SAM61070 - Interest, penalties and surcharge: penalties: grounds of reasonable excuse: FAP
This guidance refers to tax returns received for 2009-10 and earlier. For further information regarding the new rules for the tax years 2010-11 and later, see SAM61200 onwards.
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 customer prevented completion and return of the tax return by the due date.
Examples of what you might agree as grounds of reasonable excuse
Examples of what you should not agree as grounds of reasonable excuse
Disability
Examples of what you might agree as grounds of reasonable excuse
The customer did not receive the return
Where you are satisfied that the customer did not receive the return, for example it has been sent back as undelivered.
The completed return was lost or delayed in the post
The customer is expected to allow sufficient time for the return to reach you. However if the return was posted in good time and an unforeseen event occurred which disrupted the normal post service and led to loss or delay of the return, for example fire or flood at the Post Office where the return was handled or prolonged industrial action by the Post Office, would be considered reasonable excuse.
Loss of tax records
You should normally agree as a reasonable excuse loss of records through fire, flood or theft, although you should be satisfied that the information for completion of the return could not be replaced in time for the customer to complete the return by the due date.
Serious illness
The illness must be so serious that it prevented the customer from controlling his business affairs immediately before the deadline and from that date to the time the completed return is received. Coma, heart attack, stroke or any other serious or life threatening illness constitutes a reasonable excuse.
Where the illness involves a lengthy stay in hospital or convalescence the customer should normally have made arrangements for completing and sending in the tax return on time. There may however be circumstances where this was not possible.
The serious illness of a close relative or domestic partner should only be accepted if the situation took up a great deal of the customer’s time and attention during the period from the filing date to the date the return is received.
Bereavement
The death of a close relative or domestic partner shortly before the filing date should be treated as a reasonable excuse, as long as steps had already been taken to complete the return on time.
HMRC Online Service does not accept the return
Accept as a reasonable excuse if a paper return is filed after the filing date because
-
- The customer or agent was unable to file using SA Online
-
- Provides either the error message or details of the error message
-
- The date they tried to file the return online and realised that it could not be filed online
HMRC does not want to penalise customers who have made a genuine attempt to file online before the deadline. You should therefore consider sympathetically on its merits a reasonable excuse claim without details of the appropriate error message.
Do not accept under this heading a claim that the failure to file on time was caused by the lack of free HMRC software (see below under ‘Examples of what you should not agree as a reasonable excuse’).
Delayed receipt of online activation codes (PINs)
Accept as a reasonable excuse if the customer registered to use the online service before the filing date but did not receive their activation PIN in time to file by the deadline, provided that they filed online as soon as possible once they received their activation PIN.
(This text has been withheld because of exemptions in the Freedom of Information Act 2000)
Duplicate return
Where the customer states the return was sent in under a different UTR and the record confirms this, accept as a reasonable excuse.
Examples of what you should not agree as grounds of reasonable excuse
Tax return too difficult
The customer should have taken early steps to contact you or a tax advisor for assistance in order to complete the return by the due date.
Pressure of work
The time given for completion of a return is considered to be sufficient to allow the customer to arrange his affairs to ensure that the return is completed by the due date.
Failure by tax agent
Failure by agent would not normally be treated as a reasonable excuse. It is the responsibility of the customer to ensure that his return is completed and delivered on time.
Lack of information
Where the customer is unable to obtain all the information needed to complete the return, the guidance issued with the return states that estimated information and an explanation in the additional information space should be submitted.
Absence of HMRC reminders
Normally reminders are issued before the return due date but lack of receipt of a reminder should not be treated as a reasonable excuse. The tax return itself shows the due date and it is the customer’s responsibility to ensure that the return is received by that date.
Lack of free HMRC software
HMRC is not obliged to provide free software to enable customers to file their returns online. Free HMRC software only covers the personal tax return and certain supplementary pages.
Customers who need to complete other supplementary pages or who file other returns online, for example the Trust and Estates Tax Return or the Partnership Tax Return, need to use commercial software.
Do not accept as a reasonable excuse any claim that the customer failed to file on time because HMRC did not make available free software appropriate to their circumstances.
Reasonable excuse for late partnership returns
Only the representative partner can have a reasonable excuse for not sending the partnership return back by the due date. The circumstances of the other partners are not normally relevant but you should consider the facts of each case on its own merits.
Disability
Ordinarily, the existence of a disability will not, on its own, present a barrier to customers in meeting their tax obligations. However if a customer claims that they have not been able to comply with a tax requirement because of a disability, you should fully consider how the effects of any disabling condition could have prevented them from complying with that obligation.
Every failure should be considered separately. Only in exceptional cases would we accept the same disability as a reasonable excuse on more than one occasion. This is because we would expect any customer who knows he will find it difficult to meet a requirement because of an existing disability, to make every effort to anticipate this and make alternative arrangements.
The following scenarios are examples used to help you understand the factors to consider when making a decision about reasonable excuse. Note: They are not model answers, nor are they to be viewed as the ‘correct’ response in situations that appear similar. Each reasonable excuse case is unique and must be considered on its own facts.
Scenario 1
Mr A is blind. He is unable to use the HMRC website and so decides to submit his SA return on paper. He asks an agent to compile and submit the return for him, but, before the filing date, the agent is taken ill. He returns the paperwork to Mr A shortly before the filing date, but as he is blind, Mr A is unable to complete the return himself and has no opportunity to make alternative arrangements before the filing date. He immediately arranges for another person to complete and submit his return by 14 November.
He receives a £100 filing penalty but it is cancelled on appeal because we accept that he had a reasonable excuse for missing the deadline date and had remedied the failure without delay.
We would not accept that every blind person who fails to submit his return by the due date has a reasonable excuse. In this case, the customer had taken steps to comply with his obligation but circumstances outside his control left it too late for him to make alternative arrangements and his disability prevented him from doing it himself.
Scenario 2
Mr X is an unrepresented self-employed builder without any family. He is diagnosed with a post-traumatic stress disorder in July 2011. He has to stop working and is incapable of taking any decisions. He is therefore unable to complete his returns and calculate the tax due for 2010-11 on 31 January 2012 or to appoint an agent. Following treatment, he is able to return to work in May 2012. He completes his tax return in May and pays the remaining tax due shortly thereafter.
Having received medical evidence of his condition, we accept that the customer has a reasonable excuse. No penalties are due as he fulfils his tax obligations after the excuse has ceased.
