What is a reasonable excuse? Tax experts issue guide to late filing penalties

HM Revenue & Customs (HMRC) have announced that 850,000 penalties for late tax returns will be issued over the next fortnight.

The guide is available from the LITRG website via the link: http://www.litrg.org.uk/News/2012/late-file-reason

The guide includes sections on:

• Appealing against penalties
• What is a ‘reasonable excuse’ for a late tax return?
  
• Examples of ‘reasonable excuse’
  
• Deciding whether you have a ‘reasonable excuse’
  
• What to do if you decide to appeal against the penalty

Robin Williamson, LITRG Technical Director, said:

“The law allows people who have a reasonable excuse to be excused a penalty for submitting their tax return late.

“The basic test is that you behaved as any reasonably responsible person would have done in the circumstances. If you have done so, do not be discouraged from lodging a reasonable excuse appeal against any late filing penalty you receive. HMRC say they wish to be more flexible in how they interpret reasonable excuse, and to treat people with sensitivity and even-handedness. Even if HMRC turn down your appeal at the first hurdle, remember that the ultimate decision lies not with them but with the Tribunal.”

Additionally, some people who have missed the deadline for submitting an SA tax return may be able to avoid a fine, if they can show that they should not have been in the SA regime in the first place. This is something that LITRG, the Chartered Institute of Taxation and other professional bodies have been asking HMRC to do for some time.

Notes to editors

1. HMRC’s briefing note on Self Assessment penalties states:

   ‘Treating people fairly

   Once the 31 January deadline has passed and penalties begin to apply, we will use our utmost discretion to ensure that we are even-handed and treat people with sensitivity. We will be as supportive and flexible as the legislation allows us. We will:

   1. be sympathetic in exercising our discretion where people are prevented by circumstances outside their control from filing on time. In such cases, we will cancel the penalty, but the taxpayer must still file as soon as possible
   2. take people out of Self Assessment if they shouldn’t be in and they contact us. If they can demonstrate that they do not need to be in Self Assessment, they will no longer need to submit a return and we will cancel any penalty they have incurred.

      We know that there are some people in Self Assessment who should not be. The problem is that until they contact us, either by submitting a return or by calling us, we don’t know whether they should be or not. So, after the January deadline, in both our direct letters and in our advertising, we will be inviting them to call us to give us some basic information that will help us to assess whether they should be in Self Assessment. If they shouldn’t, we will take them out and cancel any penalty they have incurred

      Anyone who thinks they should not be in Self Assessment can call us after the January deadline has passed on 0845 900 0444. Our staff will help them.

2. LITRG are keen for their guidance to have the widest possible circulation and media outlets are encouraged to link to it and to reproduce extracts from it, provided these are attributed to LITRG.
3. Experts from LITRG are available for interview or to provide background information. Please contact them via the contact details at the top of the page.
4. The Low Incomes Tax Reform Group (LITRG) is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.

Technical Team

21 February 2012