The UK First-Tier Tribunal (FTT) in the case of Paramount Electrical Contractors LLP v HMRC [2016] UKFTT 0519 considered what would be considered a reasonable excuse when a taxpayer fails to make a return on time.

The taxpayer in this case was required to file a tax return for the period ended 5 April 2015. The filing date was 19 April 2015. However, his tax return was only filed on 22 April 2015. The HMRC imposed a late filing penalty.

The taxpayer accepted that the tax return was filed late but claimed that he had a “reasonable excuse” which would absolve him from the late filing penalty. In particular, he claimed that he had not received the tax return form from the HMRC through the post on time. He also pleaded an insufficiency of funds.

The FTT found that the taxpayer did not have a reasonable excuse. First, the FTT held that the taxpayer should have put in place procedures to ensure that the tax return form was received on time. When he had not received the form by 5 April 2015, he should have contacted the HMRC but there was no evidence that he had done so till 19 April 2015. This alleged late receipt of the tax return form was not a matter beyond the control of the taxpayer. Second, the FTT held that an insufficiency of funds cannot amount to a reasonable excuse unless the lack of funds was caused by an event outside the taxpayer’s control. The FTT did not accept that the effect of the economic circumstances was an event outside the taxpayer’s control. It was incumbent on the taxpayer to have in place contingency arrangements to pay his taxes.

Editorial Note

The term “reasonable excuse” is similarly found in section 94A(2) of the Singapore Income Tax Act in relation to the obligation to file tax returns on time. This case is helpful to remind us that any late receipt of a tax return form from the IRAS is not considered a “reasonable excuse” to absolve one from the penalties arising from a failure or delay in filing tax returns.