Owner-Managed Businesses

Reasonable excuse for late paid tax

Produced by Tolley
  • 20 Dec 2021 09:30

The following Owner-Managed Businesses guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Reasonable excuse for late paid tax
  • Introduction
  • HMRC’s view
  • What is not a reasonable excuse?
  • What might be a reasonable excuse?
  • Insufficiency of funds as a reasonable excuse
  • Interaction between lack of funds and time to pay arrangements
  • Reliance on a third party
  • When does a reasonable excuse end?
  • Case law
  • More...

Reasonable excuse for late paid tax

Introduction

If a penalty for late payment of tax has been correctly charged by HMRC, the taxpayer can only appeal if they believe they have a ‘reasonable excuse’ for failing to comply with the legislation. This is discussed below. However, even if the Tribunal finds that the taxpayer does not have a reasonable excuse, it may reduce the amount of the penalty payable due to special circumstances. See Simon’s Taxes A4.567D.

For details of the penalties for late payment of tax, see the Late payment penalties under self assessment and Late payment penalties for PAYE/NIC guidance notes.

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’.

This guidance note considers the concept of reasonable excuse. For commentary on how to build a case for reasonable excuse, see the Winning reasonable excuse cases guidance note.

HMRC’s view

HMRC considers a reasonable excuse to be ‘something that stops a person from meeting a tax obligation despite them having taken reasonable care to meet that obligation’. In order to assess whether the excuse is reasonable, HMRC assesses ‘the experience, knowledge and other attributes of the person who has failed’ when deciding whether the taxpayer has taken reasonable care to meet the obligation.

In order to have a chance of success, the reasonable excuse must have existed prior to the deadline for payment. If it arose

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