Search Results for: reasonable excuse

VAT: Avoiding a Default Surcharge. Reasonable Excuse – Update

By   14 March 2022
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I have looked at the Default Surcharge regime in detail here but as statistics show more business to be in default (which is probably accurately attributable, inter alia, to the pandemic) I consider how a penalty may be mitigated, by the provision of a “Reasonable Excuse”. HMRC has updated its internal guidance on Reasonable Excuse this month.

Specifically: HMRC state that “…where a person has not been able to meet an obligation on time due to the impact of COVID-19, HMRC will usually accept that they will have a reasonable excuse.”

What is a Default Surcharge?

The Default Surcharge is a civil penalty issued by HMRC to encourage businesses to submit their VAT returns and pay the tax due on time.

A default occurs if HMRC has not received your return and all the VAT due by the due date. The relevant date is the date that cleared funds reach HMRC’s bank account. If the due date is not a working day, payment must be received on the last preceding working day.

More on late returns here and on late payments here.

New rules forthcoming

It is noted that there is a new regime for penalties, details here although these changes have been delayed until 1 January 2023

Reasonable Excuse

If a business has a reasonable excuse for failing to pay on time, and it remedies this failure without unreasonable delay after the excuse ends, it will not be liable to a surcharge. The onus is on a business to satisfy HMRC that it has a Reasonable Excuse.

Definition

There’s no statutory definition of Reasonable Excuse and it will depend on the particular circumstances of a case. A Reasonable Excuse is something that prevented the business meeting a tax obligation on time which it took reasonable care to meet. There is a great deal of case law on this particular issue. Please contact us should there be doubt about a Reasonable Excuse.

What may count as a Reasonable Excuse?

HMRC give the following examples:

  • “your partner or another close relative died shortly before the tax return or payment deadline
  • you had an unexpected stay in hospital that prevented you from dealing with your tax affairs
  • you had a serious or life-threatening illness
  • your computer or software failed just before or while you were preparing your online return
  • service issues with HMRC online services
  • a fire, flood or theft prevented you from completing your tax return
  • postal delays that you could not have predicted
  • delays related to a disability (including mental health) you have”

This list is not exhaustive.

What is NOT a reasonable excuse

Statute identifies two specific situations that are not a reasonable excuse:

  • lack of funds to pay any VAT due, or
  • reliance on any other person to perform a task, where there has been a delay or inaccuracy on that person’s part.

There can be exceptions to these two exclusions. For example, an insufficiency of funds may be a reasonable excuse where the insufficiency is a result of events outside the person’s control.

HMRC also states that these situations would not normally be accepted, on their own, as a reasonable excuse:

  • pressure of work
  • lack of information
  • lack of a reminder from HMRC

Facts

HMRC will establish what facts the business believes gave rise to a Reasonable Excuse. The facts may include:

  • the taxpayer’s beliefs
  • the taxpayer’s own experiences and relevant attributes
  • the situation of the taxpayer at any relevant time
  • acts carried out by the taxpayer or someone else
  • acts that the taxpayer or someone else should have carried out but did not.

Case Law

Although not a VAT issue, in the Upper Tribunal (UT) case of Christine Perrin [2018] UKUT 156 [TC], the judge provided guidance on how the Tribunal should approach a Reasonable Excuse defence. There are four steps:

  1. establish what facts the taxpayer asserts give rise to a reasonable excuse
  2. decide which of those facts are proven
  3. if those proven facts amount to an objectively reasonable excuse for the default
  4. having decided when any reasonable excuse ceased, decide whether the taxpayer remedied the failure without unreasonable delay after that time

Appeal

If HMRC refuse to accept an advance of a Reasonable Excuse and the Default Surcharge is maintained, there are two potential remedies:

If a business disagrees with a decision that it is liable to a surcharge or how the amount of surcharge has been calculated, it is possible to:

  • ask HMRC to review your case (A Statutory Review)
  • have your case heard by the Tax Tribunal

If you ask for a review of a case, a business will be required to write to HMRC within 30 days of the date the Surcharge Liability Notice Extension (SLNE) was sent. The letter should give the reasons why a business disagrees with the decision.

