Truck & Driver UK – September 2019

Truck & Driver August 2019^59

THE LAW AND YOU

So, what is a ‘reasonable

excuse’? Guidance from HMRC

allows for a number including:

l A taxpayer’s close relative or

domestic partner passing away

around the time they should have

filed their return or paid tax;

l A serious illness, where the

taxpayer or a close relative falls

seriously ill around the time the

tax should have been paid; or

l Unforeseen events which can

include delays due to industrial

action or returns or payments

being lost in the post.

As to what might not, or will very

rarely, be considered a

reasonable excuse, HMRC says

these include:

l A deliberate failure to submit a

tax return on time as this act is

controlled by the taxpayer;

l Insufficient funds – but not if

the shortage could not have

been reasonably foreseen by the

taxpayer, or the lack of funds is

down to something outside their

control (the effective lockdown at

TSB bank in April 2018 would

probably count here); or

l Reliance on

someone else,

unless it can be

shown that the

taxpayer took

‘reasonable care’

to avoid the

compliance failure

• such as the act of
  hiring a professional accountant
  as opposed to a family friend,
  for example.
  Also worth noting is that
  HMRC has the power, in certain
  circumstances, to provide a
  ‘special reduction’ to a penalty
  where it can be removed entirely.
  These situations are, as would
  be expected, considered on a
  case-by-case basis, and HMRC
  offers no real definition of what
  constitutes ‘special circumstances’.
  Another option open to HMRC is
  to ‘stay’ a penalty; this effectively
  delays its enforcement. But, in
  exchange, the taxpayer will
  probably have to agree some
  form of compromise with HMRC.

The tax tribunal

But just because HMRC has

levied a penalty doesn’t mean

that a taxpayer must accept it.

The system does allow

taxpayers a right to appeal a

penalty to the Tax Tribunal, an

independent body that will

consider the arguments of both

sides – objectively.

It’s at this point that a

taxpayer will have the opportunity

to show that they took

‘reasonable care’ and can show

a ‘reasonable excuse’ or ‘special

circumstances’. However,

considering that there are no real

definitions of these terms, this

won’t be easy.

The harsh reality

Quite simply, any taxpayer

handed a penalty levied by the

tax authorities will face a steep

uphill climb to prove that he or

she had a ‘reasonable excuse’

when the failure occurred, or that

special circumstances existed

and therefore an exemption, or

‘special reduction’, should have

been given.

Those without a ‘reasonable

excuse’ will leave the ball in

HMRC’s court to determine

whether the penalty is justifiable

and correct. But even if HMRC

finds against the taxpayer, he or

she has the right to challenge the

decision at a tribunal.

It’s absolutely key to

remember that the word

‘reasonable’ can mean different

things to different people. Those

in doubt should consider taking

good advice (see the ‘More

information’ panel, above left)

before fighting a losing case that

will both drag out the inevitable

and cause stress at the same

time. Appeals are time limited –

don’t delay, so speak to a good

accountant.

Adam Bernstein is a

freelance business writer

who covers a variety of

subjects that include law,

finance and management

More information

l HMRC: gov.uk/tax-appeals/penalty

l FIND AN ACCOUNTANT

UK: accaglobal.com/uk/en/

member/find-an-accountant.

html?isocountry=GB

England and Wales: icaew.com/

about-icaew/find-a-chartered-

accountant

Scotland: icas.com/find-a-ca

Ireland: charteredaccountants.ie/

Find-a-Firm#firm