HMRC allows grounds to appeal against a penalty if the taxpayer has a ‘reasonable excuse’ for why they filed a return late or paid their tax late.
A ‘reasonable excuse’ is an event or happening that prevented a taxpayer from complying with a tax obligation despite the fact that they took reasonable care. HMRC only take into account hard facts with regards to what they constitute as a ‘reasonable excuse’.
Following are some examples of ‘acceptable’ reasonable excuses:
• A taxpayer’s partner or another close relative died shortly before the tax return or payment deadline;
• an unexpected stay in hospital that prevented the taxpayer from dealing with their tax affairs;
• a life threatening illness;
• the failure of a computer or software just before or while the taxpayer was preparing their tax return;
• service issues with HMRC;
• a fire, flood or theft which prevented the completion of a tax return;
• postal delays which could not have been predicted; or
• delays relating to a disability.
Following are some example of excuses that HMRC will not accept as a valid reason for failing to meet a tax obligation:
• relying on someone else to send the return and they failed to send it;
• a cheque or payment bounced due to insufficient funds;
• the taxpayer found HMRC’s online system too complicated;
• the taxpayer did not receive a reminder from HMRC; or
• the taxpayer made a mistake on their return.
Impact of coronavirus
HMRC has added COVID-19 as a reasonable excuse. All the taxpayer needs to do is appeal on the grounds of how coronavirus has affected them or their business. Example, you or a close relative of yours was seriously ill due to the virus, somebody close to you like a partner or close relative died of Coronavirus around the tax deadline.
Where the taxpayer appeals on the grounds that they had a reasonable excuse for failing to file a return or pay a tax bill, they should file the return or pay the bill as soon as they are able after the reason for the reasonable excuse has been resolved.
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