We are able to assist with all disputes with HMRC and have an enviable record of succeeding in having Default Surcharges removed.

VAT – What is reasonable care?

By   7 June 2023
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What is reasonable care, and why is it important?

HMRC state that “Everyone has a responsibility to take reasonable care over their tax affairs. This means doing everything you can to make sure the tax returns and other documents you send to HMRC are accurate.”

If a taxpayer does not take reasonable care HMRC will charge penalties for inaccuracies.

Penalties for inaccuracies

HMRC will charge a penalty if a business submits a return or other document with an inaccuracy that was either as a result of not taking reasonable care, or deliberate, and it results in one of the following:

  • an understatement of a person’s liability to VAT
  • a false or inflated claim to repayment of VAT

The penalty amount will depend on the reasons for the inaccuracy and the amount of tax due (or repayable) as a result of correcting the inaccuracy.

How HMRC determine what reasonable care is

HMRC will take a taxpayer’s individual circumstances into account when considering whether they have taken reasonable care. Therefore, there is a difference between what is expected from a small sole trader and a multi-national company with an in-house tax team.

The law defines ‘careless’ as a failure to take reasonable care. The Courts are agreed that reasonable care can best be defined as the behaviour which is that of a prudent and reasonable person in the position of the person in question.

There is no issue of whether or not a business knew about the inaccuracy when the return was submitted. If it did, that would be deliberate and a different penalty regime would apply, see here  It is a question of HMRC examining what the business did, or failed to do, and asking whether a prudent and reasonable person would have done that or failed to do that in those circumstances.

Repeated inaccuracies

HMRC consider that repeated inaccuracies may form part of a pattern of behaviour which suggests a lack of care by a business in developing adequate systems for the recording of transactions or preparing VAT returns.

How to make sure you take reasonable care

HMRC expects a business to keep VAT records that allow you to submit accurate VAT returns and other documents to them. Details of record keeping here

They also expect a business to ask HMRC or a tax adviser if it isn’t sure about anything. If a business took reasonable care to get things right but its return was still inaccurate, HMRC should not charge you a penalty. However, If a business did take reasonable care, it will need to demonstrate to HMRC how it did this when they talk to you about penalties.

Reasonable care if you use tax avoidance arrangements*

If a business has used tax avoidance arrangements that HMRC later defeat, they will presume that the business has not taken reasonable care for any inaccuracy in its VAT return or other documents that relate to the use of those arrangements. If the business used a tax adviser with the appropriate expertise, HMRC would normally consider this as having taken reasonable care (unless it’s classed as disqualified advice)

Where a return is sent to HMRC containing an inaccuracy arising from the use of avoidance arrangements the behaviour will always be presumed to be careless unless:

  • The inaccuracy was deliberate on the person’s part, or
  • The person satisfies HMRC or a Tribunal that they took reasonable care to avoid the inaccuracy

* Meaning of avoidance arrangements

Arrangements include any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable). So, whilst an arrangement could contain any combination of these things, a single agreement could also amount to an arrangement.  Arrangements are `avoidance arrangements’ if, having regard to all the circumstances, it would be reasonable to conclude that the obtaining of a tax advantage was the main purpose, or one of the main purposes of the arrangements.

NB: We at Marcus Ward Consultancy do not promote or advise on tax avoidance arrangements and we will not work with any business which seeks such advice.

Using a tax adviser

If a business uses a tax adviser, it remains that business’ responsibility to make sure it gives the adviser accurate and complete information. If it does not, and it sends HMRC a return that is inaccurate, it could be charged penalties and interest.

Evidence

Before any question of reasonable excuse comes into play, it is important to remember that the initial burden lies on HMRC to establish that events have occurred as a result of which a penalty is, prima facie, due. A mere assertion of the occurrence of the relevant events in a statement of case is not sufficient. Evidence is required and unless sufficient evidence is provided to prove the relevant facts on a balance of probabilities, the penalty must be cancelled without any question of reasonable excuse becoming relevant.

