In Khalid Bhatti v HMRC [2018] TC06332, payroll software issues were not a reasonable excuse for late filing of PAYE returns under Real Time Information (RTI): software issues had been claimed in earlier years with promises of future compliance

Under Real Time Information (RTI) for PAYE, a return of payments (FPS) must be filed each month. Late Filing Penalties apply if these are not filed on time (i.e. as or before payments are made).

HMRC alleged that Bhatti had failed to file six FPS (August 2016 to January 2017) on time.

  • Bhatti argued that he had a Reasonable Excuse for late filing as his agent had had technical issues with their software (IRIS) and that HMRC had accepted this in other cases.
  • HMRC countered that each case was considered on its own merits and that it was not reasonable for him to rely on his payroll provider given the experience they had had.

The FTT found that:

  • The excuses offered were vague and lacking necessary detail; software issues had been claimed in earlier years with promises of future compliance. Thus no reasonable excuse existed.
  • One of the penalties was thrown out due to lack of evidence by HMRC.


The penalty notices issued did not state the period in which an appeal could be made; a reference to HMRC’s website was not good enough.


Late Filing Penalties

Real Time Information

Tax penalties for RTI

Statutory Review

How to appeal a tax penalty

Grounds for appeal: Taxpayer excuse

Appeals: Late

External: Khalid Bhatti v HMRC [2018] TC06332