Non-payment of tax liabilities during bankruptcy

The taxpayer was a medical practitioner. She entered into an individual voluntary arrangement (IVA) between 2008 and October 2013.

She believed that her tax liabilities during that period would also be covered by the IVA so that she would be debt free.

That was not the case. So when the taxpayer made her payment for 2013-14 she did not realise that HMRC was allocating payments for earlier years. The knock-on effect continued so that the payments for 2015-16 were still being allocated to earlier liabilities. In the meantime HMRC issued penalties for late payment of tax for 2012-13 to 2015-16 against which the taxpayer appealed.

The First-tier Tribunal decided the taxpayer had not shown she had a reasonable excuse for the late payments on the ground she thought she had no liability from 6 April 2009 to October 2013. The judge considered it ‘more likely than...