None of us are perfect

Finally, it is worth repeating a comment found in HMRC’s internal guidance “People do make mistakes. We do not expect perfection. We are simply seeking to establish whether the person has taken the care and attention that could be expected from a reasonable person taking reasonable care in similar circumstances…” 







HMRC internal manual: VAT Assessments and Error Correction update

By   21 October 2024
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HMRC’s manual VAT Assessments and Error Correction was updated on 15 October 2024.

This internal guidance is for HMRC inspectors (but is equally useful for advisers) covers assessments and error correction. The amendments apply mainly to General assessment procedures: Importance of avoiding delay.

The manual covers:

  1. Making Tax Digital for Business (MTD) – how to deal with MTD customers
  2. Powers of assessment
  3. VAT assessments
  4. Error correction for VAT
  5. How to assess and correct
  6. “VALID” computer printouts
  7. Demand for VAT
  8. Remission of tax

It also refers to for the most up-to-date guidance on reasonable excuse CH160000.as a defence against penalties and interest.

More on:

How to avoid MTD penalties

Disclosure of Avoidance Schemes – new rules

New HMRC guidance on error reporting

New online service for error correction

Error Disclosure under £10,000 – Draft Letter To HMRC

 

 

 







VAT: New penalty regime delayed

By   17 January 2022
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The new system for the way penalties and interest is charged due to be introduced on 1 April this year has been deferred to 1 January 2023.

The new points-based regime has been delayed to allow HMRC to implement the necessary IT changes.

I wonder if that represents a reasonable excuse for HMRC being late…

VAT: New rules for Uncertain Tax Treatments

By   7 September 2021
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The government have released draft legislation and guidance in respect of Uncertain Tax Treatments (UTT). In addition to VAT, this legislation also covers; corporation tax, income tax and PAYE.

Who is affected?

Large businesses with a:

  • turnover of more than £200 million per annum
  • balance sheet total over £2 billion

Threshold

A business must notify HMRC in cases of UTT where the tax advantage of the treatment is £5 million or more in a twelve-month period.

Start date

The new rules will be introduced from 1 April 2022.

Notification

There are three triggers for notification:

  1. Provision made in the accounts

The amount relates to a transaction which a provision has been made in the accounts, in accordance with GAAP, to reflect the probability that a different tax treatment will be applied to the transaction

2. HMRC’s known interpretation of the law

Reliance was placed on an interpretation or application of the law that is different to HMRC’s known interpretation or application.

3. Substantial possibility amount would be found to be incorrect

It is reasonable to anticipate that, if a court were to consider the way in which the amount was arrived at, there is a substantial possibility that the treatment would be found to be incorrect.

Tax advantage

The definition of tax advantage for VAT is:

  • Less output tax is accounted for or is accounted for later, than would otherwise be the case
  • If there is an input tax claim which would otherwise not be obtained; a larger claim, or a claim earlier than would otherwise be the case
  • If input tax is recovered as a recipient of a supply before the supplier accounts for the output tax; the period between the time when the input tax is recovered or the time when the output tax is accounted for is greater than would otherwise be the case
  • The amount of non-deductible tax is less than it otherwise would be
  • An obligation to account for VAT is avoided

Exemptions

There are exemptions from notification. For VAT, exemption will apply where it is reasonable to conclude that HMRC is already aware of the information which would otherwise be required to be notified or in circumstances where a business has previously requested clearance and where HMRC agrees with the proposed treatment.

Penalties

The penalty for failure to make a notification will be £5k initially, £25k for a second failure and £50k for a third failure within a three-year period. There will be an opportunity to advance a reasonable excuse argument to avoid a penalty.

VAT: The Default Surcharge. Is it fair and proportionate?

By   6 January 2020
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What is the Default Surcharge? 

Default Surcharge is a civil penalty to “encourage” businesses to submit their VAT returns and pay the tax due on time the charge is introduced via VATA 1994 s 59(A).

When will a Default Surcharge be issued?

