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HMRC internal manual

Senior Accounting Officer Guidance

HM Revenue & Customs
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Reasonable excuse: what is reasonable excuse

A person will not be liable to a penalty if they have a reasonable excuse for a failure of the Senior Accounting Officer (SAO) provisions and they remedy that failure without unreasonable delay after the excuse ends.

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). This was confirmed by the First Tier Tribunal, in Anthony Wood trading as Propaye v HMRC (2011 UK FTT 136 TC 001010), in the judgement released on 23 February 2011.

A reasonable excuse is normally an unexpected or unusual event that is either unforeseeable or beyond the person’s control, and which prevents the person from complying with an obligation under the SAO provisions. A combination of unexpected and foreseeable events may, when viewed together, be a reasonable excuse.

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

If the person could reasonably have foreseen the event, whether or not it is within their control then, we expect the person to take steps to meet their obligations.

A company should identify its SAO or SAOs during the financial year. So it should be able to tell HMRC who they are the day after the end of the financial year. A company does not have to wait until the day before the deadline to notify us. If a problem arises in notifying it is more likely to be an administrative or communication matter than one of not having the information. Also there will be a number of people within the company who can provide the notification on the company’s behalf and it is difficult to envisage a scenario where all those people would be unavailable to act on behalf of a company.

By contrast, an SAO may have to await the preparation of financial statements and the company’s return and tax computation to be able to explain failures in the systems on a qualified certificate. The SAO may well need much of the time available. In the case of sickness, bereavement and so on shortly before the last date we could see that the SAO might have this as an excuse.

So the company will be less likely to have a reasonable excuse for missing its time limit for notifying HMRC than an SAO will have for failing to provide their certificate on time.

It is not possible to give a comprehensive list of what might be a reasonable excuse. Each depends upon the particular circumstances in which the failure occurred and the particular circumstances and abilities of the person who has failed. What is a reasonable excuse for one person’s circumstances may not be a reasonable excuse for another person in different circumstances.

SAOG20300 gives some examples of what could be a reasonable excuse.

The law does specify two situations that are not reasonable excuses. These are

  • shortage of funds, but see the exception in SAOG20600, and
  • reliance on another person, but see the exception in SAOG20700.