Late filing appeals: the lowdown
Here at E R Grove we spend quite some time encouraging you to file your tax returns early, and a lot of time strongly encouraging you to file them on time! But did you know that it is sometimes possible to appeal against a late filing penalty if you have a ‘reasonable excuse’ for late filing, provided that you meet other specific conditions too?
This has been highlighted in the recent case of Harrison v HMRC (2022) which at first glance might look pretty clear cut. Harrison believed that his previous accountants had submitted his 2014/15 tax return by the due date, however he was then informed by his new accountants that in fact the old firm had not submitted his tax return at all. To complicate matters, Harrison was going through some family and business problems at the time and suffering from mental health issues. This meant that he was not as on top of his tax affairs as he might normally have been, and it was September 2018 before this return was filed, almost 3 years late.
The courts accepted that the above constituted a ‘reasonable excuse’ for late filing. However, once aware of the problem Harrison did not submit his return ‘without reasonable delay.’ He continued to carry out complex work on his business during the period – showing that he would have been capable of submitting the return earlier had he prioritised it. In legal terms this meant that he was deliberately withholding information from HMRC and was therefore subject to a penalty of over £40,000, and his appeal was dismissed.
This case highlights the fact that where a return is over twelve months late the penalties are based upon a percentage of the tax liability depending upon the taxpayer’s behaviour. In this case Harrison endured several extremely difficult events and suffered from depression but was found to be capable of approving his tax return in spite of this, and therefore the penalty amount reflected the ‘deliberate’ nature of the withheld filing.
The moral of the story is this. Although it is possible to appeal a late filing penalty you really need a watertight excuse for this, and to show that you have made every effort to file at your earliest opportunity. Therefore the best way to get out of a late filing penalty is to avoid getting one in the first place!