Good news for taxpayers (well a bit!).  Times are hard and paying tax an unfortunate if important and compulsory imposition.  Business being business, sometimes it proves difficult to pay on time.  Late payment now results in surcharge penalties unless there is a ‘reasonable excuse’.

The concept of ‘reasonable excuse’ is one which is evolving.  Sometimes it seems HMRC treat all claims like the ones they have heard about ‘my dog ate my tax return’ or ‘my Mam threw the HMRC cheque on the fire’, but thankfully HMRC cynicism can be overcome by a good case well presented (at least on appeal).

In the recent case of T James, the taxpayer persuaded the Tax Tribunal that he had a ‘reasonable excuse’ because he chose (out of limited resources) to provide his corporate business with funds to pay their PAYE, VAT and corporation tax, rather than keep up with his previously agreed ‘time to pay’ arrangements on his personal account with HMRC.

Whilst saying the taxpayer would have been well advised to explain the position to HMRC in advance of making the decision, the Tribunal helpfully found that although a mere inability to pay tax was not an excuse in itself the reasons why a person is unable to pay can constitute a reasonable excuse.

In this case the Tribunal took into account the business pressures and the fact that maintaining the businesses as going concerns increased employment and the overall tax take.

It was not so much a failure to pay tax altogether, more a choice to focus on the business taxes first.

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