Reasonable Excuse scorecard 2011: Taxpayers 20 HMRC 12

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With the help of tax advisers, AccountingWEB has assembled a guide to the areas on which taxpayers have appealed late payment and filing penalties. [Updated 5 January 2012]

Originating from an idea developed by Atlas Chambers barrister Anne Fairpo, we’ve come up with a scorecard of ‘reasonable excuse’ cases.

Fairpo came up with the idea after there had been a series of decisions against HMRC where it was clear that the tribunal were taking a more lenient view.

Seeing as reasonable excuse is not defined by legislation, the words must take on their ordinary meaning, and as such we thought it would be useful to keep track of what did, or didn't count as reasonable in decided cases.

In the interest of looking for trends, Anne Fairpo commented: “It's not really surprising that there is this degree of inconsistency: by definition, ‘reasonable excuse’ is a subjective test rather than objective and so there will always be variation in interpretation.

“HMRC staff are under increasing pressure with fewer resources and so will not have time to check what previous internal decisions on a topic have been, so staff are taking their own view. Much as ‘no-one was ever fired for buying IBM’, it's probably easier under pressure to err on the side of caution. Within government, that's not usually on the side of the taxpayer,” Fairpo concluded.

HMRC suffered a horrendous April, when it lost six consecutive reasonable excuse cases. This run of defeats included some that followed the European Court of Justice precedent in Jusilla v Finland that tax penalties require the equivalent right to fair trial and “beyond reasonable doubt” proof as a criminal trial. However, the tide of reasonable excuse tribunal cases since then has run more strongly in HMRC’s favour.

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About Robert Lovell

Business and finance journalist


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    03rd Aug 2011 17:40

    Late Filing - Companies House

    Does anyone have a view if any of the recent HMRC cases could be used in relation to a £150 late filing penalty imposed by Companies House?  The accounts for filing were mailed from Aberdeen to CH in plenty of time but were delayed by a local (Edinburgh) Royal Mail strike  that I could not reasonably have known about.  The accounts arrived 2 hours after the deadline. At the time the CH website included a temporary notice stating that strike action would not constitute an acceptable excuse for late delivery. I called CH and was told that a penalty would only be withdrawn under exceptional circumstances and that there would be no point in appealing. This happened about 3 years ago but, being Aberdonian,  I'm not over it yet!

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    to Time for change
    04th Aug 2011 08:17

    Late Filing - Companies House

    Unless HMRC can win on the grounds of your "lack of clairvoyance", I'd appeal.

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    to againstausterity
    04th Aug 2011 10:13

    Companies House (Scotland) late filing fines

    Thanks Thorny

     I guess my question could have been a bit clearer - my late filing fine concerned Companies House rather than HMRC and I wondered if the latest rulings were specifically to do with the wording of the HMRC penalty clauses (which rely on 'reasonable' excuse) or if they could be applied more widely. The CH rules appear to be stricter as detailed below.





    Will the Registrar accept any mitigating circumstances if the accounts are delivered late?

    Yes. The Registrar has discretion not to collect a penalty, but exercises it in a company’s favour only in the most exceptional circumstances.

    Directors have to fulfil all their legal duties despite being in ill-health or elderly. Any director whose ability is impaired should ensure that a replacement is appointed or that other directors know the situation and make appropriate arrangements. Neither ill health nor advancing years will allow the Registrar to exercise discretion and not collect late filing penalties. The nature of the Registrar's discretion was judicially reviewed in 2002.


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    08th Aug 2011 14:35

    Sorry if you've had difficulties accessing this item

    I did an edit just before we sent out this morning's Tax bulletin (removing a duplicate taxpayer win), but with our new system changing the headline also changed the link from what was published in the headline. We've altered it manually to stay consistent for other bulletin readers and apologise to anyone who was inconvenienced by the inconsistency.

    I'm afraid it's another case of getting used to the quirks of our new content management system.

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    By pawncob
    08th Aug 2011 14:39


    If ignorance of the law is no excuse, why did I get away with this?

    (Appeal letter resulting in fine being withdrawn)

    I have received the Late Filing Penalty notice in respect of the above for March 2011.

    All returns have been filed on line, and have been NIL returns as we have not yet commenced to use any sub contractors. I was not aware that Nil returns had to be submitted at all, let alone by the 19th of the month, as this has never been necessary for PAYE returns.

