The difficulties suffered by the appellant during and following the prolonged illness and eventual death of her parents constituted a reasonable excuse for the purposes of an appeal against a penalty for the late filing of her tax return.

HM Revenue and Customs (HMRC) issued a notice on 6 April 2011 for the appellant,  a  self-employed therapist, and counselor, to file her tax return for 2010/11. The appellant failed to submit her tax return until 17 September 2012 and HMRC imposed late filing penalties (under FA 2009, Sch 55) amounting to £1,300.

The appellant appealed. In January 2013, the appellant’s agent wrote to HMRC. His letter stated that the appellant approached him in June 2012 to bring her tax affairs up to date, after caring in the previous four years for her two elderly parents in their terminal decline.

The agent’s letter to HMRC was accompanied by a letter of appeal from the appellant dated 10 December 2012. The appellant explained that (among other things) her mother had suffered a succession of strokes, and spent the last 15 months in the hospital prior to her death. Furthermore, the appellant’s father was diagnosed with terminal cancer and she had provided care to him.

The appellant’s mother died in April 2010, and her father died in September 2010. The appellant then had to deal with their affairs. Her letter pointed out that probate on her father’s estate was about to be granted. However, HMRC dismissed her appeal on the grounds that it was out of time.

The First-tier Tribunal (FTT) found it difficult to understand why HMRC considered that the appellant’s letter did not lead them to conclude that the conditions for a reasonable excuse for failing to submit the tax return on time had not been met, to enable them to accept the late appeal. The FTT’s impression was that HMRC issued a standard response letter to out of time appeals, without properly considering the appeal letter.

The FTT considered that the appellant had clearly gone through a prolonged period of difficulty, and it was understandable that during this period the appellant omitted to give proper attention to her tax affairs. HMRC argued that the appellant was able to continue her business, so there was no reasonable excuse or special circumstances. However, the FTT disagreed and stated that the appellant had to work to support herself and pay the everyday expenses of keeping her home. The FTT held that the appellant had established a reasonable excuse for the late submission of her tax return for 2010/11. The appellant’s appeal was allowed.

McDonald v Revenue and Customs [2017] UKFTT 265 (TC)