HMRC have updated their guidance on what constitutes a 'reasonable' excuse as grounds for appealing a tax penalty.

A taxpayer may Appeal a late filing or payment penalty on the basis that they have a Reasonable excuse for the tax compliance failure.

There is no definition of reasonable excuse within tax legislation, its meaning is established through case precedent.

HMRC's views on the matter are expressed through its manuals.

  • HMRC describe a reasonable excuse as "something that stopped you from meeting a tax obligation that you took reasonable care to meet."
  • Their manual goes on to say, “The law does not require that a reasonable excuse is based on an unforeseeable or inescapable event”. However, we note that many of the examples HMRC of a reasonable excuse do involve such events, for example, fire or flood, unexpected hospital stays and lack of funds due to matters outside the taxpayers' control.

The tax Penalty legislation requires that once the reasonable excuse ceases to exist the failure is remedied without ‘unreasonable delay’. Failure to act promptly may well result in a tax penalty.

  • HMRC new guidance now states that unreasonable delay would be within 14 days unless some other time limits apply.
  • This means that in most cases the taxpayer or their agent have two weeks to file a late return or make a late payment once the excuse has stopped.

Two weeks may not seem like a particularly long period of time, although, its enough time to finish self-isolation, if you have coronavirus, It should be a sufficient period in many cases, and it is useful that HMRC at last provide details of what they consider reasonable. It is important to note that 2 weeks is not stated in the legislation and therefore this is just a suggested period and longer periods may also be reasonable, depending upon the exact facts and circumstances of the case.

Useful guides on this topic

How to appeal a tax penalty (subscriber version)
What are the steps in making an appeal? What should your appeal cover? What does recent case law say on this topic?

Appeals: Grounds for Appeal Toolkit
What grounds are there to appeal a tax penalty? How can you word a tax appeal? Can you appeal HMRC errors? What is a reasonable excuse? 

Grounds for Appeal: Reasonable excuse
What is considered to be a 'reasonable excuse' when a taxpayer makes an appeal against a tax compliance failure?

Appeals: Late
When can you make a late tax appeal? What conditions must be met?

External links

HMRC Self Assessment Manual 

HMRC Compliance Handbook 

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