Reasonable excuse for failure to notify

Key points

• There is a 20-year time limit for HMRC to raise an assessment where a taxpayer has failed to notify liability to income tax or capital gains tax.
• Historically this time limit has been applied irrespective of the behaviour of the taxpayer/agent.
• The Hextall case shows that TMA 1970 s 118(2) applies which means that if the taxpayer has a reasonable excuse for failure to notify the normal four-year time limit applies instead.
• Advisers should review their existing cases to decide whether it is possible to appeal assessments raised outside the four-year time limit and bear in mind this argument for future failure to notify cases.

Most readers will be aware that TMA 1970 s 7 requires those who are ‘chargeable’ to income tax or capital gains tax to notify HMRC by 5 October following the end of the tax year unless they are...