LITRG reminds taxpayers who missed the Self-Assessment deadline of 31 January they may be able to avoid a penalty by claiming a ‘reasonable excuse’ for filing their tax return late.
06/02/2015, by Low Incomes Tax Reform Group, Tax Articles - General
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Taxpayers were required to file their tax returns for 2013/14 by 31 January 2015 in order to avoid a late penalty of a minimum of £100. However, there are certain situations where individuals, who could be unaware that they have the right to claim ‘reasonable excuse’, may be able to lodge their returns late, but not have to pay a penalty.
In all cases full details must be sent to HMRC and it may be that a combination of reasons, rather than any single reason, together may constitute a reasonable excuse. In any case, any outstanding returns should be lodged and outstanding taxes paid without further delay.
Extenuating circumstances
A number of taxpayers may have a perfectly valid reason for not having filed a return on time, which HMRC may well accept as being a reasonable excuse. It is essential that taxpayers inform the department of the reason for filing late and ensure that their returns are lodged online as soon as possible, because the law on reasonable excuse requires that a default must be remedied within a reasonable time after the excuse has ceased.
For example, if your activation code arrived on (say) 2 February 2015, the tax return should be lodged within a few days of receipt or HMRC will not accept that awaiting the code was the sole reason the tax return was outstanding.
Appealing
It is important to remember that penalty notices will normally be issued automatically, so individuals will have to appeal against a penalty if they wish to claim a reasonable excuse. This should be done within 30 days of the penalty notice being issued, and full details of why the return was late should be given. It is crucial to appreciate that after a return is three months late, penalties will increase significantly.
An online copy of the form that may be submitted with your late tax return, claiming reasonable excuse, can be found on the HMRC website. If you have received a penalty notice, an appeal notice will usually accompany it; but if not, the appeal notice can be downloaded from the GOV.UK website.
Examples of what HMRC consider to be reasonable excuses
The following examples illustrate what HMRC consider to be reasonable excuses:
- the taxpayer had a life-threatening illness that prevented the tax return being lodged;
- their partner died shortly before the deadline;
- there were unexpected or unforeseen postal delays; or
- their important documents were lost due to theft, fire or flood and could not be replaced in time.
HMRC’s list of accepted ‘reasonable excuses’ can be found on the GOV.UK website.
Situations that may (or may not) be accepted as reasonable excuses
There are other situations that can sometimes constitute reasonable excuse, but the list is by no means exhaustive and it is important not to be put off appealing because one’s situation does not exactly fit one of the examples given:
- Problems with online filing. As noted above, the taxpayer may have been unable to access the system due to lost passwords, etc. If they tried to file, though, and the system failed, they should be able to claim reasonable excuse;
- Unforeseen pressure of work. Normally this is not acceptable, but if the taxpayer had a sudden unexpected and significant increase in work, this may be a reasonable excuse;
- The taxpayer’s agent failed to lodge the return on time due to unforeseen circumstances. Normally this would not be a reasonable excuse, but if the agent’s partner, say, had died then HMRC might accept that. Of course, if an agent had all the information in good time and failed to provide a good service, then it may be possible to claim any penalty back from them;
- Physical or mental disabilities. Whether permanent or temporary this could be viewed as a reasonable excuse if it affects the taxpayer’s capacity to deal with their tax affairs;
- The taxpayer did not understand the system and needed help from, for example, Tax Aid, Tax Help for Older People or from HMRC.
A final word
It is important to keep in mind that HMRC do not have the last word on whether an excuse is reasonable; that question is ultimately one for the courts to decide and if the taxpayer cannot reach agreement with HMRC, they can always appeal to the First-tier Tribunal.
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