No offence is committed and no penalty can be charged if the person satisfies HMRC (or the Tribunal on appeal) that they:-
- Had a reasonable excuse for failing to comply with a notice or obstructing an inspection and
- They remedied the failure, or the obstruction stopped, without reasonable delay after the excuse had ceased.
Although FA 2008, Sch. 36, para. 45 provides no definition of reasonable excuse, HMRC have given the following guidance on what would be considered a reasonable excuse.
‘A reasonable excuse is normally an exceptional event that is beyond the person’s control in the particular circumstances relating to compliance with the notice or the obstruction.
Some examples of what could be a reasonable excuse are:-
- A loss of records through fire, flood or theft
- Serious illness
- A computer breakdown
- A loss of key personnel
- An unexpected cash crisis
- Unavoidable delays beyond the person’s control
An excuse will not necessarily be accepted just because it seems to fit into one of these categories. It depends on the individual circumstances of each case.’
Para. 45 states that there is no reasonable excuse for the failure or obstruction due to:-
- An insufficiency of funds, unless this is attributable to events outside the person’s control – for example the sudden insolvency of a customer who owes a large amount of money
- Reliance on a third party, unless the person took reasonable care to avoid the failure or obstruction – for example the person continues to press their bank for statements but, due to the bank’s delay despite the person’s best efforts, has to ask to postpone an inspection until the statements have been received.
HMRC have given the following circumstances in which they will not accept that the person has a reasonable excuse.
‘There are some situations which we will not normally accept as a reasonable excuse.
- Doing nothing because of a lack of understanding. The person should ask HMRC if they are uncertain of what they need to do or should find out from another source.
- Pressure of work. We expect the person to make time to meet their legal obligations.
- Assembling information or finding documents or assets is too difficult. We expect a person to get whatever help they need to complete the task.
- HMRC did not remind me. The person should do what they are required to do without being reminded.
What is or is not a reasonable excuse is personal to the individual’s abilities and circumstances. Those abilities and circumstances may mean that what is a reasonable excuse for one person may not be a reasonable excuse for another.’
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