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HMRC internal manual

Compliance Handbook

Dishonest tax agents: file access notice: reasonable excuse: shortage of funds

Where there is a financial cost involved in assembling information or retrieving documents, a shortage of funds is not in itself a reasonable excuse. You must consider why the person did not have the funds.

Assembling documents should involve little expense for a person who has reasonably well-ordered records. On the other hand, having to assemble information may well require additional expense. We expect the person to make arrangements to meet any costs of complying with the file access notice. Cash-flow problems, which are a normal incident of business life, are not a reasonable excuse.

However, a person may have a reasonable excuse for failing to comply with a file access notice when:

  • the failure resulted from a lack of funds and 
  • the shortage of funds occurred despite the person exercising reasonable care and due diligence, having given proper regard to the file access notice.

When considering if there is a reasonable excuse you must look at the circumstances that gave rise to the shortage of funds. If you accept there is a reasonable excuse for the shortage of funds you must consider if the person remedied the failure without unreasonable delay after the excuse has ended, see CH183660.

Remember that there is no statutory definition of ‘reasonable’ or ‘unreasonable’. Each case must be considered on its own facts taking into account all the circumstances that gave rise to the failure to comply with the file access notice as well as the person’s abilities and circumstances.

FA12/SCH38/PARA25 (2)(a)