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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: when does a reasonable excuse end

Where a person has a reasonable excuse for a non-deliberate, see CH72200, failure to notify, they must remedy that failure without unreasonable delay after the excuse ends.

If they do this, we will treat the excuse as continuing until the date they notify us and will therefore not charge a penalty. If they do not do this, they will not have a reasonable excuse for the failure and therefore we will charge a penalty.

You need to consider carefully the point at which a reasonable excuse ends and the actions the person took after that time to notify us. 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 judged on its own merits in view of the person’s abilities and circumstances.


No unreasonable delay

Hannah’s husband is the book-keeper for her business. In June 2010 he is diagnosed with an illness that requires hospital treatment and a period of recovery. Due to the disruption to the business record-keeping and the time that Hannah spends caring for her husband, the business records are not kept fully up to date. When she is able to bring the records up to date in August 2010 she realises that the business turnover has reached the threshold for VAT notification. Although the deadline for notifying liability to register has already passed, Hannah contacts us immediately to let us know and explains the circumstances. Hannah has a reasonable excuse for the failure to notify and she told us of the failure without unreasonable delay once the excuse ended.

Unreasonable delay

Simon starts to receive income from renting his holiday home in June 2009. Before he can notify us of his change of circumstances his partner becomes seriously ill. Following several months of intensive treatment during which time Simon was her sole carer, she improves enough for Simon to return to work in December 2010. Simon continues to receive the additional income and in March 2011 finally notifies us of his rental income. We would accept that he had a reasonable excuse until December 2010. However, there was an unreasonable delay in notifying us of the new source of income after the excuse had ceased and therefore he is not treated as having a reasonable excuse.

FA08/SCH41/PARA20 (2)(c)