What qualifies as a reasonable excuse when failing to meet HMRC deadlines?
We've definitely had our fair share of excuses, but these are some of the published excuses HMRC have received over the years:
- My pet goldfish died (self-employed builder)
- I had a run-in with a cow (Midlands farmer)
- After seeing a volcanic eruption on the news, I couldn't concentrate on anything else (London woman)
- My wife won't give me my mail (self-employed trader)
- My husband told me the deadline was 31 March, and I believed him (Leicester hairdresser)
- I've been far too busy touring the country with my one-man play (Coventry writer)
- My bad back means I can't go upstairs. That's where my tax return is (a working taxi driver)
- I've been cruising round the world in my yacht, and only picking up post when I'm on dry land (South East man)
- Our business doesn't really do anything (Kent financial services firm)
- I've been too busy submitting my clients' tax returns (London accountant)
All these people and businesses received a £100 penalty from HMRC for filing late. They appealed against the decision using these excuses, but surprisingly they were unsuccessful J
So, what is a reasonable excuse when failing to meet obligations?
Certain penalties can be mitigated, but there is no definition of a reasonable excuse, each case is decided upon its own merit. Certain penalties issued by HMRC can be mitigated where a taxpayer has a reasonable excuse for the failure to meet their obligation. What might amount to a reasonable excuse for one taxpayer may not for another.
Here are some of the penalties you can appeal against:
- an inaccurate return
- sending in your tax return late
- paying tax late
- failing to keep adequate records
So, what does HMRC consider to be a reasonable excuse? They say it must be something that stops a person from meeting a tax obligation despite them having taken reasonable care to meet that obligation.
A reasonable excuse does not have to be a single event or issue. In certain instances, a combination of factors can amount to a reasonable excuse when considered together.
The HMRC's Compliance Handbook discusses the possible reasonable excuses which include:
- general examplessuch as:
- your computer or software failed just before or while you were preparing your online return
- your partner or another close relative died shortly before the tax return or payment deadline.
- service issueswith HM Revenue and Customs (HMRC) online services
- a fire, flood or theft prevented you from completing your tax return
- postal delays that you could not have predicted
To challenge a penalty on the grounds of reasonable excuse, the taxpayer must demonstrate that they had a reasonable excuse and they put their failure right without delay.
Whether a taxpayer has a reasonable excuse it is always considered on a case-by-case basis. However, the new HMRC guidance states that pressures at work, a lack of information, not being reminded by HMRC about a tax obligation, an insufficiency of funds, finding the HMRC online system too difficult to use, and reliance on a third person is not a reasonable excuse.
There are exceptions though. An insufficiency of funds may be a reasonable excuse where the insufficiency is a result of events outside the person's control. If you're affected by coronavirus (COVID-19) for example.
HMRC may consider COVID-19 as a reasonable excuse for missing some tax obligations.
Reliance on an expert, such as an accountant may, in certain circumstances, amount to a reasonable excuse, but if a person relies on any other person to do anything, that is not a reasonable excuse unless the person took reasonable care to avoid the relevant failure.
A reasonable excuse is something that stopped you meeting a tax obligation that you took reasonable care to meet, for example:
- your partner or another close relative died shortly before the tax return or payment deadline
- you had an unexpected stay in hospital that prevented you from dealing with your tax affairs
- you had a serious or life-threatening illness
- your computer or software failed just before or while you were preparing your online return
- service issueswith HM Revenue and Customs (HMRC) online services
- a fire, flood or theft prevented you from completing your tax return
- postal delays that you could not have predicted
- delays related to a disability you have
You must send your return or payment as soon as possible after your reasonable excuse is resolved.
We work closely with our clients when it comes to tax obligations, but if you have any questions, or need help, please get in touch.