Regarding Self-Assessment tax returns, it’s crucial to be timely. Failing to submit your tax return by 31st January following the end of the relevant tax year or not paying your due taxes on time can lead to automatic penalties from HMRC. Additionally, failing to notify HMRC about chargeability will also attract similar penalties. However, the only way to avoid these penalties is by proving you have a reasonable excuse. But what exactly qualifies as a ‘reasonable excuse’?
What is a Reasonable Excuse?
There is no strict statutory definition of a reasonable excuse. One of HMRC’s internal manual defines a reasonable excuse as:
“Something that stops a person from meeting a tax obligation despite them having taken reasonable care to meet the obligation.”
Essentially, this means that despite taking the necessary steps and precautions, an individual was unable to fulfil their tax obligations due to unforeseen or uncontrollable circumstances. However, every case is unique, and what may be deemed a reasonable excuse in one situation might not hold up in another. HMRC review this on a case-by-case basis.
Excuses Rejected by HMRC
Each year, HMRC publishes some of the most bizarre excuses they receive from taxpayers. Here are some of the more amusing, yet rejected, submissions:
• “I was just too busy – my first maid left, my second maid stole from me, and my third maid was slow to learn.”
• “My hamster ate my post.”
• “After seeing a volcanic eruption on the news, I couldn’t concentrate on anything else.”
• “I’m too short to reach the post box.”
• “My boiler had broken and my fingers were too cold to type.”
• “My ex-wife left the tax return upstairs, and I can’t go and get it because I suffer from vertigo.”
While entertaining, these excuses failed to meet HMRC’s criteria for what constitutes a reasonable excuse.
Examples of Valid Reasonable Excuses
To provide clarity, HMRC includes a range of scenarios in their manuals, including issues related to physical or mental illness, reliance on a third party, bereavement, postal delays, technical issues & loss of records due to fire or flood (not keeping adequate records is not a reasonable excuse).
In addition, HMRC provides specific examples in their manuals and online guidance:
• An unexpected hospital stay that prevented the person from dealing with their tax affairs.
• The person’s computer or software failing just before or during the submission of the online return.
• A fire, flood, or theft prevented the completion of a tax return.
• Delay caused by HMRC themselves.
• Active service overseas for members of the Armed Forces.
These examples show that, in essence, the taxpayer must demonstrate that they were prevented from fulfilling their obligations due to circumstances beyond their control and that they acted as a reasonable person would have in the same situation.
Case: Farmer v R & C Commissioners
One case that highlights the nuances of what can be considered a reasonable excuse is Farmer v R & C Commissioners. The taxpayer in this case submitted her paper tax return for 2021–22 on time but sent it to an outdated HMRC address. She received an initial £100 penalty along with daily and six-month penalties. Although she was unaware that the address was incorrect (which served as a reasonable excuse for the initial penalty), the First-tier Tribunal ruled that she should have taken corrective action after receiving notice of the first penalty. Consequently, while the initial £100 penalty was overturned, the daily and six-month penalties were upheld because she did not act quickly enough to mitigate her situation.
This case demonstrates that even when a reasonable excuse exists, taxpayers must remedy the situation promptly to avoid accumulating further penalties.
Special Circumstances
HMRC may also consider ‘special circumstances’ that don’t qualify as reasonable excuses but warrant some leniency. This includes factors that, while not directly causing the failure, may justify a reduction or cancellation of penalties. Taxpayers are encouraged to communicate with HMRC as soon as issues arise and maintain a record of any difficulties faced.
In Summary
For HMRC to accept a reasonable excuse, the taxpayer must show that they took all possible steps to meet their tax obligations but were prevented from doing so by events outside their control. While some excuses are immediately dismissed, legitimate reasons related to health, bereavement, technical failures, or misinformation may be considered valid. However, it is vital for taxpayers to act promptly and keep thorough documentation to support their claims when penalties arise.
Next steps
If you need any help in filing your tax return, tax return advice, or in relation to any other tax matters, then please get in touch.
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