Reasonable Excuse

The late submission of VAT returns, or late payment of tax due to HMRC can result in penalties via the default surcharge mechanism. However, these penalties can be avoided provided the business in question has a ‘reasonable excuse’. The term ‘reasonable excuse’ is not fully defined by HMRC although guidelines on its interpretation are present in the legislation. Each individual case will be judged on its own merit and no guarantees can be made on the validity of an excuse until it is heard by HMRC directly. Potentially valid reasons that may result in the waiving of penalties include compassionate circumstances, the loss of key personnel or an unexpected cash crisis caused by unforeseeable circumstances.


In a recent case C A Support Services Limited appealed against the application of a default surcharge on the grounds that the late payment of VAT was a result of the bank processing the payment in a normal way after it was specified that the payment had to reach HMRC by a certain date. The payment was 3 days late and the business was fined accordingly.


The most efficient defence for penalties is prompt submission of VAT Returns and prompt payment of VAT due to HMRC but if you or one of your clients has received an assessment from HMRC, please contact our helpline and see if your penalties can be mitigated or even waived completely.

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