United Kingdom
14 September 2011 - Reliance on agent was reasonable excuse for late self assessment payments
The First Tier Tribunal has ruled in the Stephen Rich v HMRC case that a taxpayer who relied on his agent to deal with his self assessment returns had a reasonable excuse for the late payment of tax for the years 2006/07 to 2008/09, and set aside surcharges raised by HMRC for 2007/08 and 2008/09.
In April 2007 the taxayer advised his accountant of the commencement of self-employed income, and instructed him to notify HMRC accordingly. In April 2008 the taxpayer sent income details to his accountant and informed him that he had not heard from HMRC. The accountant then submitted a form 64-8 to HMRC and requested a UTR number, but HMRC had no record of receiving this. In April 2009, the taxpayer sent further income details to his accountant and informed him that he had still not heard from HMRC. In April 2010 the accountant submitted form CWF1 electronically, after which HMRC issued a UTR. Tax returns were then submitted for the years 2006/07 - 2008/09, and the tax due was paid in June and July 2010.
The Tribunal referred to Rowland v HMRC [2006] in support of the principle that reliance on a third party could be a reasonable excuse in relation to income tax.
HMRC contended that the steps taken by the taxpayer fell short of those that would have been taken by a prudent person exercising reasonable foresight and due diligence, but the Tribunal disagreed and decided that the taxpayer's reliance on his agent was reasonable, and set aside the surcharges.
It should be noted that under the new penalty regime which is now in place for returns for the 2010/11 tax year onwards, reliance on a third party is not a reasonable excuse for failing to make a return unless the taxpayer took reasonable care to avoid the failure.