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HMRC internal manual

Compliance Handbook

Data gathering: penalties: reasonable excuse: what is a reasonable excuse

A data-holder won’t be liable to an initial fixed penalty or daily default penalties for failing to comply with a data-holder notice, if

  • they satisfy us that they have a reasonable excuse for the failure, and
  • they put right the failure without unreasonable delay after the excuse has ended, see CH29680.

There is no statutory definition of reasonable excuse, which “is a matter to be considered in the light of all the circumstances of the particular case” (Rowland v HMRC [2006] STC (SCD) 536 at paragraph 18). For example in Anthony Wood trading as Propave v HMRC (2011 UK FTT 136 TC 001010) the First Tier Tribunal applied this definition in their decision released on 23 February 2011.

A reasonable excuse is normally an unexpected or unusual event that could not have been reasonably foreseen or is beyond the person or data-holder’s control, and which prevents them from complying with an obligation on time. An unexpected combination of events may, be a reasonable excuse.

It is necessary to consider the actions of the person from the perspective of a prudent person, exercising reasonable foresight and due diligence, having proper regard for their responsibilities under the tax acts.

If the person could reasonably have foreseen the event, whether or not it is within their control, we expect them to take steps to meet their obligations.

It is not possible to give a comprehensive list of what might be a reasonable excuse. Each depends upon the particular circumstances in which the failure occurred and the particular circumstances and abilities of the data-holder who has failed. What is a reasonable excuse for one data-holder’s circumstances may not be a reasonable excuse for another data-holder in different circumstances.

If there is a reasonable excuse it must exist throughout the period of default.

CH29630 gives some examples of what could be a reasonable excuse.

The law does specify two situations that are not reasonable excuses. These are

  • shortage of funds, but see the exception in CH29660, and
  • reliance on another person, but see the exception in CH29670.