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Covid-19 and reasonable excuse

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Deadlines for responding to information notices, submitting returns and making appeals and payments will be missed due to the direct or indirect effects of coronavirus. HMRC’s updated guidance extends appeal deadlines by three months for those ‘affected by coronavirus’ and acknowledges that coronavirus may be a reasonable excuse. However, advisers should ensure that taxpayers cogently set out their cases using supporting evidence so it is clear how coronavirus prevented them from meeting tax obligations whilst demonstrating that failures were rectified without undue delay after excuses ended.

Reasonable excuse is a key part of the UK’s tax administration system. If a person has a reasonable excuse for failing to do something before a deadline expires then they will not be penalised for that failure. The caveat to this is that they must remedy the failure (e.g. by submitting their tax return) without undue delay after the excuse ceases. The key question is whether taxpayers may have a reasonable excuse if they are affected by the coronavirus pandemic and the UK’s lockdown.

When is reasonable excuse relevant?

If a taxpayer has a reasonable excuse then no penalties are due for:

  • late submission of a tax return (e.g. FA 2009 Sch 55);
  • late payment (FA 2009 Sch 56);
  • failures to notify liability to tax (e.g. TMA 1970 s 7 due to TMA 1970 s 118(2)); and
  • failure to comply with an information notice (FA 2008 Sch 36 para 45).

Additionally, if taxpayers have a reasonable excuse for missing deadlines to appeal against decisions such as a closure notices or assessments, then HMRC will permit late appeals if the other criteria in TMA 1970 s 49 are also met.

However, no late payment penalties are due if taxpayers seek and obtain time to pay agreements with HMRC before fully making the subsequent payments on time in accordance with the agreements’ terms (FA 2009 Sch 56 para 10). Reasonable excuse is therefore not needed if this applies. Similarly, government Covid-19 guidance confirms that penalties are not charged on deferrals of VAT and the 31 July income tax self-assessment payment on account.

Deadlines are also important where a taxpayer is making a claim or election. However, in HMRC v Raftopoulou [2018] EWCA Civ 818, the Court of Appeal decided that the existence of a reasonable excuse does not enable the deadline for making a claim to be extended as making claims is optional whereas TMA 1970 s118(2) applies to something which is ‘required to be done’ (i.e. mandatory obligations). HMRC may, however, exercise its discretion to permit late claims (see HMRC’s Self Assessment Claims Manual at SACM10035 and SACM10040).

What is a ‘reasonable excuse’?

Reasonable excuse is not defined in legislation. Some Acts, such as FA 2009, permit a reasonable excuse defence whilst excluding from ‘reasonable excuse’:

  • insufficiency of funds, unless it is attributable to events outside the taxpayer’s control;
  • reliance on another person, unless the taxpayer took reasonable care to avoid the failure; and
  • failing to rectify the omission without undue delay after the excuse ceased.

We therefore need to consider case law in order to understand what constitutes a reasonable excuse.

The Clean Car Company Ltd v C & E Commrs [1991] VATTR 234 confirmed that a reasonable excuse is a reasonable reason why a person should be excused. An honest and genuine belief that a person met their tax obligations is insufficient on its own. Instead, the tribunal said the objective test could be expressed as ‘was what the taxpayer did a reasonable thing for a responsible trader conscious of and intending to comply with his obligations regarding tax, but having the experience and other relevant attributes of the taxpayer and placed in the situation that the taxpayer found himself in at the relevant time?’

The Upper Tribunal in Perrin v HMRC [2018] UKUT 156 followed this approach, confirming that ‘to be a reasonable excuse, the excuse must not only be genuine, but also objectively reasonable when the circumstances and attributes of the actual taxpayer are taken into account’ (para 49). The UT also helpfully (at para 81) set out the following four-stage method to determine whether a reasonable excuse defence applies:

‘(1) First, establish what facts the taxpayer asserts give rise to a reasonable excuse (this may include the belief, acts or omissions of the taxpayer or any other person, the taxpayer’s own experience or relevant attributes, the situation of the taxpayer at any relevant time and any other relevant external facts).

‘(2) Second, decide which of those facts are proven.

