COVID-19: tax penalties and appeals relaxations

Published on 14 May 2020

HMRC have confirmed in official guidance that they will allow the impact of the coronavirus pandemic to be considered in tax penalty appeals. It can also be taken into account if appeals are made late.

HMRC will cancel some penalties for failing to meet a tax obligation if you have a ‘reasonable excuse’ for the failure. Examples of tax obligations are needing to file a tax return or make tax payments by the relevant deadline. The reasonable excuse must be present at the time of the failure, and the tax obligation must be fulfilled within a reasonable timeframe after the excuse has ended.

Image of desk stationery and the word appeal
(c) Mathias Rosenthal

Can being affected by coronavirus be a reasonable excuse?

On GOV.UK, HMRC have now added to their guidance on reasonable excuse some extra information about coronavirus, confirming that the impact of it will be taken into account.

⚠️ Importantly, you must explain how the situation has affected you and prevented you from fulfilling the relevant tax obligation. This is not, therefore, a ‘blanket’ excuse for people not to meet their tax obligations for the duration of the pandemic. If you can still meet your obligations, then you must continue to do so.

However, it might be that coronavirus social distancing or shielding measures have prevented you from accessing information you need to fulfil your tax obligations, for example. HMRC might therefore agree this is a reasonable excuse.

If HMRC do not agree that it is a reasonable excuse, you have a right to disagree with their decision and ask for it to be internally reviewed and/or appeal to the tax tribunal.

I still haven’t completed my 2018/19 Self Assessment tax return – can I claim a reasonable excuse because of the coronavirus?

It would depend on the circumstances. As above, the excuse behind the failure to meet the tax obligation must be present at the time of the failure.

So, let’s say you had gathered your papers together to complete your 2018/19 Self Assessment tax return on 29 January 2020 (just before the deadline of 31 January for online returns). But on 29 January, you are taken into hospital with acute appendicitis and have to have an urgent operation. You are discharged from hospital on 2 February.

HMRC should accept that you had a reasonable excuse for failing to submit your tax return by 31 January, and it may be that you need to recuperate for a while after you are discharged from hospital. But as soon as you were well enough to do so, you should have submitted the online return and appealed against the late filing penalty on reasonable excuse grounds.

However, it is unlikely that coronavirus will have impacted on many people required to file 2018/19 Self Assessment tax returns by 31 January 2020, given that effects were mostly not seen until after that date, and lockdown measures were first introduced in late March.

You might, however, have a reasonable excuse based upon coronavirus if your 2018/19 tax return was issued late and the deadline for submitting it was not until, say, 31 March 2020.

Also, a reasonable excuse does not necessarily have to be a single event. A series of misfortunate or collection of circumstances has been held in the tax tribunal to be a reasonable excuse. Therefore, if you had, for example, been very ill at the Self Assessment deadline of 31 January and were still ill or recovering when lockdown and shielding measures for vulnerable groups were introduced, it could be that coronavirus has exacerbated an existing situation. Taken together, the circumstances as a whole could amount to a reasonable excuse for continued failure.

As noted above, you would need to explain the full circumstances to HMRC (or the reviewer/tribunal on further appeal).

You might also find our recent article about late filing penalties for Self Assessment tax returns of interest.

Note that, as we understand it, if you had not submitted your 2018/19 tax return by 23 April 2020, you will not be eligible for the coronavirus Self-Employment Income Support Scheme. As far as we are aware at the time of writing, there is no relaxation to this deadline, even if you have a reasonable excuse argument.

What if I am late asking for a review of, or appealing, an HMRC tax decision because of coronavirus?

HMRC have said that they will allow further time for seeking a review of, or appealing against, an HMRC decision.  

You must usually appeal against an HMRC tax decision within 30 days of the date of the decision (for example, the date a penalty notice is issued).

As confirmed in guidance on GOV.UK, for notices and decisions issued from February 2020, HMRC are allowing an extra 3 months for you to appeal. You should note when making the appeal that the delay is due to coronavirus.

Similarly, if HMRC have already carried out a review of their decision but you wish to appeal further, you usually have only 30 days to submit your appeal to the tribunal. HMRC have said in guidance on GOV.UK they will not object to the late appeal for review decisions from February 2020, as long as you are not more than 3 months late.

HMRC have not included in the guidance an end date for this relaxation, so we assume it will continue for the duration of the coronavirus pandemic, or until HMRC announce that it is being brought to an end.

Where can I find out more?

You might find our general guidance on tax penalties and appeals helpful.

Following a freeze in the housing market which was declared on 23 March, the government has announced that individuals can move home provided they follow the guidance on social distancing. Those doing so should be reminded that if you are UK resident and you dispose of a UK residential property on or after 6 April 2020, you should make a capital gains tax report within 30 days.

However, HMRC have said that they will not issue late-filing penalties for any transactions completed before 1 July 2020 and reported up to 31 July 2020. This means that you will not need to appeal against any penalty, as HMRC simply will not issue one. Any tax due that should have been paid within 30 days will, however, attract interest if it is late. See GOV.UK for more information.

Contact: Kelly Sizer (click here to Contact Us)

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