SAM10090 - Appeals, postponements and reviews: appeals: reasonable excuse
As explained in SAM61290, a customer can appeal against any late filing penalty on the grounds that they had a reasonable excuse for the late submission of the return, and against a late payment penalty, or a surcharge (for tax years 2009-10 and earlier), on the basis that they had a reasonable excuse for late payment.
For a late filing penalty, you should consider whether the customer had a reasonable excuse at the date of the relevant failure.
A late payment penalty is not imposed until the balancing or final payment for the year is more than 30 days overdue. Therefore, even if there were problems on or around the due date, the customer should have been able to make arrangements to pay before the trigger date for the first late payment penalty.
If a customer has requested a Time To Pay (TTP) arrangement, then you should refer to SAM61380.
Surcharge (for tax years 2009-10 and earlier) is not imposed until the balancing or final payment for the year is more than 28 days overdue. Therefore, even if there were problems on or around the due date, the taxpayer should have been able to make arrangements to pay before the surcharge date.
There is no definition in law of ‘reasonable excuse’. Any reasonable excuse will be based on all the facts and circumstances of the specific case.
A reasonable excuse is normally something that stopped the customer from meeting a tax obligation on time that they took reasonable care to meet. It might be due to circumstances outside their control or a combination of events.
Once a reasonable excuse has ended, the customer must submit the outstanding return or make payment without unreasonable delay. As a guide, ‘unreasonable delay’ would be within 14 days, unless another time limit applies. Each case needs to be determined based on the circumstances of the individual case. Further guidance on reasonable excuse can be found in the Compliance Handbook at CH160000,
For more information on what may or may not be reasonable excuse, you should refer to CH160300 and CH160800.
Some examples of what you should not agree as grounds of reasonable excuse may include, but are not limited to the following:
Tax return too difficult
The customer should have taken early steps to contact HMRC or a tax adviser for assistance in order to complete the return by the due date.
Tax return not sent in
Non submission of the return should not in itself be treated as a reasonable excuse. The same event that prevented the taxpayer from paying on time may however have also prevented the tax return from being filed on time. Each case should be considered on its own facts.
Repeated claims that the customer did not receive the return
Reasonable excuse might not apply in cases where the customer has claimed on more than one occasion that he did not receive the return. SA Notes will show if the customer has claimed this as a reasonable excuse before. In these cases you must check the record for a change of address, or if a return has been received back as RLS for the year involved. If no evidence is found you should assume that the return was delivered and not accept the customer has a reasonable excuse. You must include these facts in any submission to the tribunal.
Pressure of work
The time given for completion of a return is considered to be sufficient to allow the customer to arrange his affairs to ensure that the return is completed by the due date and that payment is made on time.
Failure by tax agent
Failure by agent would not normally be treated as a reasonable excuse. It is the responsibility of the customer to ensure that his return is completed and delivered on time and that payment is made on time.
Lack of information
Where the customer is unable to obtain all the information needed to complete the return, the guidance issued with the return states that estimated information and an explanation in the additional information space should be submitted.
Not knowing how much to pay
This is not a reasonable excuse. The customer should submit his tax return in sufficient time to allow for a calculation or statement of account to be issued before the due date. The tax return guidance tells the customer that where a statement of account is not received an estimate of the amount due should be paid.
Shortage of funds
The taxpayer is expected to have kept money aside to pay his tax bill when it is due. The legislation states that not having the money to pay is not a reasonable excuse. See Compliance Handbook (CH155800)
Cheque made out incorrectly
It is the taxpayer’s responsibility to make sure that the cheque is made out correctly.
Absence of HMRC reminders
Normally reminders are issued before the return due date but lack of receipt of a reminder should not be treated as a reasonable excuse. The tax return itself shows the due date and it is the customer’s responsibility to ensure that the return is received by that date. Likewise, the tax return guidance shows the due date for payment and it is the customer’s responsibility to pay on time.
Lack of free HMRC software
HMRC is not obliged to provide free software to enable customers to file their returns online. Free HMRC software only covers the personal tax return and certain supplementary pages.
Customers who need to complete other supplementary pages or who file other returns online, for example the Trust and Estates Tax Return or the Partnership Tax Return, need to use commercial software.
