Reasonable excuse for late paid tax

By Tolley in association with Philip Rutherford
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The following Employment Tax guidance note by Tolley in association with Philip Rutherford provides comprehensive and up to date tax information covering:

  • Reasonable excuse for late paid tax
  • Introduction
  • HMRC’s view
  • Case law

Introduction

If a penalty for late payment of tax has been correctly charged by HMRC, the taxpayer can only appeal if he believes he has a reasonable excuse for failing to comply with the legislation. For details of the penalties for late payment of tax, see the Penalties for late payment by employers guidance note. Reasonable excuse is provided for late payments of tax by FA 2009, Sch 56, para 16.

The term ‘reasonable excuse’ is not defined in the legislation and therefore the meaning is continually being reassessed by the courts and should be seen “in light of all the circumstances of the particular case”.

Rowland v HMRC [2006] STC (SCD) 536 (subscription sensitive)

Historically HMRC took a very hard line on what constituted a reasonable excuse for the late filing of a tax return or the late payment of tax. HMRC’s guidance has been, and continues to be, very restrictive on the circumstances in which a taxpayer can claim reasonable excuse. In many cases recent case law have, produced a different interpretation of reasonable excuse from the expressed views of HMRC.

This guidance note outlines HMRC’s guidance on what may or may not constitute reasonable excuse and then explores the importance of case law and the impact of pertinent judgments. What is clear is that if a taxpayer believes there are grounds for claiming reasonable excuse a well structured argument will need to be put forward and the taxpayer should be prepared to fight the case with HMRC.

HMRC’s view

HMRC considers a reasonable excuse to be “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 to pay on time”.

In order to decide whether the excuse is reasonable, HMRC assesses whether the taxpayer exercised the “reasonable

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