CH192380 - Penalty reform - penalties for failing to file VAT returns by the due date for periods from 1 January 2023: penalties for failing to make returns: reasonable excuse

NB: “These rules currently only apply to VAT for VAT periods starting on or after 1 January 2023. These rules will come into force for other tax regimes at a future date. You must check the date from which these rules apply for the tax or duty you are dealing with”

The liability to a penalty point or financial penalty does not arise in respect of a failure to file a VAT return if the taxable person satisfies HMRC (or on appeal, the Tribunal) that they had a reasonable excuse for the failure. The following are not reasonable excuses for this purpose:

• An insufficiency of funds, unless attributable to events outside the taxable person’s control.
• Where the taxable person relies on another person to do anything, unless the taxable person took reasonable care to avoid the failure, and
• Where the taxable person had a reasonable excuse for the failure, but the excuse has ceased, the taxable person is to be treated as having continued to have the excuse if the failure is remedied without reasonable delay after the excuse has ended.

There is no statutory definition of “reasonable excuse” or “unreasonable delay” so both phrases must be given their ordinary meaning.

Please refer to HMRC guidance – CH160000 - on reasonable excuse when the person seeks to rely on this in relation to the liability to a penalty point and/or financial penalty.

FA2021 SCH 24 para 19 (1) and (2)