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    TaxKilnUK tax guidance

    Tribunals + HMRC Enquiries → Penalty regime + reasonable excuse

    HMRC Penalty Regime — Schedule 24/55/56 FA 2007/2009 + Behaviour Assessment + Reasonable Excuse (Perrin v HMRC)

    Three statutory schedules govern most HMRC penalties on individuals and small businesses. Schedule 24 FA 2007 covers inaccuracy penalties on tax returns (0%-100% of the under-assessed tax, calibrated by behaviour: careless 0%-30%, deliberate 20%-70%, deliberate-and-concealed 30%-100%). Schedule 55 FA 2009 covers late filing of Self Assessment returns (£100 fixed, then daily £10 to £900 max, then 5% or £300 at 6 months, repeat at 12 months). Schedule 56 FA 2009 covers late payment of tax (5% surcharges at 30 days / 6 months / 12 months for SA — replaced for VAT from 1 January 2023 by Sch 26 FA 2021). 'Reasonable excuse' is a defence under Sch 55 para 23 + Sch 56 para 16 (corrected from earlier para 9 reference) — analysed under the 4-stage Perrin v HMRC [2018] UKUT 156 (TCC) framework: identify circumstances, decide on reasonableness, consider remediation, consider whether the excuse covered the entire default period.

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    In plain English

    The penalty regime splits into three buckets: getting the figures wrong (inaccuracy — Sch 24), filing late (Sch 55), and paying late (Sch 56). VAT moved to a separate points-based regime under Sch 26 FA 2021 from January 2023. The two main planks of the defence vocabulary are 'behaviour' and 'reasonable excuse'. Behaviour determines penalty PERCENTAGE on inaccuracy penalties + time limit on under-assessment recovery (see /tribunals-and-hmrc-enquiries/enquiry-types-and-time-limits). Reasonable excuse is the COMPLETE defence to late filing + late payment penalties (Sch 55 para 23 / Sch 56 para 16 — note the para 16 reference, corrected from informal earlier para 9 mentions). The Upper Tribunal in Christine Perrin v HMRC [2018] UKUT 156 (TCC) gave a structured 4-stage framework for reasonable excuse that the FTT now applies consistently: (1) identify the facts relied on as constituting the excuse; (2) decide which (if any) are proved; (3) decide whether, viewed objectively, those proved facts amount to a 'reasonable excuse' for the default; (4) decide whether the excuse was 'put right without unreasonable delay' once it ceased. Reasonable excuse is fact-specific. Serious illness, bereavement, dependency on a professional adviser who failed to perform, fire/flood/burglary — all routinely accepted. 'I forgot' / 'I was too busy' / 'HMRC said the wrong thing' — routinely rejected unless very specific facts. 'I relied on my accountant' is accepted only if the taxpayer acted reasonably + delegated to a competent adviser + checked the work to the extent reasonable. The penalty appeal route: HMRC issues penalty notice → 30-day window to appeal in writing to HMRC → if HMRC reject, 30-day window to request statutory review OR notify appeal to FTT. Most penalty appeals on reasonable-excuse grounds are self-serve. Form T240 is the FTT notice of appeal (see /tribunals-and-hmrc-enquiries/statutory-review-and-ftt-procedure).

    How it works

    Schedule 24 FA 2007 — inaccuracy penalties

    Applies where a document submitted to HMRC contains an inaccuracy AND that inaccuracy was careless or deliberate. Penalty as % of 'potential lost revenue' (PLR — the additional tax that would have been collected if the document had been accurate). Four behaviour bands: innocent error (no penalty); careless (0%-30%); deliberate but not concealed (20%-70%); deliberate and concealed (30%-100%). Disclosure reductions (para 9-10): unprompted disclosure to HMRC achieves the lower end of each range; prompted disclosure (after HMRC enquiry started) sees less reduction. Suspension of careless penalty (para 14) available where HMRC sets specific conditions for future compliance — broadly underused by taxpayers as a settlement lever.

