Reasoning with the unreasonable
30 January 2024
HMRC applies penalties for submitting your tax return or paying tax liabilities after the statutory deadlines, but these can be subject to appeal if you have a reasonable excuse.
HMRC guidance indicates that a reasonable excuse is ‘something which stopped you meeting a tax obligation that you took reasonable care to meet’ and includes issues such as bereavement, unexpected illness, IT issues with your own equipment, HMRC service issues, postal delays, fire or flood, being unaware of your legal responsibilities or reliant on other people to send your return.
There have been several tribunal cases in recent years relating to reasonableness in this context and the speed at which a taxpayer addresses their obligations. In the case of Perrin vs HMRC, part of the decision was based on the existence of a reasonable excuse for the taxpayers’ failure to meet their obligations, but when the reasonable excuse stopped, the taxpayer did not address the failure without unreasonable delay.
Unreasonable excuses may include having insufficient funds to pay HMRC, finding the HMRC system too difficult to use, not getting a reminder or making a mistake. HMRC has taken the approach in the past that ignorance of the rules is not a reasonable excuse. On the rare occasion that ignorance of the rules is accepted as a reasonable excuse, this tends to be where the rules are not well known and haven't been widely publicised. In the case of a late filing penalty, it will be very difficult for taxpayers to contend they are unaware of the 31 January deadline as HMRC widely advertises this.
With a spate of challenges to taxpayers who are yet to submit their returns, such as the closure of the self-assessment helpline, significant delays in dealing with correspondence at HMRC and the strike at Fujitsu, which may impact HMRC’s online services, there are potentially several significant challenges to submitting on time. However, HMRC has sought to make taxpayers aware of these issues, so any appeals based on difficulties faced in contacting HMRC in January are likely to be met with limited sympathy.
What is clear is that some of the reasons for late filing that HMRC has previously shared are wholly unreasonable, including the death of a pet goldfish, cruising around the world on a yacht and only picking up post when on dry land, and one accountant being too busy submitting clients’ returns to submit their own.
HMRC guidance indicates that a reasonable excuse is ‘something which stopped you meeting a tax obligation that you took reasonable care to meet’ and includes issues such as bereavement, unexpected illness, IT issues with your own equipment, HMRC service issues, postal delays, fire or flood, being unaware of your legal responsibilities or reliant on other people to send your return.
There have been several tribunal cases in recent years relating to reasonableness in this context and the speed at which a taxpayer addresses their obligations. In the case of Perrin vs HMRC, part of the decision was based on the existence of a reasonable excuse for the taxpayers’ failure to meet their obligations, but when the reasonable excuse stopped, the taxpayer did not address the failure without unreasonable delay.
Unreasonable excuses may include having insufficient funds to pay HMRC, finding the HMRC system too difficult to use, not getting a reminder or making a mistake. HMRC has taken the approach in the past that ignorance of the rules is not a reasonable excuse. On the rare occasion that ignorance of the rules is accepted as a reasonable excuse, this tends to be where the rules are not well known and haven't been widely publicised. In the case of a late filing penalty, it will be very difficult for taxpayers to contend they are unaware of the 31 January deadline as HMRC widely advertises this.
With a spate of challenges to taxpayers who are yet to submit their returns, such as the closure of the self-assessment helpline, significant delays in dealing with correspondence at HMRC and the strike at Fujitsu, which may impact HMRC’s online services, there are potentially several significant challenges to submitting on time. However, HMRC has sought to make taxpayers aware of these issues, so any appeals based on difficulties faced in contacting HMRC in January are likely to be met with limited sympathy.
What is clear is that some of the reasons for late filing that HMRC has previously shared are wholly unreasonable, including the death of a pet goldfish, cruising around the world on a yacht and only picking up post when on dry land, and one accountant being too busy submitting clients’ returns to submit their own.
Kate Aitchison
Partner, Tax
AUTHOR
Kate Aitchison
Partner, Tax
