What is a 'reasonable excuse' in terms of making an appeal against a tax penalty for late filing, late payment or error?

This is a freeview 'At a glance' guide. Subscribers: see your detailed guide, Grounds for Appeal: Reasonable Excuse.

A taxpayer may appeal a tax penalty when they are able to prove that they had a reasonable excuse for not doing what they were supposed to do.

  • The phrase "reasonable excuse" takes its everyday meaning however the courts and tribunals have their views on this. Contrary to HMRC guidance, reasonable excuse is not simply limited to "unforseeable or exceptional circumstances".
  • A taxpayer is expected to know which deadline applies and make a reasonable effort to meet their filing obligations.
  • Reliance on the acts of a third party, such as an accountant or adviser is no defence for VAT penalties, it is a defence for direct tax penalties in certain circumstances.

Each case will be considered on its own merits.

See Appeals: Grounds for Appeal Toolkit

Read this in conjunction with our guide: How to appeal a tax penalty.

Reasonable excuse or reasonable care?

To avoid any confusion in terminology:

  • The defence of "reasonable excuse" applies to compliance failures in tax.

These include:

  • Late filing of returns - Schedule 55 FA 2009
  • Failing to file online - TMA 1970 s8(1)(d) / VAT
  • Failing to make a payment on time - Schedule 56 FA 2009
  • Failing to notify chargeability - Schedule 41 FA 2008

The defence of "reasonable care" is slightly different, although the two may cross over. 

  • Reasonable care mainly applies in the context of calculating tax geared penalties for error and mistake caused by careless behaviour Sch 24 FA 2007.
  • Carelessness for the purposes of discovery assessments s29(4) TMA 1970.

What is a reasonable excuse?

"Reasonable excuse" is not fully defined by the legislation.

For a reasonable excuse to be made out there are only two requirements:

  • The taxpayer in making an appeal ("the appellant") must put forward an excuse.
  • It must be decided whether, when viewed objectively, that excuse is reasonable in the context of the delay that has triggered the penalty.

HMRC's original view was that an excuse is reasonable where some "unforeseeable and exceptional event" beyond the taxpayer's control is responsible for the compliance failure. Unsurprisingly the Tax Tribunal does not confine itself to such a narrow interpretation.

Excuses may include (but are not limited to):

  • Illness
  • Natural disaster - i.e. a global coronavirus pandemic
  • Postal delay
  • IT issues
  • HMRC error
  • Adviser error

See  Appeals: Grounds for Appeal Toolkit

Reasonable excuse and COVID-19

For 2019-20 Self Assessment tax returns HMRC have confirmed that they will accept a delay to filing as a result of COVID-19 as a reasonable excuse.

Useful guides on this topic

Links to our guides are found in our Penalties & Compliance sections:


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