Nota Bene: contributory negligence

David Whiscombe comments for BrassTax on a recent case.

Ben Associates (UK) Ltd [2018] UKFTT 429 (TC) is in many ways an unexceptional case.

The company failed, over a period of years, to file its Corporation Tax returns at the proper time and penalties were levied against it by HMRC.  The company’s defence was that it had a “reasonable excuse” for the failures.  That, if true, would absolve it from liability to penalties.  The claimed excuse was that the director of the company “knew nothing about the tax legislation, [and] had relied entirely on the Appellant’s previous accountants to make the required tax filings and generally to manage the tax affairs of the Appellant.”

The law in this area provides that “where [the taxpayer] relies on any other person to do anything, that is not a reasonable excuse unless [the taxpayer] took reasonable care to avoid the failure.”  In other words, you cannot simply delegate to someone else responsibility for the timely meeting of your tax obligations: something more is required.

That “something more” is doing whatever is reasonable having regard to the personal attributes, experience and knowledge of the taxpayer.

In the case of Ben Associates, the Tribunal judge observed that “it is not sufficient simply to rely on a third party to ensure compliance with one’s tax obligations.  One must also take reasonable steps to check on the activities of the third party and not simply accept the third party’s unsubstantiated assurances that all is well without asking for some evidence to that effect.”

That might in our view be setting the bar a little too high.  We think that it is probably reasonable in the first instance to rely on a reputable professional adviser’s confirmation that a tax return has been filed or other compliance action taken, at least until evidence arises that it hasn’t: after all, professional advisers don’t usually lie to clients.

However, when (as in Ben Associates) HMRC send out repeated notifications that returns have not been filed, simply passing them to the accountant, without expressing any curiosity as to the true state of affairs, falls short of taking reasonable care to avoid failure.  Thus, in failing to take even the most obvious and rudimentary steps to satisfy itself that returns had been filed, the company had failed to take reasonable care to avoid failure and was fully exposed to the penalties.

But there’s another angle to this.  It was all the fault of the “previous accountants” wasn’t it?  Can’t the company sue them to recoup the penalties?  Well, perhaps.  We don’t know of course know who the “previous accountants” were or the precise circumstances in which Corporation Tax returns were apparently filed late or not at all for six consecutive years, but yes: it does prima facie look as if someone might have some explaining to do.

But here’s the rub: the law recognises something called “contributory negligence”.  So, the fact that an independent Tribunal has found that the company has itself failed to take reasonable care to ensure that the returns were filed on time is not going to help the company in framing any case it may seek to make against the “previous accountants”.

Where the “failure” relates not to the timeliness with which tax returns are filed but to their accuracy, slightly different considerations apply, especially following a change of legislation wrought by Finance (No 2) Act 2017.  But that’s a story for another day.  So keep watching our website for the next instalment…

In the meantime, for more information, please get in touch with your usual BKL contact or use our enquiry form.



Sam Inkersole

In 2022, Sam won the Taxation’s Rising Star award at the Taxation Awards in and was named in the Accountancy Age 35 Under 35.

Jon Wedge

While Jon’s client work focuses on the financial services sector, he also oversees the firm’s assurance service, as well as supporting the trainees following in his footsteps.


Elana joined us in 2017 as an ACA trainee, after graduating from Durham University where she had studied languages. She is now a manager in our assurance team.


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