A business is in default if it sends in its VAT return and or the VAT due late. No surcharge is issued the first time a business is late but a warning – a Surcharge Liability Notice (SLN) is issued. Subsequent defaults within the following twelve months – the “surcharge period” may result in a surcharge assessment. Each time that a default occurs the surcharge period will be extended. There is no liability to a surcharge if a nil or repayment return is submitted late, or the VAT due is paid on time but the return is submitted late (although a default is still recorded).

How much is the surcharge?

The surcharge is calculated as a percentage of the VAT that is unpaid at the due date. If no return is submitted the amount of VAT due will be assessed and the surcharge based on that amount. The rates are:

  • 2% for the first default following the SLN, and rises to
  • 5%
  • 10%
  • 15% for subsequent defaults within the surcharge period.

A surcharge assessment is not issued at the 2%  and 5% rates if it is calculated at less than £200 but a default is still recorded and the surcharge period extended. At the 10% and 15% the surcharge will be the greater of the calculated amount or £30.

Specific issues

The default surcharge can be particularly swingeing for a fast-growing company. Let’s say that a small company grows quickly. In the early days the administration was rather haphazard, as is often the case, and a number of returns and payments were submitted late. Fast forward and the turnover, and the VAT payable, has grown significantly. Being late at this time means that the amount of default surcharge is considerably higher than when the original default which created the surcharge took place.  This leads us onto whether the surcharge is proportionate.

A business with cashflow difficulties may well ask whether it should be penalised by HMRC for having those difficulties; which of course will add to the problem.

Proportionality

The existing, long-standing default surcharge regime has always had issues with the principle of proportionality. The regime has regularly been challenged in the Courts.

Is it proportionate that a same penalty is applied for a payment which is one day late and one which is one year late? This is a matter which has concerned both HMRC and the Courts for a number of years.

In the Upper Tribunal case of Total Technology (Engineering) Ltd the Judge concluded that it was possible for an individual surcharge to be disproportionate, but that the system as a whole was not fundamentally flawed. It is also worth noting that in In Equoland judgment the judge stated that a penalty which is automatic and does not take into account the circumstances is at the least tending towards being disproportionate.

Disagreement over a surcharge

If you disagree with a decision that you are liable to surcharge or how the amount of surcharge has been calculated, it is possible to:

  • ask HMRC to review your case
  • have your case heard by the Tax Tribunal

If you ask for a review of a case, a business will be required to write to HMRC within 30 days of the date the Surcharge Liability Notice Extension was sent. The letter should give the reasons why you disagree with the decision.

Defence against a surcharge

In order to have a surcharge withdrawn (it cannot be reduced, as it is one of the few penalties that cannot be mitigated in any circumstances) it is necessary to demonstrate that a business had a reasonable excuse for the default.  This is a subject of an article on its own.  Certain factors, like relaying on a third party are not accepted as a reasonable excuse. HMRC state that a business will not be in default if they, or the independent tribunal, agree that there is a reasonable excuse for failing to submit a VAT Return and/or payment on time.

There is no legal definition of reasonable excuse but HMRC will look closely at the circumstances that led to the default.

If the circumstance that led to the default were unforeseen and inescapable and a business is able to show that its conduct was that of a conscientious person who accepted the need to comply with VAT requirements, then it may amount to a reasonable excuse.

What sort of circumstances might count as reasonable excuse?

HMRC provide guidelines on circumstances where there might be a reasonable excuse for failing to submit a VAT Return and/or payment on time. These include:

  • computer breakdown
  • illness
  • loss of key personnel
  • unexpected cash crisis – where funds are unavailable to pay your tax due following the sudden reduction or withdrawal of overdraft facilities, sudden non-payment by a normally reliable customer, insolvency of a large customer, fraud or burglary. A simple lack of money is unlikely to be accepted as a reasonable excuse.
  • loss of records

Ongoing issues

HMRC is considering whether and how it should differentiate between those who deliberately and persistently fail to meet administrative deadlines or to pay what they should on time, and those who make occasional and genuine errors for which other responses might be more appropriate. This has been a lengthy process to date.

A previous HMRC document highlighted two issues with the current VAT default surcharge regime.

