Self Assessment Penalty Guidance

Your client may be able to appeal the late filing penalty for their Self Assessment tax return if they can demonstrate a reasonable excuse or special circumstances. Below are details of the options available:

1. Reasonable Excuse

A reasonable excuse is a situation where your client was unable to meet their filing obligation due to circumstances beyond their control.

Examples include:

• Serious illness or bereavement: If your client or a close family member was seriously ill or passed away around the filing deadline, such circumstances may qualify as a reasonable excuse (FA 2009, Sch 55, para 23).
• Unforeseen events: Natural disasters, fire, or theft that prevented filing on time may be accepted.
• Technical issues: Problems with HMRC’s online systems or other IT failures that prevented submission (FA 2009, Sch 55, para 23).
• Third-party reliance: If your client relied on an advisor who failed to file the return, this may be considered a reasonable excuse, provided the client took reasonable care in appointing the advisor (Sudall v HMRC [2017] UKFTT 404 (TC)).

The reasonable excuse must have existed before the filing deadline, and the failure must have been remedied as soon as possible after the excuse ended (FA 2009, Sch 55, para 23). If your client believes they have a reasonable excuse, they should submit an appeal using form SA 370 or online via their Government Gateway account. Appeals must be made within 30 days of the penalty notice date (FA 2009, Sch 55, paras 20-22).

2. Special Circumstances

If no reasonable excuse exists, your client may still request a special reduction of the penalty. Special circumstances are defined as uncommon or exceptional situations where strict application of the penalty rules would produce a result contrary to the policy intention of the law (FA 2009, Sch 55, para 16; CH 170600).

Examples include:

• Complexity of tax affairs: If the taxpayer’s situation was unusually complex and contributed to the delay, this may warrant a reduction (Ferguson v HMRC, FTT [2020] UKFTT 66 (TC)).
• Other mitigating factors: HMRC may consider factors such as the taxpayer’s compliance history or the impact of external events.

Special reduction claims are rare and should only be pursued after exhausting other avenues, such as reasonable excuse appeals. The request can be made using form SA 370, even though the form is primarily for reasonable excuse appeals (CH 170800).

3. Practical Steps

To appeal the penalty:

• Submit form SA 370: Include the tax year, penalty amount, and detailed explanation of the reasonable excuse or special circumstances.
• Appeal within 30 days: Ensure the appeal is submitted within 30 days of the penalty notice date.
• Provide evidence: Include supporting documentation, such as medical records, correspondence with HMRC, or evidence of technical issues.
• Appeal to Tribunal: If HMRC rejects the appeal, your client can escalate the matter to the Tribunal within 30 days of HMRC’s decision (CH 160900).

4. Risk & Compliance Considerations

• Timely action: Ensure the appeal is submitted promptly to avoid missing the 30-day deadline.
• Accuracy of information: Verify that all details provided in the appeal are accurate and supported by evidence.
• Potential HMRC challenges: HMRC may reject the appeal if the excuse is deemed insufficient or if the taxpayer failed to act promptly after the excuse ended.

Recommendation

If your client has a valid reasonable excuse or special circumstances, they should proceed with an appeal immediately. If the penalty is upheld, consider whether a special reduction may apply. Ensure all appeals are supported by robust evidence and submitted within the statutory deadlines.

For more information, please contact us at: consultancy@vantagefeeprotect.com

Angela Robson
Senior Tax Manager