMRC website
• The death or bereavement of a close relative shortly before the deadline
• Severe disruption due to natural disasters

Common reasons that are not accepted include:

• Ignorance of the law
• Being too busy or forgetting
• Lack of access to professional advice
• Believing someone else was handling it
• Financial constraints

Key Lessons from the Case

1. Tax obligations apply regardless of nationality. Foreign nationals must familiarise themselves with the UK system if they are liable to file tax returns.
2. Online notices are considered legally served. If you sign up for paperless communications, you are expected to monitor your online tax account.
3. A reasonable excuse has a strict legal definition. Personal assumptions or unfamiliarity with local systems will not suffice.
4. Documentation and action are essential. If you believe you have a valid reason, maintain clear records and take prompt action once the issue is resolved.

Best Practices for Foreign Nationals in the UK

• Register with HMRC promptly if you become liable to pay tax in the UK.
• Set reminders for key deadlines, especially if using online accounts.
• Seek guidance early, either from HMRC or a professional adviser.
• Understand your tax status, especially if you’ve recently moved or have income from multiple countries.
• Keep up to date with changes to tax rules post-Brexit or as a result of global events.

This case serves as a crucial reminder: tax rules apply equally to everyone, and ignorance of the law—even for foreign nationals—is not a valid reason for failing to file on time. The UK tax system expects individuals to take reasonable steps to understand and comply with their obligations. By staying informed and organised, taxpayers can avoid unnecessary penalties and ensure full compliance with UK tax laws.