Tribunal – What is a reasonable excuse?
The tribunal recently examined an appeal by two taxpayers against penalties imposed for late filing of income tax and partnership returns. The returns which were due by 31 January 2008 were all filed over 9 months late. The appeal centred on the question as to whether the taxpayers had a reasonable excuse for the tardiness of the returns.
The ‘reasonable excuse’ in this case was that the taxpayers’ previous agent had let them down. Whilst this may have been the case, the tribunal also carefully considered the case put forward by HMRC. HMRC pointed out that the penalty warning notices sent to both taxpayers contain a clearly worded warning that a penalty would be charged for late filings.
HMRC also notified the tribunal that both taxpayers had previously been charged penalties for late filing of returns so should have been well aware of the filing requirements.
The tribunal ultimately dismissed the appeal noting that the reliance on a third party to file a return is not a reasonable excuse. A ‘reasonable excuse’ will only be accepted where the circumstances are outside the control of the taxpayer or the third party (agent). There was some dispute between the previous agents and the taxpayers as to the facts. However, the tribunal was clear that even if the previous agents were totally to blame this was still not a reasonable excuse.
As the tribunal stated, the taxpayers “relied upon what they now regard as a firm of unreliable accountants”. It was up to the taxpayers to appoint new advisers earlier than they had done in order to obtain the help required to comply with their obligations.