‘(3) Third, decide whether, viewed objectively, those proven facts do indeed amount to an objectively reasonable excuse for the default and the time when that objectively reasonable excuse ceased. In doing so, it should take into account the experience and other relevant attributes of the taxpayer and the situation in which the taxpayer found himself at the relevant time or times. It might assist the FTT, in this context, to ask itself the question “was what the taxpayer did (or omitted to do or believed) objectively reasonable for this taxpayer in those circumstances?”

‘(4) Fourth, having decided when any reasonable excuse ceased, decide whether the taxpayer remedied the failure without unreasonable delay after that time (unless, exceptionally, the failure was remedied before the reasonable excuse ceased). In doing so, the FTT should again decide the matter objectively, but taking into account the experience and other relevant attributes of the taxpayer and the situation in which the taxpayer found himself at the relevant time or times.’

What does HMRC’s guidance say?

HMRC updated its guidance on reasonable excuse (see, confirming that it ‘will consider coronavirus as a reasonable excuse for missing some tax obligations (such as payments or filing deadlines)’. The guidance emphasises that taxpayers must:

  • explain how they were affected by coronavirus when appealing against a penalty; and
  • submit the return or make the payment as soon as they can.

HMRC’s guidance also confirms that coronavirus disruption may be a reasonable excuse for late filing in relation to country by country, common reporting standard and DAC 6 reporting (see HMRC’s International Exchange of Information Manual at IEIM800000).

Practical application for penalty appeals

There are many ways that coronavirus may affect taxpayers. The most obvious is the direct effect of serious illness and death. Some intensive care patients also suffer complications causing life changing physical or mental health after-effects. These may detrimentally affect their abilities to comply with tax obligations, such as their ability to prepare and file tax returns. Similarly, family members may be affected by grief or caring responsibilities, diminishing their ability to deal with their tax affairs for some time.

Coronavirus may affect individuals’ and business’ cash flow, particularly where businesses are unable to operate normally due to lockdown guidance. Insufficiency of funds can be a reasonable excuse where it is caused by something outside the taxpayer’s control. The government’s instruction to stop trading during the lockdown is an example of an event outside of taxpayers’ control. Some businesses are able to continue trading, mostly at reduced levels (such as a restaurant offering takeaway). Individuals may be affected differently; for example, clinically vulnerable and clinically extremely vulnerable people may resume their self-employment more slowly than those without health issues. Additionally, the lockdown’s aftermath could cause a recession which may further detrimentally affect some taxpayers’ finances.

The lockdown closed many businesses, so people did not travel to those premises. Some people were therefore separated from their business records, leaving them unable to comply with HMRC’s information notices. Whilst HMRC paused some compliance checks, thus giving people more time if needed, hopefully few penalties will be charged because an inability to access records due to the lockdown should be a reasonable excuse. Taxpayers returning to premises to find HMRC letters requiring attention should proactively contact HMRC to obtain revised deadlines and rectify the situation without undue delay.

Once HMRC discharges the burden of establishing that events occurred such that a penalty is due, the burden of proof is on the taxpayer to demonstrate that they had a reasonable excuse on the balance of probabilities (Perrin). Tribunals are more likely to find in favour of taxpayers where a clear link is demonstrated between the excuse and how it prevented the taxpayer from meeting their tax obligations throughout the period until the failure is rectified, such as in Bond v HMRC [2013] UKFTT 761.

Determining whether there was a reasonable excuse depends heavily on the facts, including the taxpayer’s circumstances (such as their experience, knowledge and health) at the relevant time. It is not possible to list all situations linked to coronavirus that are reasonable excuses. However, some examples from case law are as follows:

