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Even Tax Deadlines Can Be Tinged With Mercy

Tax payment deadlines are strict and failure to meet them usually results in financial penalties. However, the regime can occasionally be tinged with mercy, as it was in one case in which a tribunal came to the rescue of a struggling company which suffered a burglary shortly before its quarterly VAT bill was due for payment.

The company ran a small indoor soft play area for children. It had set money aside to settle its VAT liability before its premises were broken into and £4,300 stolen from its safe. The burglars also caused damage which required emergency repairs costing £2,300. An unseasonal change in the weather led to a steep falling off in business and a cash flow crisis just as the VAT payment deadline approached.

The company’s VAT bill, for almost £8,000, was settled two days after the deadline and HM Revenue and Customs raised a default surcharge of nearly £2,000. However, in overturning the penalty, the First-tier Tribunal (FTT) found that the company had a reasonable excuse for the late payment.

Even exercising all due diligence, the company could not have been expected to foresee the extraordinary sequence of events which caused the cash flow emergency. The FTT also noted that the imposition of the surcharge could threaten the existence of the business and the jobs of its 14 staff.