Understanding reasonable excuses for late tax returns

Meeting tax obligations is an essential responsibility for individuals and businesses alike. However, there are circumstances that may prevent a person from submitting their tax return on time. In such cases, taxpayers may be able to claim a ‘reasonable excuse’ for their late submission to avoid penalties. Understanding what qualifies as a reasonable excuse is key to ensuring fair treatment and avoiding unnecessary penalties.

There is no statutory definition of reasonable excuse, which is instead assessed based on the facts of each individual case. Whether or not a person has a reasonable excuse depends on the specific circumstances surrounding their failure to meet the tax obligation, as well as the person’s personal situation and abilities. What might be a reasonable excuse for one individual may not be the same for another.

When evaluating a reasonable excuse, it is important to consider what a reasonable person with similar characteristics and intentions – someone who genuinely wanted to comply with their tax obligations – would have done in the same situation. This helps determine whether the actions taken were reasonable.

In making this assessment, it is also important to consider the unique circumstances of the taxpayer, including factors such as age, experience, health or any specific difficulties they may be facing. A taxpayer who prioritises compliance with their tax obligations and makes every effort to ensure accurate and timely returns may still have a reasonable excuse if their personal situation warrants it. The test of reasonable excuse is an objective one. There is no one-size-fits-all answer and each situation should be assessed on its own merits.

Examples of reasonable excuses

1. Medical emergencies: physical illness can be considered a reasonable excuse for failing to meet a tax obligation, but only if the illness is serious enough to prevent the person from meeting their obligation around the deadline. This would typically include life-threatening or severe conditions such as a coma, heart attack or stroke.

If a person knows in advance that they will be hospitalised or undergoing a long recovery, they should have taken appropriate measures to ensure their obligations are met. However, situations like emergency hospital admissions or short-notice illness may justify the failure to make arrangements.

The serious illness of the person, their partner or a close family member may also be accepted as a reasonable excuse if it consumed the person’s time and resources, preventing them from meeting the obligation or arranging for someone else to handle it.

For physical illnesses, the following should be considered:

• whether the condition had a substantial, long-term adverse effect on the person’s ability to comply
• the impact of the illness or disability on their ability to meet the deadline
• if the person took reasonable steps to make alternative arrangements in advance, particularly if the illness was foreseeable or recurring
• if the illness is short-term or the person has a fluctuating condition, it is reasonable to expect them to plan ahead. In contrast, for more severe conditions like multiple heart attacks or strokes, it may be a reasonable excuse for more than one occasion, provided the recovery process is prolonged.

Example 1:

Mr. X needs hip surgery and expects to be in hospital for a few months. He is expected to make arrangements for his tax obligations in advance. If he fails to do so, he would not have a reasonable excuse unless his surgery and recovery process hindered him from making such arrangements.

Example 2:

Mrs. Y has suffered a stroke and was unexpectedly admitted to the hospital. She had no chance to make arrangements before the deadline and, in this case, her physical illness would be accepted as a reasonable excuse.

2. Reasonable excuse – mental health: mental health conditions can be complex and vary widely, ranging from anxiety and depression to personality disorders and beyond. For mental health to be considered a reasonable excuse, it’s important for the person to explain, with the help of any supporting letters or documents, how the condition directly affected their ability to meet their tax obligations. Key matters to consider include:

• What is the nature of your mental health condition?
• How did it affect your ability to manage tax affairs?
• Did it prevent you from dealing with HMRC or communicating with us?
  was there anyone who helped you manage your tax affairs (family, friend, or agent)? If so, what arrangements were made?

In some cases, HMRC may need to request evidence of the condition, such as a doctor’s note or a report from a mental health professional. Evidence of a mental health condition can come from various sources, including:

• a doctor
• a mental health professional
• a social care professional
• a voluntary sector organisation (eg, Citizens Advice, TaxAid).

If the condition is fluctuating, it’s important to assess whether reasonable steps were taken to ensure tax obligations were met, or whether the condition prevented such steps.

Example
Mr. Y, a self-employed builder, was diagnosed with post-traumatic stress disorder (PTSD) in July 2018, which significantly impacted his ability to make decisions. As a result, he could not file his tax return by the 31 January 2020 deadline or appoint an agent to assist him. After receiving treatment, he recovered enough to make decisions, appoint an agent, and return to work in May 2020. Mr. Y completed his return in June 2020 and paid the tax due shortly after. He provided medical evidence, including the period of treatment and the impact it had on his ability to meet his obligations, and HMRC accepted his reasonable excuse. Therefore, no penalties were imposed as he completed his obligations soon after his illness ended.

3. Bereavement: the death of a close family member shortly before the deadline may also qualify as a reasonable excuse.

4. Natural disasters: events like floods or fires that disrupted your ability to access necessary documents or file on time are often accepted as reasonable excuses.

5. Reliance on another person: the law states that relying on someone else to fulfil an obligation is not considered a reasonable excuse unless the person took reasonable care to prevent the failure. When a task is delegated to another, the individual remains responsible for ensuring it is completed and cannot claim a reasonable excuse simply because the person they relied on failed to do it.

