HMRC defines a ‘reasonable excuse’ as some unexpected or unusual event beyond your control and provides a few examples on its website such as: a) a failure in the HMRC computer system, b) taxpayer’s computer breaking down before or during the preparation of the online return, c) a serious illness making the taxpayer incapable of filing his tax return, or d) a taxpayer registered with HMRC for online services not getting the activation code in time.
However, many of the cases decided by the First-tier Tribunal seemed to differ in spirit with HMRC’s definition of what constitutes a reasonable excuse. Here are some examples:
TC01618 decided on 02/12/2011:
In this case the taxpayer logged onto the HMRC system in good time, and printed out a copy of what he thought was a completed P35 return and genuinely believed that he had filed the return. Whilst he didn’t wait for the online submission message, his behaviour was that of someone who seriously intended to honour his tax liabilities, and, in genuinely believing that he had filed the return, the tribunal decided that he had a reasonable excuse for filing the P35 return late.
TC01626 decided on 06/12/2011:
This case was about penalties imposed by HMRC for late payment of PAYE and NIC dues. The taxpayer’s severe financial difficulties leading to insufficiency of funds, which was attributable to events outside his control, was considered a ‘reasonable excuse’.
TC01634 decided on 07/12/2011:
HMRC’s failure to promptly notify and collect dues from the taxpayer was considered a reasonable excuse for not filing the return on time. The first P35 late filing notice was sent to the taxpayer after four months.
TC01636 decided on 07/12/2011
In this case a partnership did not file the paper return due by the end of October 2010 as it intended to file it online by the later filing date. When it tried online, it found that the HMRC website did not provide the necessary software for partnerships. Unlike other taxpayers, filing a partnership return online requires the taxpayer to purchase an HMRC accredited software from the market. The tribunal observed that the taxpayer did not know that it would be faced with an inability to file online, by reason of HMRC’s failure to provide the faciliy. So the appeal was allowed.
TC01706 decided on 04/01/2012
In this case the taxpayer filed the tax return for the year ended 05 April 2010 on time but his agent sent a cheque for the tax due by post to the HMRC by first class post on 24 February 2011, which should have been delivered to HMRC well before 28 February 2011, to avoid surcharge. HMRC received the payment on 02 March 2011. HMRC argued that it was not responsible for inefficiencies within the postal system. The tribunal found that the appellant exercised due diligence in instructing a professional agent to assist her and the agent did dispatch the payment at such time and in such manner that it was reasonable to expect that it would be received by HMRC within 28 days from the due date i.e. 28 February 2011 and the appeal was allowed.
‘Reasonable excuse’ is a very wide term and depending on individual situations, its interpretation can go far beyond that mentioned on the HMRC website.
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