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HMRC internal manual

Compliance Handbook

HM Revenue & Customs
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Penalties for Failure to Notify: in what circumstances is a penalty payable: reasonable excuse: what is a reasonable excuse - examples

This page gives some examples of what might constitute a reasonable excuse for failing to notify. Please remember that these are hypothetical examples and are only intended to give you an idea of the factors you might need to consider. They are not model answers to a particular situation or the ‘correct’ way to deal with similar cases. Real cases will have many other factors to take into account and you need to consider each in the light of all the relevant facts. An excuse will not necessarily be accepted as reasonable just because it seems to fit into one of these categories. It depends on the individual circumstances of each case.

The person can appeal and is entitled to a review if we do not accept their excuse, see ARTG2100+ for direct taxes and ARTG3000+ for indirect taxes. See CH71660 for guidance about when a reasonable excuse ends.


We normally treat the death of a close relative or domestic partner around the time when the person should have compiled with the obligation to notify as a reasonable excuse.

Serious illness

We will normally treat the serious illness of the person or of a close relative or domestic partner around the time when the person should have told us about the activity as a reasonable excuse

Unforeseen Events

We will normally accept that there is a reasonable excuse if the letter or form notifying us of the taxable activity is lost or delayed in the post because of an unforeseen event disrupting the postal service. For example

  • fire or flood at the sorting office where the form would be held, or
  • prolonged industrial action.

Employment Status

A person might have understood that they were an employee and that payments to them had been subject to PAYE. In fact they were self-employed and therefore failed to notify liability to income tax, national insurance contributions and, possibly, VAT.


Liam commences work in May 2009 straight from university as a self employed bookkeeper. In June 2009 the company has a compliance review and he receives a letter from HMRC giving the opinion that he is an employee. As a result he does not notify us of his self employment. The company contests the decision and the case is heard in July 2011 by the First-tier Tribunal. They agree with the company. On notification of the decision Liam immediately contacts us to request SA returns. You should accept that Liam had a reasonable excuse for failing to notify us.