Alan Perkins State Pension Tax Case: How to Beat HMRC Fines
There are few things more terrifying for a UK pensioner or executor than the arrival of a brown envelope from HMRC.
The letter usually starts with cold, bold text: Penalty Notice.
Often, this isn’t about tax evasion. It is about a simple mistake. Perhaps you missed a line on a Self Assessment return, or you didn’t realize that the State Pension, hich is paid without tax deducted, must still be declared as taxable income. This is known as “Fiscal Drag,” and it catches thousands of retirees every year.
When you make a mistake, HMRC typically charges a penalty for a “careless inaccuracy.” They will tell you that the law is the law and that ignorance is no defence.
But they are wrong.
A landmark legal ruling, known widely as the Alan Perkins state pension tax case (officially Usher & Perkins v HMRC), proved that HMRC is not above the law. If HMRC’s own poor customer service or delays contributed to your situation, you might not have to pay that fine.
This guide explains who Alan Perkins is, how he defeated HMRC in the First-tier Tribunal, and how you can use his victory to defend your own pension tax rights.
Who Is Alan Perkins? (The Case Background)
To understand why this precedent is so powerful, we need to look at the facts of the case.
Alan Perkins was not a tax avoider. He was an executor. Along with Mr. Usher, he was responsible for administering the estate of the late Terence J Guy.
Administering an estate is complex. You must file a tax return for the deceased person up to the date of their death. In this specific case, the executors filed the return but made a significant error. They omitted roughly £15,000 of State Pension income and some private pension arrears.
The “Careless” Mistake
The error wasn’t malicious. The executors had confused the deceased’s “State Pension” with his “Occupational Pension.”
Because the State Pension is paid gross (meaning no tax is taken off before it hits your bank account), it is easy to overlook when staring at piles of paperwork. The executors assumed the income had already been taxed or was part of the other pension figures they had submitted.
HMRC spotted the gap. They categorized this as a “Careless Inaccuracy” under Schedule 24 of the Finance Act 2007.
Normally, this carries a penalty of between 15% and 30% of the lost tax revenue. HMRC issued the penalty notice, demanding payment. Most people would have paid it out of fear.
Alan Perkins didn’t. He appealed.
[Usher & Perkins (Executors of the Estate of Terence J Guy) v HMRC [2016] UKFTT 050 (TC)]
The Turning Point: HMRC’s Failure
Why did Perkins fight back? He admitted the error was careless. Under strict tax law, a careless error warrants a penalty.
However, the Alan Perkins state pension tax case hinges on what happened after the error was made.
When the executors realized the situation was complex, they wrote to HMRC seeking guidance on the correct tax position for the estate. They were trying to do the right thing.
HMRC’s response, or lack thereof, was shocking.
The 12-Month Silence
The Tribunal heard evidence that the executors waited over a year for a substantive reply from HMRC. During this time, interest was accruing on the unpaid tax, and the executors were left in limbo, unable to finalize the estate or correct the error formally.
Perkins argued a crucial point: How can a taxpayer be penalized for carelessness when the tax authority itself is being negligent?
This argument attacks the concept of “Special Reduction.” Under the law, HMRC has the power to reduce penalties if there are “special circumstances.” HMRC argued that their own delays were just normal administrative processing and did not count as special.
The Judge disagreed.
The Tribunal Ruling: Why The Taxpayer Won
The case went to the First-tier Tribunal, presided over by Judge Cornwell-Kelly. His ruling is now a vital tool for anyone fighting a similar battle.
The Judge was highly critical of HMRC. He noted that while the initial error by the executors was indeed careless, the subsequent behavior of HMRC was unacceptable.
Judge Cornwell-Kelly stated that a taxpayer is “entitled to expect a timely response” from the tax authority.
The “Special Circumstances” Precedent
The Tribunal ruled that HMRC’s delay was so excessive that it constituted a “special circumstance.”
