Stalin ate my homework: Reasonable excuse and the Self Assessment deadline

As the title of Alexei Sayle’s acclaimed autobiography reminds us, school teachers are used to feeble excuses. So is HMRC. Each year on its website, we are entertained by examples of excuses offered for missing the filing deadline; this year a few specious expenses claims were also thrown in.

Here are some of the wackier excuses:

‘I was up a mountain in Wales, and couldn’t find a post box or get an internet signal.’

‘I’ve been cruising round the world in my yacht, and only picking up post when I’m on dry land.’

‘My mother-in-law is a witch and put a curse on me.’

As is well known, if a taxpayer has a reasonable excuse for late filing, no penalty arises. It is not a question of a penalty being incurred, then cancelled because of a reasonable excuse; there is simply no penalty.

The reasonable excuse defence is available both for late filing of a tax return and for late payment of tax. It is claimed by appealing against the penalty, which can be done online or by completing the form that arrives in the post with the penalty notice. Alternatively, one can pre-empt the penalty notice by getting in touch with HMRC as soon as possible and pleading reasonable excuse.

When is an excuse reasonable and who decides?

HMRC defines a reasonable excuse as ‘something that stopped you meeting a tax obligation that you took reasonable care to meet’, and lists various examples of situations which it will accept (among them the recent death of a partner or close relative, serious illness, disability, flood fire or theft, computer failure, problems with HMRC’s online service).

It also lists situations that will not normally be accepted. However, HMRC is not the sole arbiter of whether an excuse is reasonable. The First-tier Tribunal sometimes take a different view. Perhaps the leading case was The Clean Car Company Ltd (1991) VATTR 234, in which Judge Medd expressed his view in a well-known passage:

‘One must ask oneself: was what the taxpayer did a reasonable thing for a responsible trader conscious of and intending to comply with his obligations regarding tax, but having the experience and other relevant attributes of the taxpayer and placed in the situation that the taxpayer found himself in at the relevant time, a reasonable thing to do?

It seems to me that Parliament in passing this legislation must have intended that the question of whether a particular trader had a reasonable excuse should be judged by the standards of reasonableness which one would expect to be exhibited by a taxpayer who had a responsible attitude to his duties as a taxpayer, but who in other respects shared such attributes of the particular Appellant as the tribunal considered relevant to the situation being considered.’

There are two criteria set out in this passage:

  1. The standard of reasonableness expected of someone with ‘a responsible attitude to his or her duties as a taxpayer’, which is an objective test.
  2. Such attributes of the appellant as the tribunal consider relevant, such as age and experience, health, or ‘the incidence of some particular difficulty or misfortune’, which is subjective.

Both must be taken into account when deciding whether the taxpayer acted reasonably. Were the taxpayer’s actions consistent with the actions of one who took their tax responsibilities seriously but whose particular characteristics had a bearing on how they discharged those responsibilities?

As Judge Berner put it in Nigel Barratt [2015] UKFTT 329 (TC):

‘The test of reasonable excuse involves the application of an impersonal, and objective, legal standard to a particular set of facts and circumstances. The test is to determine what a reasonable taxpayer in the position of the taxpayer would have done in those circumstances, and by reference to that test to determine whether the conduct of the taxpayer can be regarded as conforming to that standard.’

HMRC’s guidance also says: ‘. . . what is a reasonable excuse for one person may not be a reasonable excuse for someone else.’

However, HMRC does not always keep to its own guidance. Sometimes it fails to consider the circumstances and abilities of the individual taxpayer, focusing too much on the objective element of the test – what the hypothetical, average ‘reasonable taxpayer’ would have done - and leaving out the characteristics of the individual before them.

For example, in Pokorowski [2019] UKFTT 86 (TC), HMRC maintained that a homeless man, to whom a notice to file had been addressed at a place from which he had been evicted, did not have a reasonable excuse for failing to file his tax return on time, even though he filed it as soon as he reasonably could once he was back in accommodation and had re-started work. The tribunal vehemently disagreed, calling HMRC’s pursuit of penalties in the case ‘a scandal’. That is an extreme example of HMRC focusing on the objective part of the test while shutting its eyes to the subjective part.

The failure of an agent

It is to be hoped that the need to plead reasonable excuse will rarely arise when an agent is involved, mainly because one expects the agent to act properly; but also because statute provides that reliance on another person to do something is not a reasonable excuse for failure to do it, unless the taxpayer took reasonable care to avoid the failure. This is sometimes mis-construed to mean that the taxpayer can never rely on the failure of an agent, but there are cases in which the tribunal has allowed a taxpayer’s appeal on the grounds that the taxpayer did all they could, and was entitled to rely on the agent to do what they said they would do (see for instance Northam [2017] UKFTT 706). It is as well for the reputation of the profession that such cases are rare!

Robin Williamson

Written by Robin Williamson

Robin Williamson MBE CTA (Fellow) is an author and commentator on tax, welfare and public policy. He was technical director of the CIOT’s Low Incomes Tax Reform Group from 2003 to 2018 and a part-time senior policy adviser at the Office of Tax Simplification from 2018 to 2019. In May 2020 he won the lifetime achievement award at the Tolley Taxation Awards.

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