HMRC reveals ‘Top 10 oddest excuses’ for late tax returns

HMRC has revealed the ‘Top 10 oddest excuses’ for sending in a late return.

The following bizarre, exotic and flimsy excuses have all been used by tardy taxpayers:

• My pet goldfish died (self-employed builder)
• I had a run-in with a cow (Midlands farmer)
• After seeing a volcanic eruption on the news, I couldn’t concentrate on anything else (London woman)
• My wife won’t give me my mail (self-employed trader)
• My husband told me the deadline was 31 March, and I believed him (Leicester hairdresser)
• I’ve been far too busy touring the country with my one-man play (Coventry writer)
• My bad back means I can’t go upstairs. That’s where my tax return is (a working taxi driver)
• I’ve been cruising round the world in my yacht, and only picking up post when I’m on dry land (South East man)
• Our business doesn’t really do anything (Kent financial services firm)
• I’ve been too busy submitting my clients’ tax returns (London accountant)
• All of these people and businesses received a £100 penalty from HM Revenue and Customs (HMRC) for filing late. They appealed against the decision using these excuses, but were unsuccessful.

Penalties for late self-assessment returns

An individual encountering a tax-related situation faces a sequence of penalties, as follows:

• Initially, there is a fixed penalty of £100, which is applicable even when there is no tax owed (with the exception of a valid reasonable excuse).
• After three months, daily penalties accumulate at a rate of £10 per day, capping at a maximum of £900.
• Once six months have passed, an additional penalty is incurred, equivalent to 5% of the tax amount due or £300, whichever is higher.
• Upon reaching the 12-month mark, another penalty of either 5% or £300 is imposed, depending on which amount is greater.

Additionally, late payment of tax results in extra penalties, including:

• At 30 days late, a penalty of 5% of the unpaid tax.
• At 6 months late, an additional penalty is imposed.
• At 12 months late, yet another penalty is incurred, each calculated as a percentage of the outstanding tax amount.

Reasonable excuse

A taxpayer is responsible for being aware of the relevant deadlines and making a diligent effort to fulfill their obligations by submitting accurate tax returns.

Should you encounter a tax penalty due to late filing, late payment, or an error, you have the option to appeal if you can demonstrate a reasonable excuse. It’s important to note that our tax legislation does not provide a precise definition for what constitutes a “reasonable excuse.” In most cases, it should involve an unforeseen or exceptional event beyond your control that hindered your ability to meet the deadline.

HMRC guidance

HMRC guidance (https://www.gov.uk/tax-appeals/reasonable-excuses) gives acceptable reasonable excuses for filing an online return late, such as:

What may count as a reasonable excuse

A reasonable excuse is something that stopped you meeting a tax obligation that you took reasonable care to meet, for example:

• 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 or mental illness you have
• you were unaware of or misunderstood your legal obligation
• you relied on someone else to send your return, and they did not
• You must send your return or payment as soon as possible after your reasonable excuse is resolved.

What will not count as a reasonable excuse

The following will not be accepted as a reasonable excuse:

• 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

Related Case laws

As there are many forms of reasonable excuse it is something that is not just limited to ‘unforeseeable or exceptional circumstances’. If HMRC turns down your appeal, even after a review, you can ask for the appeal to be heard by the Finance and Tax Tribunals . The Tribunal looks at the facts and circumstances and makes a decision.  As the test is subjective, there will always be variations in interpretation of what is reasonable or not.

Cases that have been successful

These include the following:

• Emotional distress (Sarah Corns v HMRC [TC01701], heard in November 2011) – Separation, husband’s alcoholism.
• Serious illness, cancer treatment (Joanna Woolf v Revenue & Customs [2014] UKFTT 024 (TC)) – Illness hindered the taxpayer’s ability to pay.
• Reason for impecuniosity – (Barron v Revenue & Customs [2011] UKFTT 482 (TC) (15 July 2011) – Unable to pay the tax due on time, but there was a valid reason for the taxpayer’s shortage of funds.
• Emergency for broken hip – (Tower Perkins Services and Products v HMRC [2011] UKFTT 481) – The taxpayer’s appeal was allowed in part.
• Genuine mistake – (Leachman v HMRC [2011] UKFTT 261) – The taxpayer and accountant each thought the other had filed the return.
• Online filing facility did not work – (Louise Fernandez v HMRC [2011] UKFTT 259) – The taxpayer was denied entry to HMRC’s online facility.
• Health – (Martin Stone v HMRC [2010] UKFTT 414) – The failure was compounded by HMRC’s failure to send the right forms.

Unsuccessful cases

These include the following:

• High blood pressure illness – (RFL Consultants v HMRC [2011] UKFTT 431) – The timing of the illness did not correspond to the timing of default.
• Return submitted on time, payment eight days late – (Grant Vehicle Repairs v HMRC [2011] UKFTT 420) – Someone else could have paid.
• Online system blamed for delay – (Toolbox.net v HMRC [2011] UKFTT 363) – It was improbable that HMRC’s system would not generate confirmation of the return.
• Other more exotic excuses that resulted in a penalty include: my pet goldfish died (self-employed builder); My wife won’t give me my mail (self-employed trader); My bad back means I can’t go upstairs, and that’s where my tax return is (a working taxi driver).

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