A business has won an appeal against a fine for late payment of VAT because its tax agent was unable to talk to HMRC on the phone to request more time.
The agent of McNamara Joinery telephoned HMRC on 5 February, two days before the VAT payment was due, to request more time to pay the tax due to the client’s cash flow problems.
However, the agent told the first-tier tribunal (McNamara Joinery Ltd v HMRC, TC05278), that the line kept disconnecting. The agent had the same problem
on 12 February, but finally got through and arranged a two-week extension.
HMRC said that the taxpayer did not have a reasonable excuse for paying the VAT late and charged him a penalty of £490.
The tribunal said that a reasonable excuse is normally an unexpected event, something unforeseeable, something out of the appellant’s control.
Insufficiency of funds is not regarded as a reasonable excuse, but the tribunal said that the business and its agent did all they could to contact HMRC about the problem.
The tribunal said it did not accept HMRC’s submission that the business and its agent should have been aware that there was a strong likelihood that there would be a large volume of calls being made to the respondents on the days immediately prior to the due date and that as a result the appellant and agent could reasonably have expected delays in being able to make contact.
“HMRC does not publish times when their lines are likely to be busy. Rather than expecting delays it is reasonable for a taxpayer to expect telephone calls to HMRC to be answered without delay.”
The tribunal agreed with HMRC’s comment that the “time to pay agreements” should be made on or before the due date. But the tribunal also said that if a taxpayer is unable to make contact with HMRC before the deadline “that must be worthy of consideration as a reasonable excuse for the late payment.”