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HMRC internal manual

Aggregates Levy Guidance

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HM Revenue & Customs
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Penalties: Reasonable excuse

Law

The relevant law on whether there is reasonable excuse for a civil penalty to be withdrawn or reduced is contained in Finance Act 2001, section 46, Civil penalties, and in the relevant Schedules as under Law in section AGL8100.

Case history

We do not have any Tribunal case histories that would help us to establish what is and is not considered a reasonable excuse for any of the aggregates levy (AGL) penalties.

In considering “reasonable excuse” we can turn to VAT cases for some initial guidance. The concept of what constitutes a ‘reasonable conscientious businessman’ was first defined by a past President of the VAT Tribunal, Judge Medd OBE QC, in the appeals of Appropriate Technology and The Clean Car Company.

In the case of Appropriate Technology, (LON/90/1350X) Judge Medd asked himself the following question:

“Would a reasonable conscientious businessman who knew all the facts of the case as I have set them out, and who was alive to and accepted the need to comply with one’s responsibilities in regard to the rendering of VAT returns, consider that the Appellant Company, in acting as it did in the circumstances in which it found itself, had acted with due care in the preparation of its return?

If such a businessman would reach the conclusion that the taxpayer had acted with proper care, then I would consider that the taxpayer should be regarded as having a reasonable excuse”.

Our policy is that unless a business can show that it was alive to and accepted the need to comply with its AGL responsibilities, then no reasonable excuse exists. It should be noted that ‘reasonableness’ refers to the conduct of the business, not to the error made.

Judge Medd further expanded the concept of the reasonable conscientious businessman in The Clean Car Company Ltd case, (LON/90/138X), when he said:

“One must ask oneself: was what the taxpayer did a reasonable thing for a responsible trader conscious of and intending to comply with his obligations regarding tax, but having the experience and other relevant attributes of the tax-payer and placed in the situation that the taxpayer found himself at the relevant time, a reasonable thing to do? Put in another way which does not I think alter the sense of the question; was what the taxpayer did not an unreasonable thing for a trader of the sort I have envisaged, in the position that the taxpayer found himself, to do?

It seems to me that Parliament in passing this legislation must have intended that the question of whether a particular trader had a reasonable excuse should be judged by the standards of reasonableness which one would expect to be exhibited by a taxpayer, but who in other respects shared such attributes of the particular appellant as the Tribunal considered relevant to the situation being considered.

Thus, though such a taxpayer would give a reasonable priority to complying with his duties in regard to tax and would conscientiously seek to ensure that his returns were accurate and made timeously, his age and experience, his health or the incidence of some particular difficulty or misfortune and, doubtless, many other facts, may all have a bearing on whether, in acting as he did, he acted reasonably and so had a reasonable excuse”.

Reasonable excuse

There is no excuse in AGL law in the following circumstances:

  • Insufficient funds to pay;
  • No loss of levy;
  • Person liable or someone on their behalf acted in good faith;
  • Reliance on a person to perform a task or the conduct of that person; or
  • (after the new failure to notify penalty came into force on 1 April 2010 where the failure was not deliberate), the person had a reasonable excuse, that excuse has now ended and they have still failed to notify without unreasonable delay.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

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  • (This content has been withheld because of exemptions in the Freedom of Information Act 2000)
  • (This content has been withheld because of exemptions in the Freedom of Information Act 2000)