CH160100 - Reasonable excuse: overview

A person who:

  • fails to give notice of chargeability to tax, or
  • does not file on time, or
  • fails to pay on time or to meet certain other time bound obligations

may become liable to a penalty.

A person will not be liable to a penalty for a failure if they have:

  • a reasonable excuse, and
  • put the failure right without unreasonable delay after the excuse had ended.

There is no statutory definition of ‘reasonable excuse’ or ‘unreasonable delay’. Both phrases must be given their ordinary meaning. Each case must be considered on the facts, and in view of the person’s abilities and circumstances.

HMRC considers reasonable excuse to be something that stops a person from meeting a tax obligation despite them having taken reasonable care to meet the obligation.

To be a reasonable excuse for failing to meet an obligation, the excuse must exist on or before the date of the obligation. If the excuse arises after that date, the obligation has not been met and it cannot be a reasonable excuse for that failure.

The onus is on the person who failed to comply to satisfy HMRC that they had a reasonable excuse at the time of the failure. Whether the person has a reasonable excuse will depend on the circumstances in which the failure occurred and the individual experience, knowledge and other attributes of the person who has failed.

A combination of events, that on their own may not be a reasonable excuse, may be a reasonable excuse when considered together. If there is a reasonable excuse it must exist throughout the period of default.

If the circumstances that causes the person to have a reasonable excuse ends, we will treat the excuse as continuing if the person

  • puts right the action, and
  • does so without unreasonable delay after the excuse ends.

Each case will depend on the facts and circumstances and must be judged on its own merits.

You need to carefully consider the point at which a reasonable excuse ends and the action the person took after that time to correct the failure or wrongdoing.

This means that if the person had a reasonable excuse for a failure and corrected that failure without unreasonable delay, then they will not have to pay a penalty.

But if the person does not put right the failure without unreasonable delay after the excuse has ended, they will not have a reasonable excuse and will remain liable to a penalty.

If we do not accept the person has a reasonable excuse, they have the right to appeal against the penalty and can request a statutory review to challenge our view about their reasonable excuse.

You need to be confident from the outset that our view has appropriate evidence should it go to tribunal. You must have also considered whether ‘special circumstances` might apply, depending on the penalty legislation that applies. The aim of the penalty regime is to improve future compliance.

You must take note of any specific legislation on reasonable excuse which applies. The requirement to correct certain offshore tax non-compliance (known as the Requirement to Correct or RTC) introduced in Section 67 and Schedule 18 0f the Finance (No. 2) Act 2017 has specific provisions relating to reasonable excuse in RTC cases where the taxpayer is liable to a Failure to Correct (FTC) penalty. Guidance on reasonable excuse in RTC cases can be found at CH123300 and Requirement to Correct tax due on offshore assets.

Note: The law does not require that a reasonable excuse is based on an unforeseeable or inescapable event and therefore we should avoid using this phrase or any similar phase.