In Nigel Barratt v HMRC [2015] TC04514 the first tier tribunal (FTT) once again found that HMRC's interpretation of reasonable excuse was 'inappropriate'.

  • From 2006 Mr Barratt ran a business as a jobbing builder, occasionally employing subcontractors.  He engaged with an accountant to deal with all accounting and tax issues including PAYE.
  • He failed to deduct tax from payments and submit annual and monthly CIS returns for the period up to 5 August 2010.  His accountant failed to advise him of these requirements.
  • Tax under-deducted from subcontractors, which could not be recovered, was just over £2,000.  
  • Penalties for the late submission of annual and monthly returns initially totalled over £129,000, although HMRC did agree to reduce these to about £4,000.
  • Mr Barratt appealed the penalties on the grounds that he had a reasonable excuse for making errors: he had relied upon his accountant.

HMRC argued that there was no reasonable excuse: a reasonable excuse must be some circumstance which is both “unforeseen and beyond the control of the taxpayer”.

FTT Decision

The FTT held that it was reasonable for Mr Barratt's to rely on his accountant in respect of all CIS matters. It dismissed the penalties.

The judge pointed out that HMRC’s argument on reasonable excuse originated from a dissenting judgement in the Court of Appeal case C&E Commrs v Steptoe [1992] STC757 which was expressly contradicted by the view of the majority.

The judge went on to say that 'it is inappropriate for HMRC to seek to rely on that formulation as representing the state of the law on reasonable excuse'.


This is not the first time that a tribunal has pointed out to HMRC that its interpretation of what constitutes ‘reasonable excuse’, see HMRC's definition of reasonable excuse: too narrow.  Despite this, however, it is a view that is still reflected in their manual guidance. 


Case reference: Nigel Barratt v HMRC [2015] UKFTT TC04514

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