Failed attempts at contacting HMRC may be a reasonable excuse for the late payment of VAT

There has been an interesting recent decision for small business owners in the First-tier Tribunal (Tax Chamber). The tribunal found that a taxpayer had a reasonable excuse for late payment of VAT when his agent, despite numerous attempts to contact HMRC before the deadline to request time to pay, was unable to get through because the telephone lines were permanently engaged.

The tribunal rejected HMRC's argument that the taxpayer should have expected the lines to be busy around the quarterly payment and submission date. It considered that it was HMRC, rather than the taxpayer, who should be expected to know which periods were particularly busy and make arrangements to deal with increased demand in peak periods.

Although the penalty was correctly calculated and not disproportionate, it was not HMRC's practice to impose a penalty for a relatively small sum, as in this case, if a request for time to pay were received before the due date. Because of the telephone difficulties, the time to pay request was finally made after the due date. The tribunal found that, as far as the taxpayer was concerned, it was an unanticipated event, beyond its control, that it was unable to contact HMRC before the payment deadline. The tribunal, therefore, allowed the appeal against the financial penalty imposed by the HMRC.

McNamara Joinery Ltd v HMRC [2016] UKFTT 529 (TC)

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