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HMRC internal manual

Self Assessment Manual

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HM Revenue & Customs
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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 the relevant penalty arose. For example, if you have an appeal against a daily penalty assessment, consider whether the customer had a reasonable excuse at the time the daily penalties first became payable. Also consider if at any time during the period of daily penalties, the customer has provided facts which show they had a reasonable excuse for any part of the period.

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 (see 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 but the law does specify two situations that are not reasonable excuse: 1) A shortage of funds and 2) Reliance on another person.

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 in the light of all the particular circumstances of the individual case. Further guidance on reasonable excuse can be found in the Compliance Handbook at CH61500 for failure to file on time and CH150000 onwards for failure to pay on time.

You must consider each case by reference to the particular circumstances in which the failure occurred and the abilities of the customer. What is a reasonable excuse for one person’s circumstances and abilities may not be a reasonable excuse for another person.

You should not agree reasonable excuse where the customer was able to manage the rest of his business and personal affairs and pay other bills during that period. It is not possible to give a comprehensive list of what might be a reasonable excuse. However, the following examples identify circumstances where you might agree reasonable excuse and circumstances where you should not agree reasonable excuse.

Examples of what you might agree as grounds of reasonable excuse
Examples of what you should not agree as grounds of reasonable excuse
Reasonable excuse for late partnership returns
Disability
Applying reasonable excuse at the date penalty arose (for tax years 2010-11 onwards)
Special reduction (for tax years 2010-11 onwards)

Examples of what you might agree as grounds of reasonable excuse

Note: These examples are not model answers, nor are they to be viewed as the ‘correct’ response in situations that appear similar. Each reasonable excuse case is unique and must be considered on its own facts.

The customer did not receive the return,SA316 or digital contact

The guidance at SAM120040 ‘Issuing returns other than at bulk issue’ refers to the action that should have been taken when first notified that a return/SA316/e-mail prompt to view their account has not been received, particularly the action described under the heading ‘Late issue/Reissue of returns’. You should review this guidance and satisfy yourself that the customer did not receive the return/SA316/e-mail prompt to view their account. For example, it has been sent back as undelivered or the completed return was lost or delayed in the post or the e-mail prompt to view their account for action to file their return was returned as `undelivered’ to the customers e-mail address. In this case, the SA Note `Digital SA316 returned as undelivered. SA3 and SA316 issued’ will be shown.

The return was lost in the post or delayed when the customer sent it back

The customer is expected to allow sufficient time for the return to reach you. However if the return was posted in good time and an unforeseen event occurred which disrupted the normal post service and led to loss or delay of the return, for example fire or flood at the Post Office where the return was handled or prolonged industrial action by the Post Office, it would be considered reasonable excuse. Or, if the customer is able to provide a certificate of posting which shows that the return was posted in good time and that there was a delay in delivery to us.

This may not apply in cases where it is not the first time that the customer has claimed not to have received a return. See further guidance below under the heading ‘Repeated claims that the customer did not receive the return’.

For further information regarding reasonable excuse in these circumstances, see subject ‘Claims for reasonable excuse’ (SAM120550).

An extended period of exceptionally severe weather very close to the filing deadline

For example, this may prevent a taxpayer, who has taken appropriate steps to ensure their return is completed and submitted by the deadline, from giving written authority to their agent to finalise and submit the return on their behalf, so the taxpayer no longer has the time, or opportunity, to make an alternative arrangement.

You may agree extreme weather conditions prevented the taxpayer from filing their return on time.

Delay caused by HMRC review of the need to complete a return

The customer may claim a reasonable excuse for failure to file, or pay, on time because they had contacted us previously to advise they no longer needed to complete a return and, after HMRC review, were advised that they still needed to do so. Each case must be considered on its own merits since if the delay was caused by the customer failing to contact us to discuss his situation for some considerable time after the notice to file was issued, the delay cannot be attributable to our delay.

However, if the customer contacted us and the delay was caused by us taking an unreasonable amount of time to advise that a return is still required, taking into account all of the circumstances of the case, reasonable excuse may apply to the period from initial contact to the date we advised that we still wanted the return, and only then if the return was filed without delay.

