Bereavement of a close relative, serious or sudden illness, fires and floods that destroyed records, and verified HMRC system outages at the relevant date usually qualify. Insufficiency of funds, software issues, forgetfulness, and reliance on an agent who let you down normally do not, unless they were caused by events outside your control. The excuse must exist at the time of the failure, and the return must be filed without unreasonable delay once it ends.
- Claiming "I just forgot" or "I was too busy". Neither qualifies. The objective test in The Clean Car Company case asks what a reasonable taxpayer in the same circumstances, who wanted to meet their obligation, would have done. Pressure of work and oversight, however genuine, do not clear that bar.
- Treating cash flow problems as a reasonable excuse on their own. Insufficiency of funds is excluded by statute, unless the shortage was itself caused by events outside your control (a customer's insolvency, an HMRC repayment held up, banking failure). Without that external cause, the claim usually fails at first review.
- Blaming your accountant or bookkeeper. Reliance on another person is excluded unless you took reasonable care to avoid the failure. Picking a competent agent, checking deadlines, following up before the due date: these can preserve the defence. Simply handing the file over and waiting does not.
- Continuing to delay after the excuse has ended. The legislation requires the return to be filed without unreasonable delay once the excuse ceases. An illness that ended in March does not protect a return filed in August. Document when the excuse began, when it ended, and when you filed.
- Filing the claim verbally with no evidence. Reasonable excuse claims are decided on evidence. Medical letters, certificates of posting, HMRC outage confirmations, accountant correspondence: each strengthens the position. A claim with no documentation is rarely accepted on first review.
How HMRC and the tribunal actually define reasonable excuse
There is no statutory definition of reasonable excuse. The legislation (Schedule 24 of the Finance Act 2021 for late submission, Schedule 26 for late payment) simply provides the defence and then leaves the meaning to the case law. HMRC's own working definition, set out in its Compliance Handbook, is concise: a reasonable excuse is something that stopped you from meeting a tax obligation despite taking reasonable care to meet it.
The leading case is Rowland v HMRC [2006] STC (SCD) 536. The Special Commissioner there held that reasonable excuse "is a matter to be considered in the light of all the circumstances of the particular case." That principle has been applied in every reasonable excuse case since. There is no checklist, and no factor is decisive on its own.
The test itself was framed earlier, in The Clean Car Company. Judge Medd asked what a reasonable taxpayer, sharing the appellant's relevant attributes and circumstances, who genuinely wanted to meet their obligation, would have done. It's an objective test, not a subjective one. A genuine belief that you were complying does not, on its own, amount to a reasonable excuse. The Upper Tribunal confirmed this approach in Marlow Rowing Club v HMRC [2020] UKUT 20 (TCC).
What the legislation explicitly says is NOT a reasonable excuse
Schedule 24 carves out two situations where the defence does not normally apply:
- Insufficiency of funds is not a reasonable excuse, unless it is attributable to events outside the taxpayer's control. So "I couldn't afford the VAT" on its own fails; "my largest customer entered administration and the receivable was written off in the same week the return was due" can succeed, on evidence.
- Reliance on another person is not a reasonable excuse, unless the taxpayer took reasonable care to avoid the failure. Engaging a competent accountant, providing the records in time, and following up before the deadline can preserve the defence. Simply handing the file over and assuming it will be filed will not.
A third statutory point is often overlooked: once the reasonable excuse has ended, the return must be filed without unreasonable delay. In practice, this means the timeline matters as much as the cause. Document when the excuse began, when it ended, and when the return was actually submitted.
Circumstances HMRC normally accepts as a reasonable excuse
HMRC's Compliance Handbook (at CH160300) sets out a non-exhaustive list of examples. None of them are guaranteed acceptances: every claim is decided on the specific facts. But the following are routinely accepted on evidence:
- The death of a partner or close relative close to the filing date, where it materially affected the person's ability to meet the obligation at that time
- Serious or sudden illness, of the taxpayer or an immediate family member, around the filing date or for a prolonged period covering it (medical evidence is normally expected)
- Loss of records through fire, flood, theft, or unrecoverable computer failure, where the records could not be reconstructed in time
- HMRC system outages or technical failures on the relevant date, where the taxpayer can show they attempted to file on time (an error message or screenshot helps materially)
- Delayed receipt of an activation code, user ID, or password from HMRC, where the taxpayer applied in good time and filed promptly once the credentials arrived
- Postal disruption (industrial action, fire at the sorting office), where a certificate of posting shows the return was sent in good time
Circumstances HMRC normally does not accept
The mirror image is just as worth knowing. These rarely succeed without an unusual external factor:
- Pressure of work, taking on too many clients, being short-staffed
- Forgetting the deadline, mislaying the diary, going on holiday
- Software failures that were within the taxpayer's control (out-of-date package, missed update, expired licence)
- Difficulty understanding the rules without taking advice (case law expects you to seek help when uncertain)
- Cash flow stress on its own, without a specific external cause documented
- An agent's mistake, where the taxpayer didn't take reasonable steps to check the filing actually happened
Got a £200 late submission penalty and wondering if reasonable excuse applies? Our Urgent VAT Advisory gives a senior specialist's read before you appeal.