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The Logic: If HMRC had replied promptly, the error would have been fixed months earlier. The executors would have paid the tax sooner. The prolonged ordeal was largely HMRC’s fault.
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The Verdict: The Judge used his power to reduce the penalty. He didn’t just lower it; he slashed it to zero.
The executors still had to pay the tax owed (you can never escape the actual tax bill), but the penalty for carelessness was wiped out.
My Professional Insight: This ruling destroys the myth that HMRC is untouchable. It establishes that the relationship between taxpayer and taxman is a two-way street. If they fail in their duty of care (customer service), they lose the moral and legal high ground to punish you for minor errors.
How to Use the ‘Perkins Defence’ Yourself
If you are reading this, you might be facing a similar penalty. Perhaps you forgot to declare your State Pension on your Self Assessment, or you are an executor struggling with a complex estate.
You can use the Alan Perkins state pension tax case as a template for your appeal. However, you must be precise. You cannot simply shout “Perkins!” and expect the fine to vanish.
Here is the step-by-step strategy to applying this defence.
Step 1: Admit the Error, Fight the Penalty
Do not try to claim you didn’t make a mistake (unless you really didn’t). If you missed declaring income, admit it.
Your argument is not: “I didn’t do it.”
Your argument is: “I made a mistake, but the penalty is disproportionate because…”
Step 2: Build Your Timeline of Failure
The Perkins victory relied on evidence of delay. You need to prove HMRC failed you.
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Check your phone logs. Did you spend hours on hold?
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Check your letters. Did you write to them and get no reply for 3, 6, or 12 months?
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Did their online system crash or provide confusing information?
Step 3: Draft the Appeal Letter
When writing your appeal (form SA370 or via the online portal), you should explicitly reference the case law.
Copy this phrasing for your appeal:
“I am appealing the penalty for careless inaccuracy on the grounds of Special Circumstances. While I accept an error was made regarding the [State Pension/Income] declaration, I refer you to the First-tier Tribunal decision in Usher & Perkins v HMRC [2016] UKFTT 050 (TC).
In that case, Judge Cornwell-Kelly ruled that excessive delays by HMRC constituted a special circumstance that warranted a reduction of penalties to zero. In my case, I attempted to contact HMRC on [Dates] and received no guidance until [Date], mirroring the administrative failures seen in the Perkins case.”
Checklist: Does Your Case Qualify?
Not every delay counts. To help you decide if you should proceed, I have created this checklist based on the Tribunal’s criteria.
| Qualifier | Description |
| Was the error “Careless”? | Yes. If the error was “Deliberate” (you hid money on purpose), this defence will fail. |
| Did you try to comply? | Yes. You must show you were trying to get it right (e.g., you called them, you filed on time otherwise). |
| Was there a delay? | Yes. HMRC must have taken an unreasonable amount of time to reply or process your information. |
| Did the delay cause harm? | Arguably. The delay must have prevented you from fixing the error sooner or caused the situation to drag on. |
[Guide to UK State Pension Tax Rules 2025]
Common Pitfalls: When This Won’t Work
I have seen many people try to use legal precedents incorrectly. It is vital to understand the limits of the Alan Perkins state pension tax ruling.
1. The “Deliberate” Trap
HMRC categorizes errors in three ways:
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Careless: You were sloppy but not dishonest.
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Deliberate but not concealed: You knew you were omitting income but didn’t try to hide it.
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Deliberate and concealed: You committed fraud and tried to cover your tracks.
The Perkins defence only works for Category 1 (Careless). If HMRC can prove you knew the tax was due and ignored it, no amount of bad customer service will save you.
2. The “Passive” Executor
In the Perkins case, the executors were active. They wrote letters. They chased HMRC.
If you simply ignored the tax return for two years and then blamed HMRC for “not reminding you,” you will lose. You must show that you were waiting for them.
3. Suspended Penalties
Sometimes, HMRC will offer a “Suspended Penalty.” This means you don’t pay the fine as long as you don’t make another mistake for two years.
