PAYE58410 - P11D processing: P11D(b) penalty appeals: consideration by a higher officer

Apart from appeals on the amount of the penalty, the employer will need to show that the conditions of the TMA 70/S118 (2) apply to enable the penalty to be discharged. The employer, therefore, has to show that there was a reasonable excuse for the failure to submit the employer’s P11D(b) annual return on time and that this was remedied as soon as could reasonably be expected after the excuse had ceased.

The question of the reasonable excuse is to be judged as at the statutory filing date of 6 July (This content has been withheld because of exemptions in the Freedom of Information Act 2000).

There is no statutory definition of reasonable excuse, which ‘is a matter to be considered in the light of all the 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.

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, 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)

‘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?’

Whether an employer has a reasonable excuse will depend on the particular circumstances in which the failure in respect of the P11D(b) occurred and the abilities of the person who has failed. What is a reasonable excuse for one person may not be a reasonable excuse for another person.

An unexpected combination of events may together be a reasonable excuse.

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

It is not possible to give a comprehensive list of what might be a reasonable excuse as each case will depend on the specific circumstances.

PAYE58415 does however give some examples of what might be a reasonable excuse and PAYE58420 gives some examples of what might not.

Successful claims for a reasonable excuse should not be frequent. Nevertheless there will be some employers who have taken reasonable care to complete the employers P11D(b) annual return on time but fail to do so as a result of their specific circumstances. If you are satisfied that is the case, then you should agree under TMA70/S54 that the penalty be reduced to nil and amend the determination accordingly.

You may be able to make your decision from information given in the letter appealing against the determination but often it will be necessary to obtain the relevant facts before coming to a decision. It will usually be quicker and easier to try to obtain further information by phone or interview.

If, after careful consideration of the excuse, you consider that the appeal should not be allowed because there was no reasonable excuse, you should explain why to the employer and seek the withdrawal of the appeal. You should take care to explain to the employer that they still have the right of appeal to the tribunal against the penalty determination if unable to agree with you.

If the appeal is withdrawn, the charge will automatically be restored after you record the end result of the appeal. Otherwise the appeal should be listed for hearing by the tribunal without delay (see ARTG4830).

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)