What recent tribunal decisions tell us
The new late submission regime came into force on 1 January 2023, and First-tier Tribunal decisions on reasonable excuse under it are now flowing through. A few practical patterns emerge.
First, the tribunal applies the Rowland and Clean Car Company tests strictly. Decisions turn on the facts: precisely what happened, precisely when, and precisely what the taxpayer did in response. Generic narratives ("we were going through a difficult period") rarely succeed without specific evidence anchored to the relevant dates.
Second, the tribunal is willing to accept reasonable excuse where the taxpayer's circumstances genuinely meet the objective test, including in cases involving smaller businesses without professional representation. The expensive misconception is that the tribunal is hostile by default. It isn't; it just applies the test it has been given.
Third, evidence wins cases. In ESC Studios Ltd v HMRC [2025] UKFTT 747 (TC), for example, the tribunal accepted that HMRC withholding a larger repayment that would have funded the VAT payment was itself an external cause sufficient to ground a reasonable excuse defence on the late payment penalty. The principle (drawn from the older Steptoe case law) applies equally to late submission where an external factor genuinely prevents filing.
How to claim a reasonable excuse, step by step
- Identify the precise cause and the precise dates. When did the excuse begin? When did it end? When did you file once it ended? Without dates, the claim is harder to assess.
- Gather the evidence first. Medical letters, death certificates, screenshots of HMRC error messages, post office certificates, accountant correspondence, bank confirmations. The strength of the claim is largely the strength of the evidence.
- Decide on the route. If the penalty has been issued, you have 30 days from the penalty decision letter to request a review or appeal. The internal review is free and conducted by a different HMRC officer. HMRC's own data on the old default surcharge regime showed about 81% of VAT penalty reviews involving reasonable excuse were varied or cancelled in the taxpayer's favour. Comparable figures for the new points-based regime aren't yet published, but the underlying review process is the same.
- Submit form WT2 if appropriate. For late submission under the old default surcharge regime, HMRC publishes form WT2 to claim reasonable excuse. Under the new regime, the appeal can be made in writing or online through the VAT account.
- If review fails, consider the First-tier Tribunal. You have 30 days from the review decision to lodge an appeal with the Tax Chamber. The tribunal will apply the Rowland test on the evidence before it. Be prepared to present the facts clearly and to address the statutory exclusions.
- File the outstanding return without unreasonable delay. If you haven't already filed, do so immediately. Continued delay weakens the claim significantly: the legislation explicitly requires the return to be filed promptly once the excuse ends.
When you might need expert VAT advisory
Reasonable excuse claims are mechanically about evidence and timing, but the framing of the case, the choice of route, and the way the statutory exclusions are addressed all change the outcome. In practice, the situations below are where a senior specialist's read meaningfully improves the result:
- You've received a £200 late submission penalty and need a sense-check on whether your circumstances clear the Rowland threshold before drafting an appeal
- You're claiming reasonable excuse where the underlying cause is insufficiency of funds, and need to establish the external-cause carve-out persuasively
- You're an accountant whose client missed a deadline because of something in your office (illness, system failure, oversight), and need to think through whether reasonable excuse can still apply to the client
- The reasonable excuse arose over a prolonged period and you want to argue the "remedied without unreasonable delay" point carefully
- HMRC has rejected your initial claim on review and you're considering the First-tier Tribunal, and want to scope the case before lodging the appeal
- You're facing multiple late submission penalties stacking up and want a clear-eyed view of which periods have the strongest reasonable excuse case
Whether you're a business owner or an accountant working on a client case, we focus on the VAT questions where extra expertise pays off, and we work in plain English.