Reasonable excuse: Top five cases of 2015 so far
The Tolley team outlines the top five cases on reasonable excuse for the year so far.
1. Where reliance on the accountant was reasonable excuse
In Sudar Shini Mehendran v HMRC  UKFTT 278 (9 June 2015), the FTT found that a taxpayer had a reasonable excuse for the late payment of CGT after Mrs Mahendran relied on her accountant to have the relevant specialist knowledge and expertise to handle her tax affairs.
Why it matters to you: This case offers a useful illustration of the way FA 2009 Sch 56 para 16(1)(b) operates. Taxpayers wishing to rely on this provision should ensure that, like Mrs Mahendran, they keep records of communications (or failed communications) with their tax agents.
2. Where reliance on an advisor was not a reasonable excuse, but penalties could be mitigated
In Jaswinder Dhariwal v HMRC  UKFTT 0041 (27 January 2015), the FTT found that reliance on an accountant was not a reasonable excuse after a tax return for the previous year was not submitted despite indication from Mr Dhariwal's accountant and several letters from HMRC.
Why it matters to you: This case focuses on the distinction between technical tax advice, reliance on which can be a reasonable excuse, and the failure to carry out administrative tasks by a tax agent which cannot give rise to such a claim. It also suggests that even where reasonable excuse is not established, mitigating circumstances can reduce the penalty. Such circumstances should therefore always be put forward.
3. Agent's late registration by HMRC was a reasonable excuse
In Perfect Permit v HMRC  UKFTT 171 (23 April 2015), the FTT found that the late registration of an agent by HMRC constituted a reasonable excuse for the late submission of employer annual returns.
Why it matters to you: Like the previous case, this case is a rare example of 'reasonable excuse' being successfully pleaded. It also confirms that a system failure by HMRC can constitute a reasonable excuse.
4. Where IT issues constituted a reasonable excuse
In Joanna L Porter t/a Crafty Creations v HMRC  UKFTT 0170 (23 April 2015), the FTT found that IT issues constituted a reasonable excuse for the late filing of a return after Ms Porter repeatedly contacted HMRC prior to the deadline explaining that she was unable to pay the tax due online.Why it matters to you: Cases in which a taxpayer successfully establishing a reasonable excuse are few and far between. This case may prove a useful precedent to any taxpayer who files a return late due to IT issues
5. Ignorance of the law is no reasonable excuse
In The Bunker Secure Hosting v HMRC  UKFTT 146 (14 April 2015), the FTT found that being unaware of the penalty regime was not a reasonable excuse.
Why it matters to you: The taxpayer accepted that it was aware of the due date for payment. Therefore the fact that he was not aware of the penalty regime could not constitute a reasonable excuse.