    Schedule 55 FA 2009 — late filing penalties (SA)

    £100 immediate fixed penalty if return filed late (Sch 55 para 3). Daily penalty of £10 per day for up to 90 days (max £900) if return more than 3 months late (para 4). Tax-geared penalty of 5% of tax due (minimum £300) if more than 6 months late (para 5). Repeat 5% (minimum £300) if more than 12 months late (para 6). Higher percentages (70% / 100%) if more than 12 months late + deliberate withholding of information (para 6(3A)-(4)). Reasonable excuse defence under para 23 covers the whole period the excuse existed.

    Schedule 56 FA 2009 — late payment penalties (SA)

    5% of tax unpaid 30 days after due date (Sch 56 para 3). Additional 5% if still unpaid after 6 months. Additional 5% if still unpaid after 12 months. Interest under FA 2009 s.101 accrues separately at base + 4% (from 6 April 2025 — corrected for the post-Spring Budget 2025 rate). Reasonable excuse defence under para 16 — note the para 16 reference (informal earlier mention of para 9 was incorrect).

    Perrin v HMRC — the 4-stage reasonable excuse framework

    Christine Perrin v HMRC [2018] UKUT 156 (TCC) set out the binding framework now used at FTT: STAGE 1 — identify the facts on which the taxpayer relies. STAGE 2 — determine which of those facts are established on the evidence. STAGE 3 — decide whether, viewed objectively, those established facts amount to a reasonable excuse. The standard is what a reasonable taxpayer in the same position with the same characteristics would have done. STAGE 4 — was the excuse 'put right without unreasonable delay' once it ceased? If the excuse only covered part of the default period, the penalty applies for the uncovered period. Hok Ltd v HMRC [2012] UKUT 363 (TCC) limits the FTT — no general fairness jurisdiction; the appeal is statutory.

    Prompted vs unprompted disclosure — disclosure quality multipliers

    Para 9-10 Sch 24 FA 2007 reduce the penalty band depending on (a) whether disclosure was prompted or unprompted by HMRC, and (b) the QUALITY of the disclosure (telling, helping, giving access to records). Unprompted careless: 0%-30% bottom = 0%. Prompted careless: 15%-30%. Unprompted deliberate (not concealed): 20%-70% bottom = 20%. Prompted deliberate: 35%-70%. The behaviour assessment + quality multipliers are NEGOTIABLE within statutory ranges — most penalty negotiations focus on shifting behaviour band downward + maximising disclosure quality credit.

    Penalty appeal procedure

    Penalty notice issued (Sch 24 para 13 / Sch 55 para 18 / Sch 56 para 11). Taxpayer has 30 days from notice date to appeal in writing to HMRC (TMA 1970 s.31). HMRC will offer either statutory review (s.49C) or direct notification to FTT. Statutory review is conducted by HMRC officer not involved in original decision; typically 45 days. If review upholds penalty (or taxpayer skips review), 30 days from review conclusion (or original decision) to notify appeal to FTT via Form T240 — see /tribunals-and-hmrc-enquiries/statutory-review-and-ftt-procedure. Most fixed + daily late-filing penalties appealed on reasonable-excuse grounds are categorised as 'basic' or 'default paper' cases at FTT — no oral hearing, no costs risk, fully self-serve.

    Who this applies to + key conditions

    Statute + manual references

    Primary: Schedule 24 FA 2007 (inaccuracy penalties); Schedule 55 FA 2009 (late filing); Schedule 56 FA 2009 (late payment); Schedule 26 FA 2021 (VAT + ITSA points-based regime from 1 January 2023).

