Following a recent article that appeared on the website of AccountingWEB, we felt it would be useful for our readers to be aware of the type of successful defence they can put forward if ever served with a penalty by HMRC, ie, what is acceptable as a 'reasonable excuse'?
'Reasonable excuse' is not defined by legislation, so the words must take on their ordinary meeting. This is a subjective test that has been open to inconsistent interpretation but thankfully there are Tax Tribunal decisions that provide guidance as to what is and what is not a 'reasonable excuse' and some of the most recent, ie, 2011, are given below.
With ever increasing pressure being mounted on HMRC staff nowadays they do not always have the time to refer to these decisions, preferring instead to rely on their own opinion which is invariably in favour of their employer.
In April of this year, HMRC lost six consecutive 'reasonable excuse' cases including some that followed the precedent laid down in the European Court of Justice involving Jusilla v Finland. Here the court ruled that tax penalties require the equivalent right to a fair trial and proof “beyond reasonable doubt” as in a criminal trial.
| Counts as Reasonable Excuse | Does Not Count as Reasonable Excuse |
| Misleading advice on postal delivery times – Alan Thomas Davies v HMRC (UKFTT 303) | Ignorance of the law – McCann v HMRC (UKFTT 440) |
| Online filing difficulties – N A Dudley Electrical Contractors v HMRC (UKFTT 260) & Louise Fernandez v HMRC (UKFTT 259) | Wrong payment method – Blue Forest v HMRC (UKFTT 447) |
| Genuine mistake – Leachman v HMRC (UKFTT 261) | Lack of technical resources to file online – Kellswater v HMRC (UKFTT 430) |
| Misleading and incomplete information – Mr T J Fisher t/a 'The Crispin v HMRC (UKFTT 235) | Illness did not coincide with period of default – RFL Consultants v HMRC (UKFTT 431) |
| Unaware old employer did not deduct all tax – Yusuf Budiadi v HMRC (UKFTT 233) | Absence of part-time bookkeeper – Grant Vehicle Repairs v HMRC (UKFTT 420) |
| Insufficient funds – Kincaid v HMRC (UKFTT 225) | Unspecified financial difficulties – Impossible TV v HMRC (UKFTT 413) |
| Misleading HMRC advice – Dental IT v HMRC (UKFTT 128) | Unable to receive post – Rocco Mana t/a Spearmint Rhino Rouge v HMRC (UKFTT 153) |
| Misleading information – Humphreys v HMRC (UKFTT 98) | |
| Lost in post – Runham & Naramore v HMRC (UKFTT 55) |
Leave a Reply