“The test of whether or not there is a reasonable excuse is an objective one. In my judgement it is an objective test in this sense. One must ask oneself: was what the taxpayer did a reasonable thing for a responsible taxpayer conscious of and intending to comply with his obligations regarding tax, but having the experience and other relevant attributes of the taxpayer and placed in the situation that the taxpayer found himself at the relevant time, a reasonable thing to do?” (5) Further, in Perrin v HMRC[2018] UKUT 156 at paragraph 81, the Upper Tribunal provided guidance as to the correct approach to a reasonable excuse defence as follows: “81. When considering a “reasonable excuse” defence, therefore, in our view the FTT can usefully approach matters in the following way: (1) First, establish what facts the taxpayer asserts give rise to a reasonable excuse (this may include the belief, acts or omissions of the taxpayer or any other person, the taxpayer’s own experience or relevant attributes, the situation of the taxpayer at any relevant time and any other relevant external facts). (2) Second, decide which of those facts are proven. (3) Third, decide whether, viewed objectively, those proven facts do indeed amount to an objectively reasonable excuse for the default and the time when that objectively reasonable excuse ceased. In doing so, it should take into account the experience and other relevant attributes of the taxpayer and the situation in which the taxpayer found himself at the relevant time or times. It might assist the FTT, in this context, to ask itself the question “was what the taxpayer did (or omitted to do or believed) objectively reasonable for this taxpayer in those circumstances?” (4) Fourth, having decided when any reasonable excuse ceased, decide whether the taxpayer remedied the failure without unreasonable delay after that time (unless, exceptionally, the failure was remedied before the reasonable excuse ceased). In doing so, the FTT should again decide the matter objectively, but taking into account the experience and other relevant attributes of the taxpayer and the situation in which the taxpayer found himself at the relevant time or times.” (6) In summary, whether there is a reasonable excuse or not depends on the particular circumstances in which the failure occurred and the abilities of the person who failed. The standard by which this falls to be judged is that of a prudent and reasonable taxpayer, exercising reasonable foresight and due diligence, in the position of the taxpayer in question: David Collis v HMRC[2011] UKFTT 588 (TC) . What is a reasonable excuse for one person may not be a reasonable excuse for another. Finally, in respect of beliefs, I remind myself that the Upper Tribunal in Perrin concluded that for an honestly held belief to constitute a reasonable excuse, it must also be objectively reasonable for that belief to be held. (7) Pursuant to Perrin: (a) First, it is the Appellant’s case that he has a reasonable excuse for the failure to submit the SDIL Return by the filing date because the Respondents’ website was not working properly. (b) Second, I accept that on26 January 2022 the Appellant signed into the Respondents website on 3 occasions in very short succession. I accept that this might indicate that the Appellant was experiencing some difficulties using the Respondents’ website, but it does not prove the cause of those difficulties i.e., a fault with the Respondent’s website or with the Appellant’s own internet connection. The Appellant did not use the help link on the website or contact the Respondents by telephone or email for assistance. I also note that the Respondents’ colleagues refer to the website experiencing the “usual and normal level of errors” at the relevant time.However, the Respondents’ website was not offline between29 October 2021 and3 February 2022 and there is no suggestion that these “usual and normal level of errors” prevented users from filing returns. Accordingly, I am not satisfied that the Appellant has proved, on the balance of probabilities, that the difficulties experienced with the Respondents’ website were as a result of the Respondents’ website or that they prevented the Appellant from filing the SDIL Return. (c) Third, I must decide whether, viewed objectively, those proven facts amount to an objectively reasonable excuse and the time that reasonable excuse ceased. In so doing, I should ask myself “was what the taxpayer did (or omitted to do or believed) objectively reasonable for this taxpayer in those circumstances?”
“68. There are many appeals in the FTT where the question as to whether there are special circumstances justifying a reduction in the amount of a penalty has been considered. Accordingly, from time to time the FTT has made general observations about what might constitute special circumstances. In many of those decisions, reference is made to Crabtree v Hinchcliffe (Inspector of Taxes)[1972] AC 707 where Viscount Dilhorne (in a rather different context to that with which we are concerned) suggested at page 739E that: “For circumstances to be special [they] must be exceptional, abnormal or unusual...” 69. In Warren v HMRC[2012] UKFTT 57 , the FTT put a gloss on the meaning of “special”
“The adjective “special” requires simply that the circumstances be peculiar or distinctive. But that does not necessarily mean that the circumstances which affect most taxpayers could not be special: an ultra vires assertion by HMRC that for a period penalties would be halved might well be special circumstances; but generally special circumstances will be those confined to particular taxpayers or possibly classes of taxpayers. They must encompass the situation in which it would be significantly unfair to the taxpayer to bear the whole penalty.” 70. In Welland v HMRC[2017] UKFTT 0870 the FTT likewise did not confine the meaning to circumstances which did not affect many taxpayers. After referring to the passage in Warren cited above, the FTT said at [125]: “What was said in Warren seems right, if very general. ... In summary, it seems to me that the alleged special circumstances must be an unusual 40 event or situation which does not amount to a reasonable excuse but which renders the penalty in whole or part significantly unfair and contrary to what Parliament must have intended when enacting the provisions.” 71. By contrast, in Collis v HMRC[2011] UKFTT 588 the FTT said at [40] that: “to be a special circumstance the circumstance in question must operate on the particular individual, and not be a mere general circumstance that applies to many taxpayers by virtue of the scheme of the provisions themselves.” 72. In our view, as the FTT said in Advanced Scaffolding (Bristol) Limited v HMRC[2018] UKFTT 0744 (TC) at [99], there is no reason for the FTT to seek to restrict the wording of paragraph 16 of Schedule 55 FA 2019 by adding a judicial gloss to the phrase. In support of that approach the FTT referred to the observation made by Lord Reid in Crabtree v Hinchcliffe at page 731D-E when considering the scope of “special circumstances” as follows: “the respondent argues that this provision has a very limited application... I can see nothing in the phraseology or in the apparent object of this provision to justify so narrow a reading of it”. 73. The FTT then said this at [101] and [102]: “101. I appreciate that care must be taken in deriving principles based on cases dealing with different legislation. However, I can see nothing in schedule 55 which evidences any intention that the phrase “special circumstances” should be given a narrow meaning. 102. It is clear that, in enacting paragraph 16 of schedule 55, Parliament intended to give HMRC and, if HMRC’s decision is flawed, the Tribunal a wide discretion to reduce a penalty where there are circumstances which, in their view, make it right to do so. The only restriction is that the circumstances must be “special”