Having regard to the hard line being taken by HMRC on any kind of error, it is comforting to know that tax tribunals are bringing some sense to bear when it comes to reasonable excuses.  

A problem arises when the taxpayer relies on somebody else (e.g. his accountant) who lets him down with the result that a penalty becomes chargeable. Is this a reasonable excuse? Of course it depends In Rowland v HMRC (2006) the Special Commissioners decided that reliance on a third party can be a reasonable excuse (although not unfortunately for VAT purposes where it is specifically precluded by s71 VAT Act 1984); however whether it is actually a reasonable excuse will depend on the facts.  

This reasoning has been reaffirmed in the recent case of Rich v HMRC TC 1380 where the taxpayer had provided his accountants with all the relevant papers and documents in ample time for all deadlines to be met for tax purposes and had given the appropriate instructions. The accountants failed to do so, the tax was paid late and surcharges arose.  

HMRC took the view that Mr Rich did not take all the steps that could be taken by a prudent person exercising reasonable foresight and due diligence. (It is not clear where they get this definition of a reasonable excuse because it differs from the test set out in B & J Shopfitting in 2010, confirmed in subsequent decisions, which is to act in a way that someone who seriously intends to honour their tax obligation would act.)  

Anyway the Tribunal did not agree with them, deciding that it was reasonable for Mr Rich to have relied on his accountants to notify HMRC in good time, and there was no reason for him to think that they would fail to do so. Accordingly, Mr Rich had a reasonable excuse and the surcharges imposed by HMRC were set aside.