LITRG alerts taxpayers who missed the Self Assessment deadline of 31 January that there could be circumstances constituting ‘reasonable excuse’ for filing their tax return late that mean no penalty applies.
18/02/2014, by Low Incomes Tax Reform Group, Tax Articles - General
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Background
Taxpayers were required to file their tax returns for 2012/13 by 31 January 2014 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. More general exceptions apply for the following:
- taxpayers who had registered for the online service between 21 January 2014 and 31 January 2014 but had not received their activation code by 31 January 2014; and
- those who had tried to access their online account between 21 January 2014 and 31 January 2014, but had forgotten their user ID or password and had requested replacements by 31 January 2014.
In all cases full details must be sent to HMRC – it may be that a combination of reasons, rather than any one reason, together may constitute a reasonable excuse. Even if granted an extension, it is essential that taxpayers inform the department of the reason for filing late, that their returns are lodged as soon as possible and that any outstanding taxes are paid without further delay. HMRC will now only accept late submissions digitally.
Activation codes
If your activation code arrived on 3 February 2014, 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.
Automatic penalty notices mean people may have to appeal
It is also important to remember that penalty notices will normally be issued automatically, so individuals may have to appeal against a penalty if they qualify for a reasonable excuse. This should be done within 30 days of the penalty notice being issued, including full details of why the return was late. A copy of the appeal notice should be included with the penalty notice. If you have received a penalty notice but not an appeal notice, an online copy of the appeal form can be downloaded from the HMRC website.
Penalties increase after a return is three months late
It is crucial to appreciate that after a return is three months late, penalties will increase significantly.
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 (victims of the recent Somerset floods have been granted an extension on these grounds) and could not be replaced in time.
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, issues that may have arisen in connection with accessing 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 unforeseen 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, say, the agent’s partner 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 might 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 or Tax Help for Older People.
LITRG published a news piece on the subject in 2012 that provides more detailed commentary on what may be a reasonable excuse.
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