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HMRC internal manual

Compliance Handbook

From
HM Revenue & Customs
Updated
, see all updates

Information & Inspection Powers: penalties: when is a penalty chargeable: reasonable excuse: when does a reasonable excuse end

Where a person has a reasonable excuse for

  • failing to comply with an information notice, or
  • obstructing an inspection

they must remedy that without unreasonable delay after the excuse ends.

It they do this, we will treat the excuse as continuing until the correction is made and will therefore not charge a penalty. If they do not do this they will not have a reasonable excuse for the failure or obstruction and therefore we will charge the penalty.

You need to consider carefully the point at which a reasonable excuse ends and the actions the person took after the time to comply with the information notice or allow the inspection. Each case must be dealt with on its own merits.

In terms of unreasonable delay, there is no statutory definition of ‘unreasonable’. Each case must be dealt with on its own merits in view of the person’s abilities and circumstances.

Examples

No unreasonable delay

Hannah, a sole trader, had a VAT officer visit for an inspection. At the visit they agree that Hannah will prepare an analysis of some invoices and send it to the officer within two weeks. After the visit Hannah falls ill and spends a month in hospital with pneumonia. After two weeks the VAT officer, unable to contact Hannah by phone, writes and requires her to provide the analysis within two weeks of the letter (an information notice). When Hannah returns to work she contacts the officer and explains that she has returned to work part-time and is on light duties. She is only managing to do the essential work necessary to keep her business going. They agree that she will prepare and send in the analysis within two weeks of returning to work full time.

Hannah is back working full time three weeks later and a week after that sends the VAT officer the list of invoices. She had a reasonable excuse for her failure to comply with the information notice which she remedied without unreasonable delay after the excuse ended.

Unreasonable delay

We sent Phil an information notice requiring him to supply documents for a direct tax enquiry by 31 July 2009. Unfortunately his business premises were flooded on 15 July and he was unable to get to his records. The police did not let him back into the building until 16 August. His records were safely stored upstairs so were not damaged by the water. Phil explained the situation and we agreed that he would provide them within 4 weeks of being let back into the building.

Phil did not deliver the documents until three and a half months after his business reopened - this was an unreasonable delay. He did not have a reasonable excuse for the failure to comply with the information notice.

FA08/SCH36/PARA45 (3)

CEMA79/S118G