Do not accept as a reasonable excuse any claim that the customer failed to file on time because HMRC did not make available free software appropriate to their circumstances.
Reasonable excuse for late partnership returns
The nominated partner is responsible for sending HMRC the partnership return. If the return is not sent to HMRC on time, the nominated partner may have a reasonable excuse for the return being late. The circumstances of the other partners are not normally relevant but you should consider the facts of each case on its own merits.
Where a nominated partner dies before submitting the return, the personal representative of the deceased is not responsible for submitting the return because they do not become a partner of the partnership in place of the deceased. The personal representatives responsibility extends only to the tax payments due from the deceased.
Disability
For information on disability, you should refer to CH160400 and CH160500.
The following scenarios are examples used to help you understand the factors to consider when making a decision about reasonable excuse.
Scenario 1
Mr A is blind. He is unable to use the HMRC website and so decides to submit his SA return on paper. He asks an agent to compile and submit the return for him, but, before the filing date, the agent is taken ill. He returns the paperwork to Mr A shortly before the filing date, but as he is blind, Mr A is unable to complete the return himself and has no opportunity to make alternative arrangements before the filing date. He immediately arranges for another person to complete and submit his return by 14 November.
He receives a £100 filing penalty but it is cancelled on appeal because we accept that he had a reasonable excuse for missing the deadline date and had remedied the failure without delay.
We would not accept that every blind person who fails to submit his return by the due date has a reasonable excuse. In this case, the customer had taken steps to comply with his obligation but circumstances outside his control left it too late for him to make alternative arrangements and his disability prevented him from doing it himself.
Scenario 2
Mr X is an unrepresented self-employed builder without any family. He is diagnosed with a post-traumatic stress disorder in July 2011. He has to stop working and is incapable of taking any decisions. He is therefore unable to complete his returns and calculate the tax due for 2010-11 on 31 January 2012 or to appoint an agent. Following treatment, he is able to return to work in May 2012. He completes his tax return in May and pays the remaining tax due shortly thereafter.
Having received medical evidence of his condition, we accept that the customer has a reasonable excuse. No penalties are due as he fulfils his tax obligations after the excuse has ceased.
Reasonable excuse at the date penalty arose (for tax years 2010-11 onwards)
A customer who does not have a reasonable excuse for failing to submit their return by the filing date will have to pay late filining penalties unless special reduction applies. If the customer is prevented from filing the return at a later point, any penalties that arise while the person has a reasonable excuse may be reduced to nil, provided the person files the return without unreasonable delay when the excuse has ceased.
The following scenarios are examples to help you understand when reasonable excuse should exist and if penalties are due.
Scenario 1.
Ms B did not have a reasonable excuse for failing to file her 2010 - 11 return by 31 January 2012 and has paid the £100 fixed penalty. She received a 30 day daily penalty warning letter on 11 June 2012 and she registered to use the online service on 12 June. She received her activation PIN on 19 June and filed her return online on 22 June. Whilst reasonable excuse should exist at the time of the failure you can accept that Ms B had a reasonable excuse which she remedied without unreasonable delay so daily panalties should not be charged for the period 12 June to 22 June. (Daily penalties are still chargeable for the period 1 May to 11 June).
Scenario 2.
Mr Y did not have a reasonable excuse for failing to file his 2010 - 11 return by 31 January 2012 and has been charged the fixed penalty, daily penalties and the first tax-geared late filing penalty. It is now December 2012 and his return is 11 months late. He engages an accountant to prepare his return so he can submit an online return before the 12 month tax-geared penalty applies on 1 February 2013. He has an appointment with his accountant to sign off his return on 29 January. However, on the day of the appointment his wife is taken seriously ill and is rushed to hospital. He has to cancel the appointment and is unable to authorise his accountant to submit the return until early February. Whilst reasonable excuse should exist at the time of the failure, you can accept that Mr Y had a reasonable excuse which he remedied without unreasonable delay and that the 12 month tax-geared penalty does not arise.
Special reduction (for tax years 2010-11 onwards)
HMRC has discretion to reduce a penalty because of special circumstances. This discretion can only be considered if there was no reasonable excuse for the failure to file on time. You must consider ‘special reduction’ if you decide not to allow the appeal. For guidance on special reduction, see CH170100.