CH160600 - Reasonable excuse: ignorance of the law

A person may have a reasonable excuse if they were unaware, they had a legal obligation to do something or misunderstood, an obligation.

If a person has done their best to ensure they are aware of and understand their obligations but missed a particular requirement they may have a reasonable excuse for the failure.

Whether a person might be expected to be aware of and understand an obligation will depend on their abilities and circumstances as well as the nature of the obligation they missed.

In Perrin, the Upper Tribunal noted [2018] UKUT 156 (TC)

“One situation that can sometimes cause difficulties is when the taxpayer’s asserted reasonable excuse is purely that he/she did not know of the particular requirement that has been shown to have been breached. It is a much-cited aphorism that “ignorance of the law is no excuse”, and on occasion this has been given as a reason why the defence of reasonable excuse cannot be available in such circumstances. We see no basis for this argument. Some requirements of the law are well-known, simple and straightforward but others are much less so. It will be a matter of judgment for the FTT in each case whether it was objectively reasonable for the particular taxpayer, in the circumstances of the case, to have been ignorant of the requirement in question, and for how long. The Clean Car Co itself provides an example of such a situation.”

A person will not have a reasonable excuse for being unaware of an obligation that might apply to them simply because HMRC did not contact them directly to tell them about it. It is necessary to consider whether it is objectively reasonable for the taxpayer to be unaware of the obligation and not to have made enquiries about it. If a person encounters a transaction or other financial event with which they are not familiar, it is normally reasonable to expect them to find out about the tax implications.

Dealing with cases where ignorance of the law is a key consideration

Just as with other reasonable excuses, you must consider:

  • the person`s own experience or relevant attributes,
  • their situation at the relevant time, and
  • any relevant external factors to decide whether they have a reasonable excuse for being unaware of or misunderstanding their obligations.

Some people will have more contact with HMRC or other professionals who can advise them on tax and therefore will be more informed about tax matters than others. HMRC provide guidance and information on Gov.uk. The website gives information on how to contact HMRC.

For example, a person who is in self-assessment should refer to the relevant guidance when they complete their tax return every year or seek advice where needed or answers to any questions they have. Whereas a person who only has PAYE income and is not required to make a self-assessment return may have less communication with HMRC or tax advisers and have less awareness of tax. This may mean they are less likely to be aware of changes that affect their tax position.

If a person is uncertain about anything to do with their tax position, they should try to find out from GOV.UK, check with an adviser or HMRC.

So, if a person was unaware of a particular obligation, you should consider whether there was anything that should have prompted the person to check whether they had any tax obligations.

A person who relied on a tax agent to tell them of any tax obligations relevant to their circumstances may have a reasonable excuse if the agent did not tell them about a particular obligation provided:

  • the agent was asked to advise on all tax matters,
  • they were suitably qualified to do so, and
  • they were given all the information the person reasonably thought they needed or asked for by the agent.

If someone receives advice or guidance from HMRC or an adviser, they should try to ensure that they understand it to the best of their ability and check anything they are uncertain about.

As with other reasonable excuses, you should consider whether the failure was remedied without unreasonable delay when the excuse ended. That is, whether the person ought to have become aware of the error and done something about it sooner.