Pro-Tip: If HMRC offers to suspend the penalty, take the deal. Going to a Tribunal is stressful and time-consuming. Only use the Perkins defence if HMRC is demanding immediate cash.
The Broader Context: The “Fiscal Drag” Danger
Why is this happening so often? It isn’t just about Alan Perkins; it’s about the current UK tax environment.
We are currently seeing a massive rise in pensioners getting dragged into tax nets. The Personal Allowance has been frozen at £12,570. Meanwhile, the State Pension rises every year via the Triple Lock.
This “Fiscal Drag” means a retiree with a decent State Pension and a small private pension is now pushing above the tax-free threshold.
The problem? The State Pension is never taxed at source.
HMRC has to collect that tax by adjusting the tax code on your private pension or asking for a Self Assessment. If their systems fail, or if they delay telling you your code has changed, you end up with a “careless error” penalty.
This is exactly where the Perkins precedent shines. It protects you from the systemic failures of an overburdened tax system.
Conclusion: You Are Not Powerless
The story of Alan Perkins is not just a legal anecdote; it is a blueprint for fairness.
HMRC relies on fear. They rely on the fact that most people, especially retirees and grieving executors, will simply pay a £500 or £1,000 fine to make the problem go away.
But the Alan Perkins state pension tax case proves that the system has checks and balances. Judge Cornwell-Kelly’s ruling reminds us that HMRC has a duty to serve the public efficiently. When they fail that duty, they forfeit their right to penalize your honest mistakes.
Key Takeaways:
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Don’t Panic: A penalty notice is the start of a conversation, not the end.
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Check the Category: Ensure the error is listed as “Careless,” not “Deliberate.”
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Document Everything: Your strongest weapon is a timeline of HMRC’s delays.
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Cite the Case: Use Usher & Perkins v HMRC [2016] in your appeal letter.
If you are sitting with a penalty notice today, check your timeline. If HMRC kept you waiting, you have a reasonable excuse. Use it.
[Contact HMRC for Self Assessment Enquiries]
FAQs
What is the Alan Perkins tax case precedent?
The Alan Perkins precedent refers to the case Usher & Perkins v HMRC. It established that HMRC’s own poor customer service and excessive delays can constitute “special circumstances,” allowing tax penalties for careless errors to be reduced to zero.
What counts as a reasonable excuse for HMRC?
A “reasonable excuse” is something that stopped you from meeting a tax obligation despite your best efforts. Common examples include bereavement, serious illness, or IT failures at HMRC. The Perkins case added “excessive HMRC delays” to this list.
Can I appeal a penalty for careless inaccuracy?
Yes. You can appeal any penalty under Schedule 24. You must argue either that the error wasn’t careless (you took reasonable care) or that there are “special circumstances” (like the Perkins case) that justify reducing the fine.
Does HMRC pay for their own delays?
Generally, no. HMRC rarely pays compensation for delays. However, as seen in the Perkins case, their delays can be used as leverage to cancel penalties that they have issued against you.
Is State Pension taxed automatically?
No. The State Pension is taxable income, but it is paid “gross” (without tax deducted). If your total income exceeds the Personal Allowance, HMRC usually collects the tax by adjusting the tax code on your private pension or wages.
How do I reference a tribunal case in an appeal?
In your appeal letter (Form SA370), simply state: “I rely on the precedent set in [Case Name and Citation Number].” Briefly explain how the facts of that case match your own situation.
What is the time limit for appealing HMRC penalties?
You usually have 30 days from the date on the penalty notice to lodge an appeal. If you miss this deadline, you must have a very good reason for the delay in appealing.
Do executors have to pay penalties for the deceased’s mistakes?
Executors are responsible for the estate’s tax returns. If the executors make a careless error (as in the Perkins case), the estate is penalized. However, executors can be personally liable if they distribute the estate’s money before settling tax debts.
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