Previous Accountant’s Failure Not a Reasonable Excuse

July 31, 2015

Previous Accountant’s Failure Not a Reasonable Excuse

When an accountant failed to file a client's year-end PAYE return, the first inkling the director of the company involved had of it was many months later – when the company received a telephone call from HM Revenue and Customs (HMRC) debt collectors pursuing payment of the penalties, which by this time had amounted to £900.

The company had changed accountants and the notices had been sent to the previous accountant. Also, for whatever reason, three penalty notices for failing to file the returns in time were not received by the taxpayer, despite the fact that the taxpayer company's director had requested that HMRC send all correspondence to the business address of the company rather than its previous registered office.

The company's new accountant appealed against the penalties, arguing that her client was unaware that it had not complied with its obligations. HMRC rejected the request to cancel the penalties, stating that the former accountant's failure to file the returns on time was not a reasonable excuse.

The First-tier Tribunal considered that the law regarding such penalties is clear, and that the delay due to reliance on professional advisers was not excusable by virtue of the tax issues involved being complex.

It upheld the penalty.

Although this particular case deals with company taxation, it has more general applicability. If you change accountants, it is important to make sure that this does not lead to any failures to meet your legal obligations.