    In the circumstances, I would be grateful if you would cancel the Notice 



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    09th Aug 2011 11:15

    Late Filing Penalty - Companies House

    I am currently embroiled in an appeal against a late penalty for filing company accounts 1 day late. The reason for this for this was a mistype made by the member of staff at our accountants changing the first accounting date to 31st March. She put 30th March in error. This was noticed and Companies House were telephoned to point out the error almost immediately. The advice given to the member of staff was very vague but the main thrust was that there could not be a change in accounting date within 5 years but as accounts could be filed up to 7 days either side it would not matter. The 2008 and 2009 accounts were subsequently filed with 31st March year ends but unfortunately our accountants were under pressure with the 2010 accounts and these were filed on the 31st December. Companies House maintain that these are late as they should have been filed on the 30th December and refuse to accept the actual situation i.e. the accounting reference date is 31st March or consider that their information had "contributed to the late filing". The letters back from Companies House are almost farcical in that they steadfastly refuse to say why the error was not rectified or why the information given was misleading. They have even prevaricated over a Freedom of Information request asking why the error could not be rectified.I am now going down the route of Jusilla v Finland to get actual factual evidence brought to light. It is ridiculous that so much time and money is spent on both sides on something like this when every business in the country needs help and guidance from Governmental bodies. Has anyone else come across such intransigence from Companies House and has anybody tried Jusilla v Finland in their argument?

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    09th Aug 2011 12:58

    Excellent article

    What an excelent article Robert. This really is the sort of in-depth technical analysis that tax practitioners need from AccountingWEB. Keep it up!

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    15th Aug 2011 12:29

    Late filing penalty - Companies House

    Is reasonable excuse even entertained by Companies House - I have recently read the guidance notes they have issued on this topic - I particularly like Scenario 3 - I would have thought that the death of your accountant would constitute reasonable excuse!


    Scenario 3 - Accountant was ill or has died Decision - Subject to cases of individual merit, the penalty is usually collected. All of this would be laughable if it wasn't for the increase in penalties - Does anyone know how quickly Companies House write and let you know that they haven't received your accounts - do they write within a week (whilst penalty is still £150) or do they wait until say fifth week when the penalty has increased to £375?

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    By exhuang
    19th Aug 2011 17:59

    Another two wins for Taxpayers

    Consult Solutions (TC1282)

    Buxton RUFC TC1281


    Question to the author: will this article be kept up to date?

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    to mabzden
    22nd Aug 2011 18:56

    Thanks for the additional case references

    Thank you exhauang for bringing Consult Solutions and Buxton RUFC to our attention. Yes, the article will be updated on an occasional basis and these two will be included. There is one other "no reciept of submission" defeat for the taxpayer (Freshwater Systems and Services v HMRC) from the same time and day as and Hoar[***] Cross Parish Council. The decision is available on the official Tax Tribunal site, but not yet from, where we've sourced all the other reasonable excuse decisions (it's got a slightly better search engine, although the tax tribunal site allows you to search for specific judges. We'll include all three in our next update.

    By my current calculation, the running score is now 16-11 to the taxpayer. But with judges Stalker and Jones adopting what appear to be different stances on the inherent reliability of HMRC systems and the burden of proof required for penalties, I expect to see one of these cases go to appeal before too long.

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    By dgwsoft
    21st Aug 2011 19:52

    VAT late payment surcharge successfully appealed


    I have just successfully appealed against a late payment surcharge, imposed because HMRC did not receive an electronic payment, made on the same day that the VAT return was electronically filed, on the day it was made.

    Here is the correspondence in case it is of use to others:

    p { margin-bottom: 0.08in; }


    10 July 2011


    Surcharge notice dated 17/06/11


    Dear Sir/Madam,


    I request that you review the surcharge notice for the period 1/2/2011 to 30/4/2011 (copy enclosed). Our records show that the VAT return was submitted online on 6/6/2011 and electronic payment was made on 7/6/2011, within the deadline for electronic payments.


    I have received the following explanation by email:


    Our Reference: XXXXXXX


    Dear Mr Williams

    04.11 Default surcharge

    Thank you for your enquiry of 28 June 2011, regarding the surcharge issued for the 04.11 VAT period.

    As you may be aware, if you pay the VAT due shown on the return electronically, you may receive up to an extra 7 calendar days to submit your return and for your electronic payment to reach us. Payment must be received in our bank account during this time. If the 7th day falls on a bank holiday or on a weekend, payment must be received by the last working day beforehand.

    HMRC does not operate the Faster Payments Service (FPS), which is offered by some banks. When making an electronic payment to HMRC you will need to make sure you make your payment to allow sufficient time for the payment to reach us. You may incur a default surcharge penalty for late payment if your payment does not reach HMRC by the due date.


    Having checked our records, I can advise that we received your payment on 9 June 2011, which is outside the up to 7 calendar days granted for paying electronically.

    If you disagree with either our decision to issue a surcharge, or how the surcharge has been calculated, you may ask us to review our decision by writing to our Review Team at the address below. Our Review Team will consider your request and reply directly with their decision.

