Sorry I'm late
Our admin team was hard at work over summer, filing our clients' annual share schemes returns and we were very proud to have got everything in on time, in spite of difficulties with HMRC's new online system.
What if we hadn't met the deadline? Penalties apply for late filing (and late payment of tax) – but technically penalties can be reduced if "special circumstances" apply. However, those circumstances must be "exceptional, abnormal or unusual" or "something out of the ordinary run of events" that is unforeseeable or beyond the taxpayer's control.
There are plenty of examples of woe-begone taxpayers who are late filing or paying tax, and who put forward an excuse that to them seems entirely reasonable. However, you shouldn't expect much leniency from HMRC. All of the following excuses have been dismissed, and the penalties applied:
- Financial hardship. HMRC say: "you are expected to have kept money aside to pay the tax bill when it is due. The tax is on the money you have already received. Also waiting for payment from somewhere else is not considered a reasonable excuse". (This may apply even if you are awaiting payment from HMRC itself!)
- The employee responsible for the returns ceasing employment. HMRC say that the responsibility for completing PAYE returns lies with the employer.
- Financial and personal difficulties - including divorce, the death of partners, and serious illness relating to close family members or oneself – or even a mixture of the above.
- Previous good behaviour – just won't wash with the Revenue
- Confusing HMRC correspondence
- Relying on another person to complete returns, including a "dilatory accountant". If your accountant or agent is failing in their duties, say HMRC, "then the company should seek redress directly" (although relying on an accountant over a period of years, during which returns have always been made on time, has been found to be a reasonable excuse).
- A mistake – however genuine (for example, setting up a direct debit payment)
It's really very difficult indeed to prove you have a reasonable excuse for being late in filing or making tax payments to HMRC. Our advice – do it in good time, and keep a close eye on anyone you've delegated the responsibility to. And of course, while a principle is a fine thing, it can be expensive - arguing the case with HMRC and going to a Tribunal is almost certainly going to cost you the same, if not more, than the penalties levied in the first place.