Tax Return Penalties

15 Feb
2012

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From 17th February HM Revenue & Customs will begin sending out penalty notices to all taxpayers who failed to file their 2010/11 returns on time. If you file your 2011 self assessment tax return late you will get a penalty, even if you do not owe any tax. The deadlines are 31 October 2011 if you file a paper tax return and 31 January 2012 if you file online. The first penalty is £100.

However, you will not have a penalty if you have a reasonable excuse for filing late. ‘reasonable’ excuse is not defined in law, but HMRC’s guidance explains how they interpret it. There are no hard and fast rules – what is ‘reasonable’ will depend on the facts of the particular situation. But generally speaking, you may have a reasonable excuse if an unexpected or unusual event beyond your control prevented you from meeting the deadline.

Examples of a reasonable excuse might be:

A serious illness made you incapable of filing your tax return.
The death of a partner or close relative shortly before the deadline.
The return was posted in good time but was lost or delayed in the post.
Important documents have been lost, through theft, fire or flood, and can't be replaced in time.

You may also have a reasonable excuse if you had problems with the online filing process, such as:

You received your online Activation Code, User ID or password late, even though you asked for them in good time.
HMRC's own computer system fails.

HMRC will not accept excuses such as:

The tax return is too complicated.
You were too busy.
You didn’t have all the information (if this is the case, you should file your return using provisional figures and send in the final ones as soon as possible).

You must file your return as soon as possible after the reasonable excuse comes to an end. HMRC says it expects to receive it within 14 days of the problem ending. If you delay filing without a reasonable excuse you will get a penalty.

If you file your return late and have a reasonable excuse, the best approach is to tell HMRC about it at the same time as you send in your tax return. You can do this either in a letter or (in the case of online filing) using HMRC’s special form. If you send a letter, it should be headed ‘REASONABLE EXCUSE CLAIM’ in large, bold letters. If you do this soon after the statutory filing date, and HMRC agrees that your excuse is reasonable, there should be time to prevent the issue of a late-fling penalty notice. However, if you are sent a penalty notice, you should appeal against it (within 30 days) and explain your reasonable excuse.

Robert Stone, commented that HMRC’s guidance is not law – it is just their interpretation of what the law means. Ultimately it is for the courts to decide what is a ‘reasonable excuse’, and recently judges have been surprisingly flexible in this. So if you think you have a reasonable excuse for filing late but HMRC does not agree, contact us to discuss your situation – we have had success in reaching agreement on ‘reasonable excuse’ disputes.

Robert Stone can be contacted on 01460 55661 or at robert@robert-stone.co.uk

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