CH160200 - Reasonable excuse: what ‘reasonable excuse’ means

‘Reasonable excuse’ has its ordinary meaning and is not specific to HMRC penalties. Tax law does not provide a comprehensive list of circumstances which will or will not be a reasonable excuse.

There is no statutory definition of reasonable excuse, which “is a matter to be considered in the light of all circumstances of the particular case” (Rowland v HMRC [2006] STC (SCD) 536 at paragraph 18). For example, in Anthony Wood, trading as Propaye v HMRC (2011 UK FTT 136 TC 001010), the First-tier Tribunal applied this definition in their decision released on 23 February 2011.

Whether a person has a reasonable excuse depends on the circumstances in which the failure to meet the obligation occurred, as well as the circumstances and abilities of the person who has failed in their tax obligations. What is a reasonable excuse for one person may not be a reasonable excuse for another person.

When considering this you must look at what a reasonable person with the same attributes and abilities who wanted to comply with their tax obligations would have done in the same circumstances and determine if the actions of the person met that standard.

If there is a reasonable excuse it must exist throughout the period of default.

How HMRC interprets ‘Reasonable Excuse’

HMRC consider reasonable excuse to be something that stops a person from meeting a tax obligation despite them having taken reasonable care to meet that obligation. It is necessary to consider what a reasonable person with the same experience and attributes as the taxpayer, who wanted to meet their obligation, would have done in the same circumstances and decide if the action of the person met that standard, as outlined by Judge Medd in The Clean Car Company (LON/90/138X)

“In reaching a conclusion the first question that arises is, can the fact that the taxpayer honestly and genuinely believed that what he did was in accordance with his duty in relation to claiming input tax, by itself provide him with a reasonable excuse. In my view it cannot. It has been said before in cases arising from default surcharges that the test of whether or not there is a reasonable excuse is an objective one. In my judgment it is an objective test in this sense.

One must ask oneself: was what the taxpayer did a reasonable thing for a responsible trader conscious of and intending to comply with his obligations regarding tax, but having the experience and other relevant attributes of the taxpayer and placed in the situation that the taxpayer found himself at the relevant time, a reasonable thing to do? Put in another way which does not I think alter the sense of the question; was what the taxpayer did not an unreasonable thing for a trader of the sort I have envisaged, in the position that the taxpayer found himself, to do?

It seems to me that Parliament in passing this legislation must have intended that the question of whether a particular trader had a reasonable excuse should be judged by the standards of reasonableness which one would expect to be exhibited by a taxpayer, but who in other respects shared such attributes of the particular appellant as the Tribunal considered relevant to the situation being considered.

Thus, though such a taxpayer would give a reasonable priority to complying with his duties in regard to tax and would conscientiously seek to ensure that his returns were accurate and made timeously, his age and experience, his health or the incidence of some particular difficulty or misfortune and, doubtless, many other facts, may all have a bearing on whether, in acting as he did, he acted reasonably and so had a reasonable excuse.”

The Upper Tribunal endorsed this approach in Marlow Rowing Club v Revenue & Customs, [2020] UKUT 20 (TCC)

“As is clear from the approach to the question of reasonable excuse in Clean Car and indeed in Perrin, the judgment of whether a taxpayer has a reasonable excuse will depend on the evaluation of the particular facts relevant to the taxpayer’s circumstances. There is no benefit in focussing on a selection from the multitude of FTT decisions on reasonable excuse, each of which will turn on their facts, to extract more specific points of principle.”

This means that all relevant facts must be considered together to make an overall assessment of each case. There are examples of reasonable excuse at CH160300, and more detailed guidance about how HMRC considers reasonable excuse in certain circumstances at:

The relevant case law on reasonable excuse can be found at CH160950.