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HMRC internal manual

VAT Civil Penalties

Mitigation Framework: Comparison between mitigation and reasonable excuse: Reasonable excuse

Prior to 1993 the reasonable excuse provision was the only one that existed for penalties other than civil evasion.

If a person has a reasonable excuse they have no liability to a penalty.

VAT Act 1994 sections 59, 62-69A and Schedule 11A para.10 allow acceptance of a reasonable excuse. However section 71 sets out certain exclusions.

Section 71 does not apply to the failure to notify use of a notifiable (tax avoidance) scheme.

The law says that lack of funds to pay the tax due, and delay and/or inaccuracy by a third party are not reasonable excuses.

Whilst a trader may offer several excuses which individually may be considered unacceptable, when looked at as a package there may appear to be a reasonable excuse. If however there is no reasonable excuse mitigation should be considered.