In certain circumstances, HM Revenue & Customs (“HMRC”) can levy penalties against a taxpayer. This can be for inaccuracies in a tax return, which will be a percentage of the tax loss based on perceived taxpayer behaviour, or for compliance failings, such as the late filing of a tax return or the late payment of tax, which will either be a fixed penalty or fixed percentage of the tax at stake levied at certain intervals after the due date. Where a taxpayer has been particularly delinquent in their filings or payments and the tax at stake is large, these penalties can become quite significant.
However, unlike the tax at stake or interest on late paid tax, these penalties can be appealed if the taxpayer has a reasonable excuse for their failings. It is generally easier to successfully appeal the behaviour related penalties than it is the compliance penalties. HMRC’s view of what was considered a reasonable excuse is as follows:
- your partner or another close relative died shortly before the tax return or payment deadline
- you had an unexpected stay in hospital that prevented you from dealing with your tax affairs
- you had a serious or life-threatening illness
- your computer or software failed just before or while you were preparing your online return
- service issues with HM Revenue and Customs (HMRC) online services
- a fire, flood or theft prevented you from completing your tax return
- postal delays that you could not have predicted
- delays related to a disability you have
They will not accept the following:
- you relied on someone else to send your return and they did not
- your cheque bounced or payment failed because you did not have enough money
- you found the HMRC online system too difficult to use
- you did not get a reminder from HMRC
- you made a mistake on your tax return
In recent years, HMRC has become less and less inclined to accept ‘reasonable’ excuses and although there is recourse to the Tribunal should you not agree with HMRC’s position, this is a stressful and costly exercise. It is therefore imperative that any penalty appeal is properly considered and put across to HMRC with supporting evidence where possible, and where necessary this should be obtained. Barnes Roffe LLP has recently successfully appealed late payment penalties totalling in excess of £500,000 on grounds not listed by HMRC as being what they consider to be a reasonable excuse. This was achieved through a careful and considered appeal and obtaining compelling expert evidence to support the position. It is important to note that any appeal must be made to HMRC within 30 days, therefore, should you be subject to HMRC penalties, please contact your Barnes Roffe LLP partner immediately to discuss the best way forward.
