In a ruling which shows that even the enforcement of tax obligations can be tempered by mercy, the First-Tier Tribunal has come to the aid of a businessman whose small recruitment company’s remittances of PAYE were repeatedly delayed after he was stricken with terminal cancer.
Allowing the company’s appeal in part against more than £10,000 in late payment penalties, the Tribunal expressed ‘much sympathy’ for the businessman who had been forced to withdraw from the day-to-day management of the company whilst he fought the disease and its physical and psychological consequences.
The Tribunal ruled that the company had a ‘reasonable excuse’ for the delays in respect of a three-month period when the businessman was undergoing treatment abroad. However, it upheld penalties imposed in respect of a further six months when PAYE payments were despatched consistently late.
The businessman, who owned 99% of the shares in the company and was its managing director, was diagnosed with cancer of the knee that necessitated invasive surgery and a lengthy period of recuperation. After a relapse, he had to undergo a full knee replacement and was informed that the leg might have to be amputated.
The disease had a very severe psychological impact upon him to the point where he lost all confidence and was incapable of managing the company effectively. He became totally dependent on managers that he employed to run the business in his absence and, although he retained responsibility for signing cheques at home, PAYE remittances were persistently delayed.
Lawyers representing Her Majesty’s Revenue and Customs argued that the delay in payments was at least in part caused by cash flow difficulties that could not amount to a reasonable excuse and that, despite his illness, the businessman should have found a way for someone to deal with PAYE payments on his behalf.
TheTtribunal observed that, albeit late, all the payments had in fact been made and ruled that the company had a reasonable excuse for the delays during a three-month period when the businessman was undergoing treatment in Florida.
However, in refusing to overturn penalties in respect of a further six-month period, the Tribunal noted that the businessman’s wife was also a director of the company and was under a duty to ensure that it met its tax obligations. The businessman was fully aware of his duty to arrange timely payment of PAYE and HMRC had taken sufficient steps to alert him to the late payment issue.
All Day Recruitment Services Limited v The Commissioners for Her Majesty’s Revenue and Customs. Case Number: TC02699