Unusual cash flow problem

Penalties for late payment of tax

The taxpayer filed his 2010-11 return online on time. He should have paid tax on 31 January but did not do so.

HMRC issued penalties and the taxpayer appealed. He said that one of his businesses a horticultural label manufacturer received no business in a year. He also owned a business park but that had less than 50% occupancy in the year and the income was less than the mortgage payments. He had tried to reorganise his finances but this resulted in a substantial personal debt.

The First-tier Tribunal said the taxpayer had done everything he could to ‘exercise reasonable foresight’ to pay his income tax. He had time-to-pay arrangements in place for VAT PAYE and corporation tax. Although insufficiency of funds could not alone constitute a reasonable excuse the cause of that deficiency might.

In this instance several...