  • Unforeseen logistical problems delaying importation of goods and consequential cash flow issues may be a reasonable excuse (Chameleon Technology (UK) Ltd v HMRC [2018] UKFTT 603).
  • A major customer unexpectedly ceasing to pay invoices, causing unavoidable issues preventing timely payment of tax can be a reasonable excuse (Skuce v HMRC [2018] UKFTT 3).
  • A recession causing the unavoidable shortage of funds may be a reasonable excuse. The question is ‘whether, given the exercise of reasonable foresight, due diligence and a proper regard for the fact that the tax is due, the lack of funds is reasonably avoidable’. Consequently, committing funds to capital investment despite existing tax payment difficulties meant there was no reasonable excuse (Dollar Land (Feltham) Ltd & Another v C & E Commrs [1995] STC 414).
  • Terminal illness coupled with serious sight problems was a reasonable excuse as the director was the sole signatory, but only for six months after which alternative arrangements should be made (Four Colours Print Services Ltd v HMRC [2012] UKFTT 685).
  • Serious illness necessitating hospital appointments may amount to a reasonable excuse (BTN Flooring Ltd v HMRC [2018] UKFTT 45 and Woolf v HMRC [2014] UKFTT 24).
  • Mental health issues were a reasonable excuse as their severity meant the taxpayer was unable to attend to his finances, taxes or instruct someone to prepare his tax returns (Hindocha v HMRC [2017] UKFTT 373).
  • Serious illness of a close relative may be a reasonable excuse (Frost Group Ltd v HMRC [2012] UKFTT 678).
  • Being unable to obtain her partner’s agreement to the business accounts and partnership returns as she was abroad receiving medical treatment was a reasonable excuse for late filing (Ansham White Solicitors v HMRC [2019] UKFTT 366).

What about appeals?

New HMRC guidance ( confirms that individuals and businesses ‘affected by coronavirus’ can have an extra three months to appeal any decision dated February 2020 or later. For example, if HMRC issued a discovery assessment on 1 March 2020 then a person affected by coronavirus has until 30 June 2020 to appeal. This extended appeal period also applies to penalty appeals and to appeals to the FTT, despite the FTT’s directions for a further general stay in relation to certain proceedings dated 21 April 2020 ( stating that the 30 day deadline must be met. The latter is because HMRC’s guidance indicates that it will not object to a late appeal if it is within the timeframe set out above. This is a welcome development, giving businesses more time to access premises to deal with their post and obtain professional advice as needed.

HMRC’s guidance uses the phrase ‘affected by coronavirus’ without defining or explaining it. However, HMRC’s SEISS guidance ( gives examples of businesses being ‘adversely affected by coronavirus’ if:

  • people are unable to work because they are shielding, self-isolating, on sick leave or have caring responsibilities because of coronavirus; or
  • they scaled down or temporarily stopped trading because their supply chain was interrupted, staff were unable to work or there were fewer customers.

HMRC advises that appeals should be submitted ‘as soon as you can’. Taxpayers must explain that the delay is because of coronavirus. Both these steps meet the requirements within which HMRC shall permit late appeals because TMA 1970 s 49(5) requires a reasonable excuse for the late appeal and s 49(6) requires that HMRC is satisfied that the request for a late appeal is made without undue delay after the excuse ceases.

Depending on how long businesses remain closed under lockdown rules, conceivably the three-month period may need to be further extended. However, the statutory late appeal provisions (TMA 1970 s 49) may be sufficient to give taxpayers additional time to lodge appeals where that is reasonably required, particularly when coupled with the three stage approach in Martland v HMRC [2018] UKUT 178, supported by evidence.

What evidence could be kept?

HMRC’s guidance does not clarify how much detail HMRC requires in order to accept that taxpayers had a reasonable excuse or could make late appeals as they were affected by coronavirus. The burden of proof is on taxpayers, so they need to be ready to provide sufficient evidence (ideally documents, backed up by witness evidence) to support their case. Failure to provide evidence makes it impossible for tribunals to conclude that a reasonable excuse existed (see, for example, Baker v HMRC [2018] UKFTT 763).

Evidence is needed showing what happened, how the excuse prevented the taxpayer from meeting their tax obligations at the time and whether the situation was remedied without undue delay after the excused ended. Examples of supporting evidence for appeals (especially to the tribunal) include:

  • doctors’ letters or other medical evidence;
  • evidence of lockdown regulations (for example, to evidence that post could not be retrieved from shut premises as that was not an essential reason to leave home and to support evidence of profit reductions);
  • accounts, bank statements, etc.; and
  • applications for government and bank grant and loan applications and their outcome (particularly refusals).


Existing case law on reasonable excuse may provide sufficient cover for people affected by coronavirus. HMRC’s clarification via its guidance is nevertheless welcome. It is important that advisers help clients:

  • collate evidence contemporaneously (rather than leaving it until the appeal in several months’ time);
  • clearly explain how coronavirus affected their ability to meet deadlines; and
  • supply supporting evidence for appeals so that it is clear to HMRC (and, if necessary, the tribunal) how coronavirus prevented taxpayers from meeting their tax obligations.