Mr A Goodall was late in submitting his tax return for 2010/11 and paying the tax due for that year. HMRC subsequently imposed penalties totalling £249 (£100 for late filing and £149 for late payment) under FA 2009, Sch. 55, para. 3 and FA 2009, Sch. 56, para. 3(2).
The Argument for Reasonable Excuse
The Appellant appealed against the penalties claiming that he had a reasonable excuse in failing to submit his return and pay his tax on time.
Mr Goodall had been filling his self-assessment return for several years, however having been made bankrupt, HMRC were required to issue him a new unique tax reference number (UTR).
The taxpayer’s advisor Mr P Ellis, of Nova Business Support LLP, claimed that Mr Goodall had been unable to submit his return earlier because he had not received the updated UTR until after the return deadline in June 2012, despite sending multiple requests to HMRC. However HMRC stated that they allocated Mr Goodall a new UTR on 24 January 2012.
There is no statutory definition of what constitutes a ‘reasonable excuse’ but HMRC do give guidance that “an unexpected or unusual event, either unforeseeable or beyond the customer’s control, which prevents him from complying with an obligation when he would otherwise have done” [SAM10090] would constitute a reasonable excuse.
HMRC cite examples of what might be accepted as a reasonable excuse which include life-threatening illnesses, the death of a partner or documents lost through theft, fire or flood which cannot be replaced in time. However case law has established that the validity of a reasonable excuse ‘is a matter to be considered in the light of all the circumstances of the particular case’ Rowland v R & C Commrs (2006) Sp C 548.
The Tribunal allowed the appeal against the penalties and agreed that there was a valid reasonable excuse for the late filed return and late paid tax. The judge did comment on how Mr Goodall’s advisors could have done more to obtain the UTR number, despite their attempts to request the number on three different occasions.
The responsibility and liability of submitting your returns falls on the tax payer and not on any third parties, and the reliance on a third party is not grounds of a reasonable excuse.
“Where reliance is placed on any other person to perform any task, neither the fact of that reliance nor any dilatoriness or inaccuracy of the part of the person relied upon is a reasonable excuse” VATA 1994, s 71(1)(b)
It is also interesting to draw comparisons with other cases which were not deemed as a reasonable excuse. As discussed in one of our earlier blogs ‘Reasonable excuse – It depends upon the facts!’, EN Jones lost her appeal for not paying her tax on time because she argued that her advisers and HMRC had not told her how much tax was due.
The main difference here from the Goodall case is that the taxpayer did not seem to show any active and diligent signs in meeting their tax obligation, where it was deemed that Mr Goodall did.