SAM62040 - Interest, penalties and surcharge: surcharge: grounds of reasonable excuse surcharge
The Legislation does not define reasonable excuse.
Each case must be considered on its own facts. A reasonable excuse can only exist where an exceptional event beyond the control of the taxpayer prevented completion and return of the tax return by the due date.
Surcharge is not imposed until the balancing or final payment for the year is more than 28 days overdue. Therefore even if there where problems on or around the due date the taxpayer should have been able to make arrangements to pay before the surcharge date.
You should not agree reasonable excuse where the taxpayer was able to manage the rest of his business and personal affairs and pay other bills during that period.
Examples of what you may agree as grounds of reasonable excuse
Payment lost in the post
Where a claim that the payment has been lost in the post or lost by HMRC is made you should ask the taxpayer to produce evidence that an attempt to pay by the due date was made. If there was a fire or flood at the Post Office where the cheque was handled this should be classed as a reasonable excuse. However, you should also consider how soon payment was made once the taxpayer became aware that the original cheque had been lost. The taxpayer should have taken prompt steps to send a replacement.
Payment dishonoured
If the payment was dishonoured solely because of an error by the bank, you should accept this as a reasonable excuse. However the taxpayer would be expected to have acted promptly in sending a replacement on becoming aware of the error.
Serious illness
The illness must be so serious that it prevented the taxpayer from paying or making arrangements to pay. Coma, major heart attack, stroke or any other serious mental or life threatening illness should all be classed as reasonable excuse, however the illness must have begun on or shortly before the due date for payment.
Where the illness involved a lengthy stay in hospital or convalescence the taxpayer would normally be expected to have made arrangements for payment. There may however be circumstances where this was not possible.
The serious illness of a close relative or domestic partner which required a great deal of the taxpayer’s attention is only accepted if the situation took up a great deal of the taxpayer’s time and attention, and the taxpayer can show that it was not possible to have made arrangements to pay.
Bereavement
The death of a close relative or domestic partner around the time of the due date should be treated as a reasonable excuse. However, the taxpayer is expected to pay within a reasonable time, particularly where other bills are being paid.
Examples of what you should not agree as grounds of reasonable excuse
Shortage of funds
The taxpayer is expected to have kept money aside to pay his tax bill when it is due. The legislation states that not having the money to pay is not a reasonable excuse.
Cheque made out incorrectly
It is the taxpayer’s responsibility to make sure that the cheque is made out correctly.
Tax return not sent in
Non submission of the return should not in itself be treated as a reasonable excuse. The same event that prevented the taxpayer from paying on time may however have also prevented the tax return from being filed on time. Each case should be considered on its own facts.
Pressure of work
You must not treat this as a reasonable excuse. The taxpayer is expected to arrange his affairs to allow time to ensure that payment is made on time.
Failure by tax agent
Failure by agent would not normally be treated as a reasonable excuse. It is the responsibility of the taxpayer to ensure that the payment is made on time.
Not knowing how much to pay
This is not a reasonable excuse. The taxpayer should submit his tax return in sufficient time to allow for a calculation or statement of account to be issued before the due date. The tax return guidance tells the taxpayer that where a statement of account is not received an estimate of the amount due should be paid.
Absence of reminders from HMRC
Normally reminders are issued before the due date but lack of receipt of a reminder should not be treated as a reasonable excuse. The tax return guidance shows the due date and it is the taxpayer’s responsibility to pay on time.
Information about this page - link will open in a new window
Bottom of Page