Reasonable Excuse – Another ‘Success’ for Taxpayer

The saga of HM Revenue and Customs seeking penalties at the slightest provocation continues, as a recent case on reasonable excuse demonstrates.

In Spink [2014] a taxpayer:

  1. Received advice from the Department of Work and Pensions about receipt of a pension lump sum which they described as having had tax deducted.
  2. The taxpayer included it on her tax return on the basis that tax had already been paid.
  3. HMRC said that they had to check with DWP about the tax status.  This took some months, with HMRC finally telling the taxpayer on 14 August 2013 that they had now been informed by DWP that no tax had been deducted.  On the same date DWP told the taxpayer this conclusion was reached because they no longer had the relevant documentation, because the papers had been destroyed apart from a ‘note on file’.
  4. The taxpayer, on returning from holiday paid he tax due in full on 3 September 2013.
  5. HMRC sought to levy a 10% penalty for ‘late filing’ and took the case to Tribunal because they did not feel the taxpayer had a ‘reasonable excuse’.


Fortunately for the taxpayer, the judge accepted it was ‘reasonable’ for the taxpayer to believe the tax was not payable until the actual tax status had been established.  Therefore the penalty was discharged.

The mind boggling thing about the case is that HMRC felt it worth putting the taxpayer through the stress of a Tribunal hearing (with all the taxpayers’ resources that such a step will have cost on their side too) despite the fact that the bulk of the delay was down to a fellow Government Department.

Logically, it suggests they believed the taxpayer’s behaviour was ‘unreasonable’ and a 10% fine was proportionate to satisfy the expectations of the compliant majority.  Personally, my view, as part of the compliant majority, would be that HMRC’s grasp for penalties represented an unfair and unreasonable impost.  It does not seem to be behaviour which is either civil, nor, when combined with the DWP role in the matter, to be providing an appropriate level of service.  Ms Spink won, after fighting.  However, how many other taxpayers have been bullied into agreement, through pressure and lack of professional advice?