Loss of tax records

You should normally agree as a reasonable excuse loss of records through fire, flood or theft, although you should be satisfied that the information for completion of the return could not be replaced in time for the customer to complete the return by the due date.

Serious illness

The illness must be so serious that it prevented the customer from controlling his business affairs immediately before the deadline and from that date to the time the completed return is received. Coma, heart attack, stroke or any other serious or life threatening illness constitutes a reasonable excuse.

Where the illness involves a lengthy stay in hospital or convalescence the customer should normally have made arrangements for completing and sending in the tax return on time. There may however be circumstances where this was not possible.

The serious illness of a close relative or domestic partner should only be accepted if the situation took up a great deal of the customer’s time and attention during the period from the filing date to the date the return is received.

Bereavement

The death of a close relative or domestic partner shortly before the filing date should be treated as a reasonable excuse, as long as steps had already been taken to complete the return on time.

Members of Armed Forces on active service overseas

Accept reasonable excuse claims from members of the armed forces on active service overseas who are unable to file by the deadline.

Duplicate return

Where the customer states the return was sent in under a different UTR, and the record confirms this, accept as a reasonable excuse.

HMRC Online Service does not accept the return

Accept as a reasonable excuse if a paper return is filed after the filing date because

* The customer or agent was unable to file using SA Online

And

* Provides either the error message or details of the error message

Together with

* The date they tried to file the return online and realised that it could not be filed online

HMRC does not want to penalise customers who have made a genuine attempt to file online before the deadline. You should therefore consider sympathetically on its merits a reasonable excuse claim without details of the appropriate error message.

Do not accept under this heading a claim that the failure to file on time was caused by the lack of free HMRC software (see below under ‘Examples of what you should not agree as a reasonable excuse’).

Delayed receipt of online activation codes (PINs)

Accept as a reasonable excuse if the customer registered to use the online service before the filing date but did not receive their activation PIN in time to file by the deadline, provided that they filed online as soon as possible once they received their activation PIN.

Delayed receipt of a replacement ID, new password or replacement activation code

Accept as reasonable excuse if the customer applied for a replacement User ID, password or activation code before the deadline, and filed their return without delay once they received the missing details. If application for this information was made after the deadline, reasonable excuse is not acceptable.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Payment lost in the post

Where a claim that the payment has been lost in the post or lost by HMRC is made you should ask the customer to produce evidence that an attempt to pay by the due date was made. If there was a fire or flood at the Post Office where the cheque was handled this should be classed as a reasonable excuse. However, you should also consider how soon payment was made once the customer became aware that the original cheque had been lost. The customer should have taken prompt steps to send a replacement.

Payment dishonoured

If the payment was dishonoured solely because of an error by the bank, you should accept this as a reasonable excuse. However the customer would be expected to have acted promptly in sending a replacement on becoming aware of the error.

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Examples of what you should not agree as grounds of reasonable excuse

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.

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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.

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Disability

Ordinarily, the existence of a disability will not, on its own, present a barrier to customers in meeting their tax obligations. However if a customer claims that they have not been able to comply with a tax requirement because of a disability, you should fully consider how the effects of any disabling condition could have prevented them from complying with that obligation.

Every failure should be considered on its own facts. We would not usually accept the same reasonable excuse on more than one occasion. This is because we would expect any customer who knows he will find it difficult to meet a requirement because of an existing disability, to make every reasonable effort to anticipate this and make alternative arrangements. If a customer is subject to an irregularly fluctuating condition which they know might recur, you should consider whether or not there are reasonable contingency measures they could plan in the event their condition recurs, to try to ensure they comply with their obligations.

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, weaccept that the customer has a reasonable excuse. No penalties are due as he fulfils his tax obligations after the excuse has ceased.

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Applying 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 the initial fixed £100 late filing penalty unless (exceptionally) they are eligible for ‘special reduction’. However, the same customer may have a reasonable excuse for not submitting the return by the date that a subsequent penalty arises. Circumstances including serious illness, bereavement, disruption to the postal service and issues with HMRC Online Service may prevent the customer from filing their return in time to avoid a later penalty.

Example 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. You can accept that Ms B had a reasonable excuse which she remedied without unreasonable delay so daily penalties 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).

Example 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. 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.

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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 CH170000.