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What a reasonable excuse is not!

11th Oct 2016
VAT Consultant vatadvice.org
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HMRC have frequently defined a ‘reasonable excuse’ in these words: “reasonable excuse is normally an unexpected or unusual event that’s either unforeseeable or beyond your control.” First Tier Tribunals have sometimes highlighted that this is incorrect, as the wording originates from a dissenting judgment in the Steptoe case.

For the first time to my knowledge the Upper Tier has explained why HMRC are wrong to use this wording. This paragraph appears in the decision of ETB (2014) Limited:

As an aside, we note that in July 2016 HMRC issued an updated version of factsheet CC/FS12 on penalties for VAT and excise wrongdoings. In that document, HMRC express the view that a “reasonable excuse is normally an unexpected or unusual event that’s either unforeseeable or beyond your control”. There are strong echoes there of Scott LJ’s dissenting judgment in Steptoe and it certainly does not reflect the views of the majority in that case. The wording in CC/FS12 is unfortunate as it could lead a taxpayer or HMRC officer or even a tribunal into error when assessing whether particular circumstances constitute a reasonable excuse

That the Steptoe decision was released in 1992 is also disappointing. HMRC have used this incorrect wording for 24 years!

You can read the full ETB decision here: http://www.bailii.org/uk/cases/UKUT/TCC/2016/424.html

Replies (12)

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By frankfx
13th Oct 2016 10:52

Les
Thankyou for highlighting the reasonable excuse issue.
However can you provide a list or access to a resource that shows how reasonable excuse has been successful in practice.
As a non specialist it is invariably a challenge to source totally reliable information. The HMRC’s manuals and guidance, are not Gospel and fail to recognise what appears to be happening in the real world

Thankyou

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Replying to frankfx:
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By chatman
17th Oct 2016 16:04

I've seen one on AccountingWeb somewhere.

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By PORT
14th Oct 2016 10:33

We saw a case where HMRC stated that the taxpayer "could have foreseen the possibility that he might have a heart attack, and should therefore have submitted his return earlier".

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Replying to PORT:
By Ruddles
14th Oct 2016 16:52

Heard that one before. I didn't believe it then, and I don't believe it now.

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By Julian Stafford
14th Oct 2016 18:45

The Clean Car company case is the one to look at. It talks about what a reasonably responsible taxpayer trying to comply with his obligations and having the skills and experience of the person concerned would do. This is basically the test to use and you need to go through exactly what the taxpayer did and how each action/inaction/assumption would stack up on the reasonableness scale. Tribunals will be sympathetic as long as the actions look sensible, logical and reasonably diligent.

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By Andy M
14th Oct 2016 19:16

With regard to an earlier comment, SA370 states on page 2 that a reasonable excuse may be -

"• Serious or life-threatening illness, for example, a major heart attack............"

One wonders how HMRC decide what qualifies as a "major heart attack", as opposed to a merely inconvenient or slightly annoying one maybe?
This is outrageous, there is no other kind of heart attack. Every heart attack is life threatening, as any cardiologist will tell you.

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Replying to Andy M:
By Ruddles
14th Oct 2016 20:11

Oh, go away. You don't know what you're talking about.

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By raybackler
17th Oct 2016 12:44

This is a good insight into the what constitutes a reasonable excuse. It seems to me that there was a massive cost involved to try and get away with not paying £900 or so. Do you have any idea of the legal costs involved?

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Replying to raybackler:
chips_at_mattersey
By Les Howard
17th Oct 2016 16:20

ETB were represented by a previous Director of the company, so that would be much less than a specialist Barrister.

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By buttercup books
17th Oct 2016 19:30

Does anyone have a link to the clean car company case.

Google has booked me six car valets and an mot, but didn't turn up the facts of the case

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Linda Skilbeck
By Linda Skilbeck
18th Oct 2016 22:20

There's a useful article in the 13 October 2016 of Taxation magazine on this topic

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By buttercup books
20th Oct 2016 17:16

Thanks, but I don't subscribe to Taxation magazine at present

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