The tax system can sometimes appear mechanistic, relentless and impersonal – but a tribunal’s decision to overturn a businessman’s late payment penalties in the light of his acute cash flow difficulties showed that it can have a human face.
The businessman’s horticultural packaging company had been affected by inclement weather and a business park that he owned had been hit by a low occupancy rate. Due to the unwillingness of banks to help his businesses through the crisis, he had stepped in to support them and ended up with a £500,000 personal debt.
Due to lack of funds, there were prolonged delays in his payment of Income Tax and HM Revenue and Customs (HMRC) added to his woes by levying penalties totalling more than £5,000. HMRC contended that there was nothing exceptional about such financial problems and that occasional bad weather was only to be expected.
The First-tier Tribunal rejected arguments that the penalties were disproportionately harsh and noted that insufficiency of funds is rarely a reasonable excuse for failing to pay tax on time. In allowing the businessman’s appeal, however, it found that he had exercised reasonable foresight, due diligence and a proper regard to his duties as a taxpayer. The payment delays were not reasonably avoidable and, in the circumstances, the penalties were overturned.