Whether a taxpayer has a reasonable excuse for a failure to comply with their obligations depends on the circumstances in which the failure arose, including the taxpayer's experience and their situation at the time. Recently, a taxpayer obtained permission to make a late appeal against a penalty for late payment of tax, and also succeeded in overturning the penalty.
The taxpayer, who had never previously completed a tax return, had submitted his return and paid the tax owed on 26 April 2023, within three months of being issued a notice to file. However, the payment of tax was due on 31 January. HM Revenue and Customs (HMRC) issued a penalty notice on 2 May. He attempted to appeal it on the same day, but mistakenly completed the form for appealing a late filing penalty instead of a late payment penalty. HMRC rejected his appeal on 21 June and sent him the correct form. He completed it 17 days later, but HMRC rejected his appeal as being outside the 30-day time limit.
Allowing the taxpayer's application to make a late appeal, the First-tier Tribunal (FTT) found that the delay, although significant, was not serious. He had made a genuine mistake in an otherwise timely initial appeal. Over a month had passed before he was notified that he had used the wrong form, and he had then rectified the error in a timely manner. His appeal to the FTT had also been lodged promptly.
Ruling on the appeal against the penalty itself, the FTT was satisfied that it had been correctly notified to the taxpayer. The payment of tax had been made on 26 April 2023, whereas it should have been made by 31 January. The penalty was therefore due and had been calculated correctly.
The FTT then addressed whether the taxpayer had a reasonable excuse for late payment. Reviewing the contents of webchats between the taxpayer and HMRC advisers, the FTT found that he had genuinely believed he had three months to both file his tax return and pay the tax due. He had been new to self-assessment and was committed to complying with his tax obligations. It was clear from the webchats that he did not want to miss any deadlines. Considering all the evidence, including the taxpayer's experience and knowledge and his situation at the relevant time, the FTT accepted that his belief that he had three months to pay the tax due was objectively reasonable. The appeal was allowed and the penalty set aside.