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Insufficiency of funds

The taxpayer had a portfolio of buy-to-let properties. In September 2014 he sold one of them. His lender insisted on repayment of all the proceeds before it would discharge the legal charge on the property. As a result he was unable to pay the capital gains tax which was due on 31 January until March 2016 after a savings policy matured.

HMRC imposed a late payment penalty but the taxpayer appealed saying he had a reasonable excuse.

The First-tier Tribunal described this as a ‘most unusual case’. The taxpayer argued that he knew about the tax bill but his bank would enable him to give a clean title to the buyer only if he passed the whole sale proceeds to it. His ability to pay was therefore outside his control. Further he paid the tax as soon as he...