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HMRC internal manual

Enquiry Manual

SA Surcharge: Reasonable Excuse and Rowland v HMRC

TMA70/S59C only applies to the 2009-10 tax year, and any previous tax year.

See CH155000+ for 2010-11 and subsequent tax years

The 2006 Special Commissioners case of Rowland v HMRC (SPC548/06) raised a new and unusual point - not a failure but an error by an agent. The Special Commissioner found as a fact that:

  • Mrs Rowland’s tax affairs were extremely technically complex, including a claim for relief for film partnership losses and its effect on what tax was payable at what date.
  • She supplied her large well-known firm of reputable accountants with a full and accurate picture of her financial affairs from which to give her tax advice.
  • They gave her comprehensive directions as to precisely what amount to pay and when/where to send it.
  • The advice and instructions were wrong and she paid insufficient tax and incurred a surcharge.
  • In the particular circumstances she, as a successful businesswoman but a lay person in these tax matters, could not reasonably be expected to challenge their advice.

The circumstances persisted throughout the period of default (the incorrect instructions were given well before the 31 January and the debt was cleared promptly when HMRC uncovered the error) so the only question was whether they gave her a reasonable excuse for not paying the full amount. In Mrs Rowland’s unusual case the Special Commissioner found that they did.

Cases with similar facts should be treated in the same way, but are expected to be rare. Quite apart from the need for the excuse to begin by the due date and persist until full payment, and the need for the client to supply full and accurate facts and then be in no position reasonably to challenge the agent’s advice, it should be exceptional for reliable professional agents to supply incorrect advice.

Note that the Rowland case is also useful for the general interpretation of reasonable excuse, for which there is not a statutory definition. See the more detailed guidance on reasonable excuse at CH26340, CH61540, CH71540, CH92100 and CH155600.