For reliance on another person to count as a reasonable excuse, the individual must have taken reasonable care in managing the task. This includes clearly explaining what needs to be done, setting deadlines, and regularly checking on progress. The person should be able to demonstrate what actions they took to ensure the task was completed and, typically, understand why the failure occurred.

If the person has taken reasonable steps and still fails to meet their obligation due to the other person’s failure, they may have a reasonable excuse.

However, they must rectify the issue without unreasonable delay once the excuse ends.

Other examples where reliance on another person may give rise to a reasonable excuse include:

• agent illness or bereavement of the agent or of the agent`s close family member or partner
• person had taken advice from an adviser and/or counsel and they appeared suitably qualified to give that advice and the person had provided all the relevant information
• person engaged a new adviser but there was a delay in obtaining paperwork/information from the previous adviser.

6. Ignorance of the law: a person may have a reasonable excuse if they were unaware of their legal obligations or misunderstood a requirement. If someone has made a genuine effort to understand their responsibilities but missed a particular requirement, this could be considered a reasonable excuse.

Whether it is reasonable for someone to be unaware of their obligations depends on their abilities, circumstances and the nature of the obligation missed. While the principle ‘ignorance of the law is no excuse’ often applies, certain legal requirements are more complex or less widely known and, in these cases, it may be reasonable for someone to not be aware of them.

HMRC typically does not notify taxpayers directly about every obligation, so it’s important to assess whether it was reasonable for the person to be unaware of the obligation or whether they should have made further inquiries. For example, if a person is involved in a financial transaction they don’t fully understand, it would generally be reasonable for them to seek advice about the tax implications.

When evaluating ignorance of the law as a reasonable excuse, HMRC will usually consider:

• the person’s experience, relevant attributes and situation at the time
• any external factors that might have affected their awareness or ability to comply
• whether they had any reasonable means to learn about the requirement (eg, via HMRC, advisers).

A person with regular communication with HMRC or tax professionals will likely be more informed than someone with limited engagement. For example, someone in self-assessment should be more aware of their obligations than someone with only PAYE income who doesn’t file a self-assessment return.

If the person relied on a tax agent for advice, they might have a reasonable excuse if the agent failed to inform them of a specific obligation, provided the agent was qualified, was asked to handle all tax matters, and was given all necessary information.

Ultimately, as with other reasonable excuses, HMRC will assess whether the person took prompt action to correct the failure once they became aware of it. If they took too long to address the issue after the excuse ended, it may not be considered a reasonable excuse.

7. Technical failures: service issues with HMRC Online Service. A reasonable excuse may be accepted in the following situations:

• HMRC Online Service does not accept the return: if the person or their agent was unable to use HMRC’s online services, they should provide the error message or details of the issue, along with the date they were unable to file online. HMRC does not intend to penalise customers who genuinely attempted to file online, so each case should be considered based on its specific circumstances, particularly if the error message was not provided.
• delayed receipt of online activation codes (PINs): a reasonable excuse may be accepted if the person registered for online services on or before the filing deadline but did not receive their activation PIN in time to file. Provided they filed online as soon as the PIN was received, this would be considered a valid reason for the delay.
• delayed receipt of a replacement ID, new password, or activation code: if a person applied for a replacement User ID, password, or activation code before the deadline and filed their return promptly once they received the necessary details, this would be considered a reasonable excuse. However, if the application was made after the deadline, this would not be accepted as a reasonable excuse.
• agent account cancelled due to fraudulent activities: if an agent’s account was cancelled by HMRC due to fraudulent activities, this may be considered a reasonable excuse for delays in filing, provided the person or agent can demonstrate they were unable to file due to the cancellation and took appropriate steps to resolve the issue as soon as possible.

8. Waiting for the overlap relief figure from HMRC: if you applied for overlap relief figure through HMRC’s tool on or before the filing deadline of 31 January 2025 and did not receive a response from HMRC, you have until 28 February 2025 to file your return without incurring a late filing penalty.

The taxpayers are advised that they should enter a provisional estimated figure if they do not know the actual figure for the overlap relief. Once they have their final figure they should amend their return. Interest will still accrue from 1 February 2025 on outstanding amounts of tax.

How to appeal

To appeal against a late filing penalty, you must first ensure that your tax return has been submitted. HMRC will not consider appeals for penalties relating to outstanding returns. Once filed, appeals must typically be made within 30 days of receiving the penalty notice.

You can submit your appeal through your Government Gateway account, via an appeal form included with your penalty notice, or by writing directly to HMRC with supporting evidence

When submitting your appeal, it is essential to include:

• your unique taxpayer reference (UTR)
• a detailed explanation of why you missed the deadline
• any supporting evidence (eg, medical records, proof of technical issues)
• your signature if submitting by post.

Appealing against late filing penalties is not guaranteed, but understanding what HMRC considers a reasonable excuse can significantly improve your chances of success. By acting quickly, providing thorough explanations and evidence, and ensuring compliance moving forward, taxpayers can navigate this process effectively while minimising financial penalties.