Every January and February, firms receive a wave of penalty notices on behalf of clients. Some are obvious losers - the client who simply did not bother. Some are obvious winners - bereavement, serious illness, HMRC system outages with confirmed reference numbers. Most sit in the messy middle, where the appeal could go either way depending on how it is framed, what evidence is attached, and how quickly it is filed.
This is a practitioner-level summary of what HMRC actually accepts in 2026, based on the current Compliance Handbook, recent First-tier Tribunal decisions, and the day-to-day appeal outcomes firms are seeing. Nothing here is legal advice - but it is the working position most experienced agents now take.
The reasonable excuse standard
HMRC must consider a reasonable excuse if it is raised. The statutory definition is unhelpful - the legislation says "reasonable excuse" without defining it - so the meaning has been developed through tribunal decisions and HMRC guidance. The current working test is whether the taxpayer behaved as a reasonable person, exercising reasonable care and foresight, would have behaved in the same circumstances. The bar is contextual, not absolute.
Three categories tend to succeed: events outside the taxpayer's control (serious illness, bereavement, fire, theft, postal disruption), reasonable reliance on someone else where that reliance was itself reasonable (a long-standing accountant who failed without warning), and HMRC system or guidance failures. Three categories almost always fail: forgetfulness, financial hardship absent specific circumstances, and ignorance of the law for taxpayers who should have known.
The 30-day clock
An appeal must reach HMRC within 30 days of the penalty notice date. Late appeals are technically possible but you must explain the delay and HMRC may refuse to consider them. The practical rule in our experience: file within 30 days even if your evidence is incomplete. State the grounds, note that further evidence will follow, and request an internal review if the initial decision goes against you.
Diary the 30-day deadline against the notice date the moment the letter lands. Practice management software should be the system of record here - your client correspondence module should generate a penalty-appeal task automatically when a notice is logged. Accupe handles this as a deadline-driven workflow: the penalty notice becomes a job, the appeal deadline becomes a tracked date, and the owner is visible to the whole team.
Evidence that gets accepted
Bald assertions do not move HMRC. Documentary evidence does. For illness, supply GP letters or hospital discharge summaries - not just dates, but a clear statement that the condition prevented the taxpayer from managing their tax affairs during the relevant period. For bereavement, the death certificate plus a short narrative on the relationship and the practical burden. For technical failures, screenshots, error references, and HMRC online service status confirmations.
- Medical: GP letter referencing the relevant period and capacity to deal with tax matters
- Bereavement: death certificate plus narrative of practical impact
- Postal: tracking number, posting receipt, or sworn statement of postage date
- HMRC system failure: error code, timestamp, screenshot, plus confirmation from HMRC online service status page where available
- Adviser failure: contemporaneous correspondence chasing the adviser, then evidence of remedial action taken when the failure became apparent
- Disaster: insurance claim references, news coverage, or fire and rescue service reports
What rarely works
Pressures of work, staff shortages, and software difficulties are weak grounds standing alone. Tribunal decisions consistently hold that a reasonable taxpayer arranges affairs to meet deadlines despite normal commercial pressures. Cash flow problems are rarely accepted as a reasonable excuse for late filing - the obligation to file is separate from the obligation to pay.
Adviser fault is a partial defence at best. Where the taxpayer engaged a competent adviser, supplied information on time, and reasonably relied on the adviser, HMRC sometimes accepts the excuse. Where the taxpayer left things to the last minute, supplied incomplete records, or knew the adviser was struggling, the defence collapses.
Special reduction: the underused option
Where the reasonable excuse case is weak but the penalty seems disproportionate, consider requesting a special reduction under paragraph 16 of Schedule 55 FA 2009. This is a discretionary HMRC power to reduce a penalty because of special circumstances. The bar is high - HMRC guidance says it should not be applied to ability to pay or routine difficulties - but it is sometimes the right framing for unusual cases that do not fit the reasonable excuse template.
Frame the request clearly: identify the special circumstance, distinguish it from a generic hardship case, and propose a specific reduced figure rather than asking HMRC to set one.
Internal review before tribunal
When HMRC rejects the initial appeal, request an internal review within 30 days. Reviews are conducted by a different HMRC officer who is meant to be independent of the original decision. Outcomes vary, but reviews succeed often enough to be worth the effort - and a review is free, whereas a tribunal appeal involves time, occasional costs, and the risk of an adverse decision.
If the review fails, the next stop is the First-tier Tribunal (Tax Chamber). Most agents handle low-value penalty appeals themselves without counsel. Consider whether the cost of preparation justifies the appeal - a £100 first late filing penalty rarely warrants tribunal time, but a daily penalty accumulation reaching £900 or a higher tax-geared penalty often does.
The appeal letter template
A good appeal letter is three paragraphs. First, identify the penalty (reference number, amount, date) and confirm that this is an appeal under the relevant provision. Second, state the reasonable excuse in plain language with the supporting evidence enumerated. Third, request a specific outcome - penalty cancellation, reduction to a stated figure, or referral for internal review.
Keep it under one page. Long appeals invite long rejections. Short, evidenced appeals invite engagement.
Tracking penalty exposure across the practice
Most firms cannot tell you, right now, how many open penalty appeals they have. They cannot tell you the aggregate value. They cannot tell you the success rate by partner or by excuse category. This is a management failure that costs money - both in unrecovered penalties and in damaged client relationships when appeals slip.
Build a penalty register. Every notice received, every appeal lodged, every response, every outcome. Six months of data tells you which staff handle appeals well, which excuse types your client base actually has, and where you should be educating clients before the next filing season.
Closing
Penalty appeals are won on three things: filing within 30 days, supplying documentary evidence not just narrative, and matching the legal test rather than appealing to fairness. Build the workflow once, track every notice as a discrete deadline-driven job, and review your success rate every six months. The £100 you save per appeal compounds across hundreds of clients into a meaningful recovery.