Economic pressure

The taxpayer company made nine out of 12 monthly payments due under PAYE late during the year 2010/11. As a result HMRC issued penalties of £29 841.89 or 3% of the annual tax and National Insurance due.

The company appealed claiming a reasonable excuse for failure to pay on time.

It explained its trading and cash flow position were adversely affected by nine specific business failures leading to liquidation or administration of debtors. The bad debts were £259 315.42. The company also said customers who paid extended their credit period and persistently paid late.

HMRC argued that the taxpayer company was a recidivist and did not have a reasonable excuse.

The evidence also showed the company was having problems with its bank which insisted on converting a £4 million overdraft facility into a confidential invoice discounting arrangement which reduced the company's working capital by around...