As you probably know, the penalty for the failure to submit the return is £100, and for the first time, the penalty is due whether or not there is any tax to pay. The deadline was 31 January 2012, although you may have noticed that the deadline was extended to 2 February this year after HMRC’s call centre announced a strike on 31 January.
Even if the two day extended deadline does not provide enough time to allow the tax return to be submitted, there is always the plea of 'reasonable excuse'. Now, 'reasonable' is of course a subjective term, and may mean different things to different people. In the current case in which Harry Redknapp has been charged with tax evasion, he claims in his defence that he writes like a two year old and can’t spell, and that he paid his accountant a fortune to look after him. Whether these excuses are acceptable will be determined shortly, but in the meantime what do we understand by 'reasonable excuse?'
HMRC provides us with some examples which include:
- a failure in the HMRC computer system
- your computer breaks down just before or during the preparation of the online return,
- a serious illness that has made you incapable of filing your tax return
- you registered for the online HMRC activation code but did not get it.
- Dog ate my tax return (only joking!)
HMRC also gives us examples which are not reasonable excuses:
- it’s all too complicated
- your accountant let you down
- you forgot
Just last week, a tribunal announced a decision in the case of Sarah Cornes v HMRC that hardship and emotional distress constituted reasonable excuse. To summarise, Ms Cornes, a solicitor had taken a 50% cut in drawings as a result of the recession, her husband was an alcoholic who lost his livelihood three times in three years. And yet HMRC felt all this was not enough to constitute a reasonable excuse and claimed that hardship or distress could not be considered, but they were overruled in this case.
So, if you are reading this and fretting over your non-submitted tax return, it is unlikely you are going to be able to rely on the reasonable excuse, and if you do qualify, you deserve all of our sympathy. For the rest of the late submitters, and last year there were more than 1.5m of you, bear in mind, it will probably cost more than the £100 penalty to get your professional adviser to fight the penalty.