    Related: Sch 24 FA 2007 para 3 (definitions of careless / deliberate / deliberate-and-concealed); Sch 24 FA 2007 para 9-10 (reductions for prompted/unprompted disclosure); Sch 24 FA 2007 para 14 (suspension of careless penalty); Sch 55 FA 2009 para 23 (reasonable excuse defence — late filing); Sch 56 FA 2009 para 16 (reasonable excuse defence — late payment); Sch 41 FA 2008 (Failure to Notify chargeability penalties); Sch 18 F(No.2)A 2017 (Failure to Correct offshore — 200% penalty); FA 2009 s.101-103 (late-payment interest framework)

    HMRC manual: CH80000 (inaccuracy penalties Sch 24); CH60000 (late filing/payment Sch 55/56); CH70000 (suspension); CH160000 (reasonable excuse)

    Case law: Christine Perrin v HMRC [2018] UKUT 156 (TCC) — reasonable excuse 4-stage analysis; Coales v HMRC [2012] UKFTT 477 (TC) — reliance on accountant + reasonable excuse; Hok Ltd v HMRC [2012] UKUT 363 (TCC) — limits on FTT fairness jurisdiction; Auxilium Project Management v HMRC [2016] UKFTT 249 — careless vs deliberate; Leach v HMRC [2019] UKFTT 352 — reasonable excuse for late SA filing

    Common mistakes + traps

    Worked example

    Tom, a freelance copywriter, missed the 31 January 2026 SA filing deadline for his 2024/25 return — he was hospitalised on 28 January with appendicitis + discharged on 5 February, then filed on 12 February

    HMRC issued a £100 Sch 55 fixed penalty on 1 March 2026 for late filing. Tom has the hospital discharge letter + GP follow-up note. He wants to appeal on reasonable excuse grounds. The tax was paid on time via Direct Debit (so no Sch 56 issue).

    1. Step 1 — Identify the penalty: £100 fixed under Sch 55 para 3. Defence: reasonable excuse under Sch 55 para 23.
    2. Step 2 — 30-day appeal window from penalty notice date (1 March 2026 → 31 March 2026). Appeal in writing to HMRC citing s.31 TMA 1970 + Sch 55 para 23 reasonable excuse.
    3. Step 3 — Apply Perrin v HMRC [2018] UKUT 156 framework. STAGE 1 facts relied on: hospitalised 28 Jan with appendicitis; surgery; discharged 5 Feb; recovery period; filed 12 Feb. STAGE 2: facts established by hospital letter + GP note. STAGE 3 objective reasonableness: serious medical event preventing access to records + cognitive capacity to complete return — readily accepted as reasonable excuse in FTT (Leach v HMRC [2019] UKFTT 352 + many similar). STAGE 4: was the excuse remedied without unreasonable delay? Discharged 5 Feb, filed 12 Feb — 7 days post-discharge, well within 'without unreasonable delay'.
    4. Step 4 — Submit appeal letter to HMRC: name, UTR, year, penalty reference, Sch 55 para 23 cited, hospital evidence attached, Perrin 4-stage analysis in plain English. Self-serve — no need to engage penalty-appeal specialist.
    5. Step 5 — Likely HMRC outcome: appeal upheld at first instance, penalty cancelled. If unexpectedly rejected: request statutory review under s.49C (45 days) OR notify appeal to FTT via Form T240 within 30 days of HMRC rejection.
    6. Step 6 — If escalated to FTT: case categorised 'default paper' — no oral hearing, decision on papers, no costs risk to taxpayer. Total cost: postage + Tom's time.
    7. Step 7 — Anti-charlatan comparison: cold-call 'penalty appeal specialist' offering 'we'll get the penalty cancelled' on no-win-no-fee 30% contingent — for a £100 penalty, the contingent fee is £30 if won; the specialist firm's structure is built around volume + Sch 24 inaccuracy penalties where amounts justify the markup. For Tom's case, fully self-serve.

    Outcome: £100 penalty cancelled at first HMRC review — typical outcome for genuine medical reasonable excuse with contemporaneous evidence + Perrin-framework appeal letter. Total cost £0 + Tom's 30 minutes. Penalty-specialist engagement would have been entirely unnecessary.

    How this connects to the rest of the framework

    Enquiry types + time limits →

    Behaviour assessment under Sch 24 same framework as behaviour for time-limit purposes — same evidence, same arguments.

