Tribunal – ‘Reasonable excuse’ due to reliance on accountants
The Tribunal recently allowed an appeal against penalties imposed by HMRC for failure to provide information relating to research and development (R&D) activities and R&D tax claims. The taxpayer had claimed the ‘reasonable excuse’ defence as they were reliant on their accountants to respond to HMRC’s requests..
HMRC had opened an enquiry into the taxpayer’s tax return for the accounting period to 30 April 2005 which had been submitted to HMRC on 19 February 2008, some 17 months late.
In August 2008 HMRC opened an enquiry and requested information related to the R&D claims as well as sundry other analyses and evidence that dividend payments had been properly authorised. In October 2008 HMRC opened another enquiry, this time into the Appellant’s tax return for the accounting period to 30 April 2007. Penalty noties were later issued for failure to provide the relevant information.
The taxpayer claimed to have a ‘reasonable excuse’ for failure to provide the information requested due to reliance on a third party (their accountants). HMRC was unwilling to accept that this was sufficient justification in this case – and sought to distinguish it from the decision in Rowland v HMRC  STC (SCD) 536.
The crux of this case centred on the fact that part of the information requested related to a R&D tax relief claim that was not a simple and straightforward task to satisfy.
The Tribunal found that the taxpayer was correct to rely on a third party with specialist knowledge to perform this task.The Tribunal therefore accepted the taxpayer’s arguments that they had a ‘reasonable excuse’ and allowed the appeals. The penalties were set aside.