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The taxpayer, a scaffolding contractor, was late paying his PAYE on six occasions. HMRC therefore rescinded his gross payment status.
He claimed reasonable excuse due to the sudden contraction of his business. He said he had done all he could to manage his cash flow, including making employees redundant, cutting back his personal drawings, and pressing debtors for payment.
He knew he had to send payment to HMRC, and did so as soon as he could.
The First-tier Tribunal noted the drop in demand for the taxpayer’s work was ‘sudden and severe’ and could not have been predicted. The taxpayer had taken a series of steps to improve his cash flow and dealt with the demands on his cash resources in a ‘fair and business-like way’.
In the judge’s view, the taxpayer met the required standards for reasonable excuse.
The taxpayer’s appeal was allowed.
