Case: Tribunal reduces penalties due to exceptional events

[2019] UKFTT 0128 (TC)

Judge Heidi Poon

Decision released 21 February 2019

Penalties – Late filing and late payment – FA 2009, Sch. 55 and 56 – Whether causation existed between the alleged reason and the default – Proximity in timing a precondition for causation – Whether reasonable care taken to avoid the failure in reliance on a third party – Whether special circumstances – appeal allowed in part.

Fleming [2019] TC 06994


The appellant (Mr Fleming) was a self-employed joiner who relied on his wife (Mrs Fleming) to keep his books. He had an accountant who dealt with his tax affairs and filed his self-assessment returns, with whom Mrs Fleming liaised. When Mrs Fleming became ill and required prolonged medical treatment, including hospitalisation, Mr Fleming took on a bookkeeper to deal with all administrative aspects of his business.

When Mr Fleming belatedly became aware that HMRC had issued him with late filing penalties and late payment penalties he found out that his bookkeeper had never been in contact with his accountant and therefore no returns had been submitted since his wife had become ill. He dismissed the bookkeeper, and his nephew helped him bring his tax affairs up to date.

Mr Fleming appealed against the penalties on the principal ground of Mrs Fleming’s illness and on the secondary ground that he had relied on the bookkeeper to ensure he complied with his tax obligations.

The FTT agreed with HMRC that Mrs Fleming’s ongoing health issues could not give rise to an excuse in terms of causation. However, the FTT did consider separately two crisis periods during which Mrs Fleming was hospitalised and had various operations, by adopting this three-stage approach to consider:

(1)causation between the excuse and the default;

(2)whether the excuse, even if it had caused the default, met the test of reasonableness to become a reasonable excuse; and

(3)the duration of the reasonable excuse.

The FTT concluded that Mrs Fleming’s ill health did not cause the defaults because when Mr Fleming employed the bookkeeper Mrs Fleming was no longer involved with the filing of any of the returns. As Mrs Fleming’s ill health did not cause the defaults there was no need for the FTT to look at the second and third stage.

The FTT also considered that Mr Fleming’s reliance on the bookkeeper did not provide him with a reasonable excuse, because not engaging with his tax obligations and having ‘complete trust’ in the bookkeeper was not a reasonable thing for a responsible taxpayer to have done.

The FTT did however decide that as HMRC had not considered the issue of special reduction, that it could. It decided to reduce the penalties by 30% because Mrs Fleming’s health issues and long periods of hospitalisation were ‘exceptional’ circumstances and ‘out of the ordinary run of events’.


When the taxpayer’s wife became ill he employed a bookkeeper to help him and assumed that she would ensure he met his tax obligations. But he did not appear to brief the bookkeeper properly about what was required, and perhaps did not appreciate everything that his wife had done. Therefore, the taxpayer’s argument that his reliance on the bookkeeper provided him with a reasonable excuse for his late filings and late payments was rejected because he had not acted as a responsible taxpayer would have done.

For commentary on penalties for late returns, see In-Depth at ¶181-500.

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