Is ignorance of the law a reasonable excuse?

Reasonable excuse is a principle which allows the taxpayer to show why they were not able to meet their tax duties to HMRC. In the past ignorance of the law has not been permissible as a reasonable excuse but more recently the tribunals have accepted that it can apply. Yet the question of whether this principle does protect the taxpayer is still in question today.

The reasonable excuse defence protects a taxpayer only from the penalty – it does not absolve them from the actual tax incurred or the interest. This is because there is a statutory obligation to pay interest on unpaid tax (TMA 1970 s 86). The tribunal does not have the authority to relieve the interest and the actual tax under the reasonable excuse defence. Penalties which allow for a reasonable excuse defence range across a variety of tax acts. The penalties also differ and...