Electronic filing and reasonable excuse

While the recent case of Ann Hauser v HMRC [2015] UKFTT 0682 (TC) is focussed on the issue of reasonable excuse, the observations made by the Tribunal in relation to agreements under s54 TMA 1970 are arguably more interesting than the decision.  This is not to undermine the decision however, decided in favour of the appellant largely on the basis that the Tribunal found her to be a credible witness, enough so to override what was shown on HMRC’s computer system.


Mrs Hauser appealed the penalty assessments issued against her in relation to the alleged failure to file her 2012/13 tax return by 31 January 2014.  The evidence presented to the Tribunal was sufficient to establish that the return had not been filed on time, it was therefore a question of whether Mrs Hauser had a reasonable excuse.

She had attempted to submit her return online on 31 January 2014 but there was no record on the HMRC computer system that this had been received.  The system indicated that she had been online but that she had failed to complete the filing process.  The printout submitted by HMRC showed the words “Not submitted” and indicated that the return process was only 95% complete.

On the evidence given by Mrs Hauser, the Tribunal found, on the balance of probabilities, that the online process had in fact been completed in full and that an online fault, either on HMRC’s system or that of the appellant had resulted in the electronic data not reaching HMRC’s computer.

The decision

The Tribunal found that Mrs Hauser did submit her tax return and that she was entitled to believe that that was enough.  On the basis that a reasonable excuse must apply at the time of the alleged failure, the Tribunal considered that this belief was sufficient to give her that excuse.  However, this in itself was not enough to substantiate the claim for reasonable excuse.  If the excuse ceases at any point the taxpayer should rectify the failure “without unreasonable delay” and the Tribunal had doubts in this regard.

Mrs Hauser failed to take further action despite the penalty assessments, warning letters and various telephone conversations had with HMRC.  However, as she had been advised that her return may not have been received due to a possible glitch in the HMRC system and subsequently submitted her return without delay following this, it was found that she remedied the failure appropriately.


The Tribunal went on to make a number of observations which were not part of their decision.  These were made in relation to the letter sent by HMRC to Mrs Hauser in response to her own letter asking for an explanation as to the late filing penalty notice she had received.  The HMRC letter displays a worrying lack of understanding as to how an agreement is reached under s54 TMA 1970 and the appeals process as a whole.

The response from HMRC was to the effect that the ‘appeal’ lodged by Mrs Hauser (the purpose of her letter being an explanation for the penalty, not worded as an appeal) had been settled under S54 (1) TMA 1970.  Essentially, the author of the letter appeared to be of the understanding that an agreement under S54 could be imposed on the taxpayer unilaterally.  The only occasion on which this could happen is where 30 days have passed from the date of an offer to review the case and there has been no acceptance of the offer (S49C TMA 1970).

The letter goes on to give three options for the taxpayer:

  • Supply further information
  • Ask HMRC for an independent review
  • Send the appeal to the Tribunal

A time limit of 30 days was imposed on these next steps, which again has no statutory basis.  A 30 day time limit would apply should HMRC be offering the review, but this is not the case here.  In reality, there should be no deadline stated.

The letter goes one step further and states that if a review is not requested within 30 days, the appeal will be settled on the basis that there is no reasonable excuse and a penalty will be due.  Again, there is no statutory basis for this statement.

Why is this case important?

Once a case has entered the internal review/appeals process there are various time limits applying which carry considerable weight, as if missed, it may result in the case being decided in favour of HMRC with no leave to appeal further.  It is clear from the HMRC correspondence in this case that there is a lack of understanding as to how the process works and the time limits that should be applied.  This confusion, and it seems unlikely that this letter is the sole instance of this, makes it all the more important that clients receives up to date and accurate advice when appealing or requesting a review.

If you have a query regarding reasonable excuse or the appeals process, please call TaxDesk on 0845 4900509 and ask for Isobel Clift.