Verbal agreement

The taxpayer company had cash flow difficulties caused by a debtor. The firm’s representative reached a spoken agreement with HMRC to defer PAYE payments but the department imposed penalties for late payment of PAYE and National Insurance.

The Revenue argued that there was no written agreement for a time-to-pay arrangement apart from one for two months that had been taken into account when setting the fines.

The First-tier Tribunal said it seemed the taxman was unclear about what had been agreed with the taxpayer or which payments should be allocated to which months meaning the company’s “genuine belief” that it had been given time to make the payments should constitute a reasonable excuse under FA 2009 Sch 56 para 16(1).

The tribunal decided the firm’s cash flow problems should not be taken into account because the debtor although late in paying made regular payments...