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HMRC internal manual

Excise Civil Penalties Manual

Reviews and Appeals: What is a 'Reasonable conscientious businessman'

The concept of what constitutes a ‘reasonable conscientious businessman’ was first defined by the past President of the VAT Tribunal, His Honour Judge Medd OBE QC, in the appeals of Appropriate Technology (LON/90/138X) and The Clean Car Company (LON/90/138X).

In the case of Appropriate Technology, Judge Medd asked the following question

‘Would a reasonable conscientious businessman who knew all the facts of the case as I have set them out, and who was alive to and accepted the need to comply with one’s responsibilities in regard to the rendering of (VAT) returns, consider that the Appellant Company, in acting as it did in the circumstances in which it found itself, had acted with due care in the preparation of its return?

If such a businessman would reach the conclusion that the tax-payer had acted with proper care, then I would consider that the tax-payer should be regarded as having a reasonable excuse’.

Our policy is that unless a trader can demonstrate that he was alive to and accepted the need to comply with his responsibilities, then no reasonable excuse exists. It should be noted that ‘reasonableness’ refers to the conduct of the trader, not the error made.

Judge Medd further expanded the concept of the reasonable conscientious businessman in The Clean Car Company Ltd

‘One must ask oneself: was what the taxpayer did a reasonable thing for a responsible trader conscious of and intending to comply with his obligations regarding tax, but having the experience and other relevant attributes of the taxpayer and placed in the situation that the tax-payer found himself at the relevant time, a reasonable thing to do? Put in another way which does I think alter the sense of the question; was what the tax-payer did not an unreasonable thing for a trader of the sort I have envisaged, in the position that the tax-payer found himself, to do?

It seems to me that Parliament in passing the legislation must have intended that the question of whether a particular trader had a reasonable excuse should be judged by the standards of reasonableness which one would expect to be exhibited by a tax-payer, but who in other respects shared such attributes of the particular appellant as the tribunal considered relevant to the situation being considered.

Thus, though such a tax-payer would give a reasonable priority to complying with his duties in regard to tax and would conscientiously seek to ensure that his returns were accurate and made in time, his age and experience, his health or the incidence of some particular difficulty or misfortune and, doubtless, many other facts, may all have a bearing on whether in acting as he did, he acted reasonably and so had a reasonable excuse’.