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HMRC internal manual

PAYE Manual

HM Revenue & Customs
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P11D processing: P11D(b) penalty appeals: consideration by a higher officer

Apart from appeals on the amount of the penalty, the employer will need to show that the conditions of the TMA 70/S118 (2) apply to enable the penalty to be discharged. The employer, therefore, has to show that there was a reasonable excuse for the failure to submit the employer’s P11D(b) annual return on time and that this was remedied as soon as could reasonably be expected after the excuse had ceased.

The question of the reasonable excuse is to be judged as at the statutory filing date of 6 July (This content has been withheld because of exemptions in the Freedom of Information Act 2000) .

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 Propaye 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 employer’s control, and which prevents the P11D(b) return being sent back by the deadline. An unexptected combination of events may together, be a reasonable excuse.

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

If the employer could have foreseen the event, whether or not it was within their control, we expect the employer to take steps to meet their obligations.

PAYE58415 gives some examples of what might be a reasonable excuse. PAYE58420 gives some examples of what might not.

Successful claims for a reasonable excuse should not be frequent. Nevertheless there will be some employers who have made reasonable endeavours to complete the employers P11D(b) annual return on time but fail to do so as a result of some unforeseen misfortune. If you are satisfied that is the case then you should agree under TMA70/S54 that the penalty be reduced to nil and amend the determination accordingly.

You may be able to make your decision from information given in the letter appealing against the determination but often it will be necessary to obtain the relevant facts before coming to a decision. It will usually be quicker and easier to try to obtain further information by phone or interview.

If, after careful consideration of the excuse, you consider that the appeal should not be allowed because there was no reasonable excuse, you should explain why to the employer and seek the withdrawal of the appeal. You should take care to explain to the employer that he still has the right of appeal to the tribunal against the penalty determination if unable to agree with you.

If the appeal is withdrawn, the charge will automatically be restored after you record the end result of the appeal. Otherwise the appeal should be listed for hearing by the tribunal without delay (see ARTG4830).

If you have any doubts about whether or not an employer’s explanation amounts to a reasonable excuse you should consult

Central Policy: Tax Administration Advice
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