    Yours sincerely


    VAT Written Enquiries Officer


    I do not consider this response satisfactory because:


    Funds were made available, and debited from our bank account on 7/6/2011. If they were not shown as cleared by HMRC’s bank until 9th then that is a matter between you and your bank. I do not believe you can lawfully regard the payment as not having been received and levy penalties on that basis.

    (NB my building society also hangs on to funds for three working days after I deposit a cheque. It is very irritating, but I do not complain to the payer about it).


    I do not believe the notice of assessment of surcharge can be lawful, because it does not state whether we are supposed to be in default in respect of the return or the payment, and it does not explain why the surcharge is calculated at a rate of 10%. Surely if you are going to issue a surcharge you must explain the basis for it?

    When I have received surcharge notices previously I have assumed that the return was received late. Now I wonder if you were just quibbling about the time taken for cheques to clear. I would like to know the grounds for previous surcharge notices, and I may wish to challenge those too.


    I believe your requirement that payments should clear by the due date (in respect of either cheques or electronic payments) is a recent one. When was this change made, and when and how was it communicated to taxpayers, and has it been tested at appeal?


    I think I was entitled to assume that either a cheque enclosed with a VAT return, or an electronic payment made within the deadline for online filing, is a payment made on time.



    Yours sincerely


    Gareth Williams





    Date: 15/08/11


    Dear Sir/Madam,


    Default Surcharge Liability: 04:11

    VAT Registration Number XXXXXXXX


    Thank you for your letter dated 10/07/11 in which you requested a review of the default surcharge issued to you regarding the period 04/11 VAT return.


    The Commissioners of HM Revenue and Customs have agreed to cancel the default for the above period. I am today sending instructions for the Surcharge Liability Notice to be removed.


    Please note: Your payment was received late on 09/06/11. HMRC dos not currently operate the faster payment service for BACS and online transactions offered by most UK High Street banks for electronic transfers.


    For future reference please note that when paying by the BACS system under the seven-day extension scheme payments must reach the Customs account by the seventh calendar day. However, if the seventh day falls on a weekend ...  (Blah Blah Blah).




    Does the panel think:


    a) the review officer was feeling generous, or

    b) HMRC do not want the legality of this kind of surcharge tested?


    I think I should write again asking why HMRC do not operate faster payments, and follow up with a letter to my MP.



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    By exhuang
    26th Aug 2011 16:36

    case reference above

    Thank you John.

    BTW, the reference for the Kellswater Reformed Presbyterian Church case noted above is TC01283 rather than TC0128.


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    31st Aug 2011 13:03

    Another taxpayer victory

    Stephen Rich v HMRC (TC 01380) - summary borrowed with thanks from Smith & Williamson's 30 August Tax Update (PDF)

    The case concerned an appeal against a penalty for late notification of chargeability to Self Assessment income tax for 2006/07. The appellant explained that they had relied on his accountant to notify HMRC of his liability to tax in April 2007. The accountant did so in April 2008.

    The Tribunal was satisfied that the accountants sent the form and that it was either lost in the post or mislaid by HMRC on receipt. In considering whether reliance on a third party can amount to reasonable excuse for the purposes of levying any surcharges for late payment, the Tribunal cited the Thorne case and Enterprise Safety Coaches cases where reliance on a third party was accepted as a reasonable excuse. The appeal was allowed.

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    30th Sep 2011 17:57

    Reasonable Excuse rulings

    Re an earlier post of mine, I have now found that the other main reason in the Humphreys case was that online filing for a Partnership Tax Return is not possible using the HMRC system, but required the puchase of 3rd party software, which was not disclosed.

    This reason is wrongly attributed to the Dudley case, which error I discovered only by reading through the full Tribunal Decisions.  However, accountingWEB still offers a great service!

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    11th Apr 2012 10:56

    Another victory

    I appealed against a penalty surcharge on the grounds that the client had no money to pay the tax (illness and redundancy).  He tried to make an agreement with HMRC for a structured payment, had to renegotiate due to a failed house sale and they would not assist.

    HMRC rejected the appeal against the surcharge.  I appealed to the first tier tribunal and HMRC have now agreed to accept the appeal and cancel the penalties.

    Why my client (who can ill afford to pay for anything) has to go through so many hoops is a mystery.  Of course I am the one who ends up out of pocket as I accepted a very reduced fee from the client (happy to help him in the circumstances - incensed at HMRCs treatment).  The cynic in me thinks HMRC are determined someone will pay somewhere.

    It should be easier/cheaper than this for those with a genuine case.

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    By amco
    21st Jul 2012 00:20


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    By exhuang
    16th Jan 2013 20:30


    It appears this scorecard was last updated a year ago.  Is there a scorecard for 2012? Or would it be best to keep all the scorecards on one page?


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