What is a reasonable excuse under section 126 of the Tax Collection and Management (Wales) Act 2016?

A reasonable excuse is a genuine reason beyond the taxpayer's control that prevented them from filing a tax return or paying a devolved tax or tax credit amount on time. If demonstrated to the Welsh Revenue Authority or tribunal, the taxpayer will not be liable for late filing or late payment penalties that would otherwise apply.

Does a lack of funds count as a reasonable excuse for failing to pay Welsh devolved tax on time?

No, insufficiency of funds is not in itself a reasonable excuse under section 126. The only exception is where the shortage of money was caused by events genuinely outside the person's control, such as a bank unexpectedly freezing accounts due to an administrative error. Poor budgeting alone would not qualify as a reasonable excuse.

Can relying on an agent or adviser be a reasonable excuse for a tax failure under TCMWA 2016?

No, reliance on another person to carry out a tax obligation is not automatically a reasonable excuse. The taxpayer must show they took reasonable care to ensure the task was completed properly despite delegating it. If reasonable care was not taken, the taxpayer remains liable for penalties arising from the failure.

What happens when a reasonable excuse ceases to apply under section 126?

If a taxpayer had a genuine reasonable excuse that later ceased, they are still treated as having the excuse provided they remedied the failure without unreasonable delay after it ended. Once the obstacle preventing compliance is removed, the taxpayer must act promptly or risk losing the protection and facing penalties for the subsequent period.

Tax Collection and Management (Wales) Act 2016 section 126

Reasonable excuse for failure to make tax return or pay tax or amount payable in respect of tax credit

Section 126 sets out the circumstances in which a person can avoid penalties for failing to file a tax return, pay a devolved tax, or pay an amount due in respect of a tax credit, by demonstrating that there was a reasonable excuse for the failure.

A person who can show WRA or the tribunal that they had a reasonable excuse for failing to file a tax return on time will not be liable to the associated late filing penalties.
Similarly, a person with a reasonable excuse for failing to pay a devolved tax on time, or for failing to pay an amount due in respect of a tax credit, will not be liable to the relevant late payment penalties.
Lack of funds is not in itself a reasonable excuse unless it was caused by events outside the person's control, and reliance on another person to carry out a task is not a reasonable excuse unless the person took reasonable care to avoid the failure.
Where a person had a reasonable excuse that later ceased to apply, they will still be treated as having a reasonable excuse provided they remedied the failure without unreasonable delay after the excuse ended.

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