HMRC’s interpretation of “reasonable excuse” questioned in more casesThursday, May 12th, 2011
Penalties overturned where taxpayer has a “reasonable excuse” and HMRC cannot disprove that the excuse is factual.
Two weeks ago we reported two First-tier Tax Tribunal decisions that overturned HMRC’s interpretation of what constitutes a “reasonable excuse”. The “excuses” in those cases involved (1) a taxpayer’s belief that his employer had paid the correct amount of tax, and (2) HMRC’s failure to provide complete and accurate information.
In both cases, the Tribunal judge disagreed with HMRC’s view that a “reasonable excuse” had to involve some exceptional event or circumstance. He stated that the phrase “reasonable excuse” is
“an ordinary expression in everyday usage which must be given its natural meaning. A reasonable excuse may involve an exceptional event but need not necessarily do so.”
A number of similar decisions have also been made by the First-tier Tax Tribunal for the same general reasons, relating to “excuses” involving
- HMRC’s misleading and inaccurate information suggesting that a taxpayer could file returns online when, in fact, in the taxpayer’s circumstances, online filing was not possible (Humphreys v Revenue & Customs)
- wrong codes provided by HMRC to permit online filing and the subsequent failure of HMRC’s helpdesk to reply to email requests for support before the filing deadline (Fernandez v Revenue & Customs)
- the taxpayer’s belief that his accountant would file a P35 while the accountant believed that the taxpayer would file it (but distinguished from an accountant’s failure to file due to neglect) (Leachman (t/a Whiteley and Leachman) v Revenue & Customs)
- HMRC’s failure to send the taxpayer a paper P35 on the basis that the taxpayer had, on one occasion (prior to mandatory online filing), filed a P35 online (NA Dudley Electrical Contractors Ltd v Revenue & Customs)
In all of the above cases, the taxpayer’s appeals against penalties were allowed in full or in part. Also, in two of the cases (Leachman and Dudley), the Tribunal judge relied on the European Court of Human Rights decision in Jussila v Finland (see the item in this newsletter Onus on HMRC to provide P35 not filed online) by requiring HMRC to disprove the reality of the taxpayer’s “excuse”.