    Statutory review + FTT procedure →

    Penalty appeals route via statutory review → FTT Form T240; most reasonable-excuse appeals are basic-case self-serve.

    Voluntary disclosure mechanisms →

    Unprompted disclosure (DDS/LPC/CDF) achieves materially lower penalty bands than prompted disclosure after enquiry opened.

    COP9 + CDF →

    COP9 Outline Disclosure within 60 days secures immunity from criminal prosecution + caps to civil penalties only (still substantial).

    /self-assessment →

    Sch 55 late filing penalties trigger immediately at 31 January for online SA; 31 October for paper.

    /downloads/hmrc-late-filing-appeal →

    Self-serve template for first-time late-filing penalty reasonable excuse appeal — Perrin-framework structure.

    Frequently asked questions

    What happens if I miss the Self Assessment deadline?+
    The Self Assessment deadline is 31 January (online filing) for the previous tax year. Miss it and HMRC apply an automatic £100 penalty. Beyond that: £10 per day from 3 months late (capped at £900), 5% of tax due at 6 months late, and another 5% at 12 months late, under Schedule 55 of the Taxes Management Act 1970. If you have a genuine reason (serious illness, bereavement, technical issue with HMRC's systems) you can appeal with evidence; HMRC accepts reasonable excuse appeals in most genuine cases.
    Do I need an accountant or can I file Self Assessment myself?+
    Legally you can file Self Assessment yourself via gov.uk for free, most simple sole-trader returns (single income source, basic expenses) are realistic to self-file. An accountant adds real value when: your trading profit is above £40,000 (extraction-strategy decisions matter), you have multiple income streams (PAYE + self-employment + property + dividends), you've crossed the £90,000 VAT threshold, you're considering incorporation, or you have an HMRC enquiry. Expect to pay £400-£1,500/year for a typical sole-trader accountant; the cost is itself a deductible expense.
    How do payments on account work?+
    When your Self Assessment tax bill exceeds £1,000 for the first time, HMRC requires payments on account toward NEXT year's tax. Half the current bill is due 31 January (alongside the current bill); the other half is due 31 July. So your first January after crossing the threshold can hit with a double-bill: last year's balance + first payment on account. Adjust via Form SA303 if you expect next year's income to drop substantially. Payments on account don't apply if more than 80% of your tax is collected via PAYE.
    Does HMRC have to accept my reasonable excuse?+
    No — HMRC will make their own assessment + can reject. The full statutory protection only kicks in on appeal to FTT, which applies the Perrin v HMRC framework independently. If your evidence is contemporaneous + the facts fit one of the established categories (serious illness, bereavement, fire/flood/burglary, reliance on competent adviser, HMRC computer failure), FTT acceptance is highly likely.
    Can I appeal a £100 fixed penalty — isn't it too small to be worth it?+
    Yes, and yes it is worth it where you have reasonable excuse — the appeal is free + self-serve + the penalty cancellation is automatic at FTT if Perrin criteria met. Also, the penalty 'sticks' on your compliance record at HMRC — useful to clear it.
    Is there a cumulative cap on Sch 55 late-filing penalties?+
    Sch 55 stacks: £100 immediate + up to £900 daily + 5% / £300 at 6 months + 5% / £300 at 12 months. For a £20,000 tax liability filed 12+ months late, the total Sch 55 alone can exceed £3,000, before Sch 56 late-payment surcharges + interest. There is no 'reasonable cap' — the statutory mechanism runs as drafted.
    What's the difference between 'careless' and 'reasonable excuse'?+
    Two different defences. Reasonable excuse (Sch 55/56) is a COMPLETE defence to late-filing/late-payment penalties — succeeds and the penalty falls away entirely. Careless (Sch 24) is a BEHAVIOUR CATEGORY for inaccuracy penalties — succeeds and the penalty range shifts from 20%-70% (deliberate) down to 0%-30% (careless). They serve different statutes.

    Free + regulated-body resources

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