Appealing HMRC Penalties: The 2026/27 Guide for Tax Professionals

Statute firmly establishes the taxpayer’s right when appealing HMRC penalties. Under established legacy rules in Schedule 55 (late filing) and Schedule 56 (late payment) of the Finance Act 2009 (FA 2009), the law treats an appeal against a penalty in the exact same manner as an appeal against the underlying tax assessment.

Crucially, the legislation explicitly protects the taxpayer’s cash flow during a dispute. Sub-paragraph 21(2)(a) of Schedule 55 and sub-paragraph 14(2)(a) of Schedule 56 dictate that HMRC cannot require a person to pay a penalty before the tribunal determines the appeal against the assessment of that penalty.

For newer penalties introduced under the Finance Act 2026 (FA 2026), Section 205 explicitly confirms the taxpayer’s right to appeal against both the imposition of the penalty and the amount charged under sections 194 to 197.  The procedure for these FA 2026 appeals strictly follows paragraph 48 of Schedule 36 to the Finance Act 2008, meaning the taxpayer must give notice in writing within 30 days.

Time Limits and the HMRC Review Process

When appealing HMRC penalties, professionals must strictly monitor statutory deadlines. Section 31A of the Taxes Management Act 1970 (TMA 1970) mandates that the taxpayer must give notice of an appeal in writing within 30 days of the date on which HMRC issued the notice of assessment.  This 30-day clock starts on the date HMRC posts or issues the decision notice, not the date the client receives it.

The appeal routing depends on the type of tax involved:

• Direct Taxes (Income Tax, Corporation Tax, PAYE): The taxpayer must first appeal directly to HMRC within the 30-day window.  After receiving HMRC’s “latest view,” the taxpayer can request an internal review by an independent HMRC officer or immediately notify the appeal to the First-tier Tribunal.
• Indirect Taxes (VAT): The taxpayer can request a review in response to the penalty assessment but retains the right to appeal directly to the tribunal before or after that review commences or concludes.

If the taxpayer opts for an internal review but remains unsatisfied with the conclusion, they have a further 30 days from the date of the review conclusion letter to notify the First-tier Tribunal.

Table: Key Deadlines for Appealing HMRC Penalties

Late Appeals and Reasonable Excuse

Taxpayers frequently miss the initial 30-day window. Section 49 of the TMA 1970 provides the statutory mechanism for late appeals.  HMRC must accept a late appeal if the taxpayer establishes a “reasonable excuse” for missing the deadline and submits the appeal without unreasonable delay after the excuse ceases.

If HMRC refuses to accept a late appeal, the taxpayer can apply to the First-tier Tribunal for permission to appeal out of time.  When deciding whether to admit late appeals, tribunals generally apply the stringent three-stage test established in Martland v HMRC, which evaluates the length and reason for the delay alongside the overall prejudice to both parties.  HMRC routinely argues against late appeals where taxpayers simply allow matters to drift without demonstrating a concrete impediment.

Appealing the Points-Based Penalty Regime

The points-based late submission penalty regime, introduced by Schedule 24 to the Finance Act 2021 (FA 2021), fundamentally changes how professionals handle compliance disputes for VAT and Income Tax Self Assessment (ITSA).

Taxpayers have the right to appeal individual penalty points as HMRC awards them.  However, if a taxpayer fails to appeal a point at the time and subsequently hits the threshold that triggers a £200 financial penalty, the tribunal retains the power to look backwards. When hearing an appeal against the financial penalty, the tribunal may also affirm or cancel any of the historic penalty points that led to the charge, even if the strict 30-day time limit for appealing those specific points expired months prior.

The Finance Act 2026 refines this system by granting HMRC the explicit statutory power under Section 262 to cancel individual penalty points.  If HMRC cancels a point, any financial penalty assessment relying on that specific point instantly ceases to have effect.  However, professionals must note that Section 262(5) prevents the taxpayer from escaping entirely; cancelling a point does not prevent HMRC from subsequently awarding a new penalty point for the exact same failure if appropriate.

Consider reviewing the specific evidence required by the First-tier Tribunal when demonstrating that an appeal was made “without unreasonable delay” under Section 49 TMA 1970 to strengthen late appeal applications.