Reliance on previous accountants was a reasonable excuse for late filing of tax return
5th Jul 2019
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The taxpayer’s reliance on a firm of accountants to prepare and file his tax return on time amounted to a reasonable excuse for late submission of the return, as the taxpayer had taken reasonable steps to avoid the failure.
The appellant was a director and shareholder of a company in the restaurant business. He engaged a firm of accountants (AC) to undertake book-keeping for the company and the preparation of the company's accounts and tax returns. The appellant provided invoices and other accounting information to AC on a monthly basis, and he had regular progress meetings with them.
In addition to dealing with the tax affairs of the company, AC also prepared the appellant’s personal income tax return. Shortly before the filing date for his self-assessment return for 2011/12, the appellant had a meeting with AC. It transpired that there were material problems with the quality of AC's book-keeping, and there were material errors in the accounting records that they had prepared.
AC informed the appellant that additional work would need to be done to correct the accounting records and that it was unlikely that AC would be able to prepare the appellant’s tax return for 2011/12 by the filing deadline of 31 January 2013. AC explained to the appellant that the company's accounts had to be finalised first, and only once the final figures were available for the company was it then possible to prepare the appellant’s tax return.
In February 2013, the appellant engaged another accountant (ES) to replace AC. However, it took some time for AC to release the appellant’s files. Upon receipt of the information, ES reconstructed the company’s accounts and prepared the appellant’s tax return for 2011/12, which was filed electronically on 31 July 2013. HMRC imposed late filing penalties. The appellant appealed.
The appellant had relied on AC to prepare his tax return. The First-tier Tribunal (FTT) noted that this reliance could only amount to a reasonable excuse if the appellant had taken reasonable care to avoid the failure to file on time (FA 2009, Sch 55, para 23(2)(b)).
The FTT noted that until his meeting with AC shortly before the filing date, the appellant had no reason to believe that AC would not meet the filing deadline. As soon as the appellant realised that the filing deadline would be missed he took appropriate steps. The FTT found that the appellant had taken reasonable care to avoid the failure and that the failure was corrected without unreasonable delay. The appellant’s appeal was allowed.
Coll v Revenue and Customs  UKFTT 87 (TC)
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