  • while the absence of penalty for the initial offence in a 12-month period gives business the chance to get processes right, some customers simply ignore this warning
  • is there an issue of proportionality, ie; the failure to distinguish between payments that are one or two days late or many months late?

It is possible that in the future we may hear proposals for the system being amended. if this is the case, I think we can anticipate the introduction of mitigation and suspension.







VAT: Issue of zero-rating certificate – The Westow Cricket Club case

By   18 December 2019
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Issue an incorrect certificate to obtain zero rated building work at your peril! Don’t get caught out – A warning.

In the First Tier Tribunal (FTT) case of Westow Cricket Club (WCC) the appeal was against a penalty levied by HMRC for issuing a certificate to a contractor erroneously under The VAT Act 1994, Section 62 (1).

Background

WCC was an entity run by volunteers but was not a charity, although it was a Community Amateur Sports Club (“CASC”). It decided to build a new pavilion and wished to take advantage of certain zero rating which was available for the construction of a building that the

“…organisation (in conjunction with any other organisation where applicable) will use the building, or the part of the building, for which zero-rating is being sought …..solely for

a relevant charitable purpose, namely by a charity in either or both of the following ways:

….(b) As a village hall or similarly in providing social or recreational facilities for a local community.”

– Public Notice 708 para 14.7.1.

To ensure that the issue of such a certificate was appropriate, the appellant wrote to HMRC giving details about the building project and seeking guidance on the zero rating of supplies to WCC in the course of the construction of the pavilion. The response was important in this case as WCC sought to rely on it as a reasonable excuse. Part or the reply stated:

“HM Revenue & Customs policy prevents this Department from providing a definitive response where we believe that the point is covered by our Public Notices or other published guidance, which, in this case, I believe it is. In view of the above, please refer to section 16 of Public Notice 708 Buildings and construction. This explains when you can issue a certificate. Section 17 includes the certificates. Furthermore, I would refer you to sub-paragraph 14.7.4 which covers what is classed as a village hall or similar building. Providing the new pavilion meets the conditions set out, and it appears to do so, the construction work will be zero-rated for VAT purposes…”

Decision 

Regrettably, the FTT found that, despite HMRC’s letter expressing a ‘non definitive’ view; which was wrong, this was insufficient to provide reasonable excuse and could not be relied upon. The FTT made references to the fact that the club was not a charity and could not therefore issue the certificate. Consequently, the 100% penalty was applicable and not disproportionate (the penalty imposed is nothing more than the VAT that would have been paid by any other CASC seeking to build a pavilion incurring a vatable supply of a similar sum).

Commentary

HMRC was criticised for potentially leaving taxpayers in ‘no man’s land’ by expressing a view whilst at the same time saying that this was not a definitive response. This is a common tactic used by HMRC and one which many commentators, including myself, have criticised.

Tribunal’s unease

The judge commented that he trusted that HMRC will take note of his concerns and if this is a matter of policy to revisit it in light of the comments made in this decision. Let us hope HMRC listens. It is also an important case for charities (and others) to note when considering if they are able to obtain the construction of buildings VAT free. This is not a straightforward area, and the penalty for getting it wrong is clearly demonstrated here.

Always get proper advice – and don’t rely on vague rulings from HMRC!







The Default Surcharge for late VAT payments

By   5 September 2017
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A Default Surcharge is a civil penalty issued by HMRC to “encourage” businesses to submit their VAT returns and pay the tax due on time.

VAT registered businesses are required by law to submit their return and make the relevant payment of the VAT by the due date.

A default occurs if HMRC has not received your return and all the VAT due by the due date. The relevant date is the date that cleared funds reach HMRC’s bank account. If the due date is not a working day, payment must be received on the last preceding working day.

Payments on Account (POA)

If a business is required to make POA it must pay them and the balance due with the VAT Return by electronic transfer direct to HMRC’s bank account. The due dates for POA are the last working day of the second and third month of every quarterly accounting period. The due date for the balancing payment is the date shown on the business’ VAT Return. It is important to ensure that payments are cleared to HMRC’s bank by these dates or there will be a default.

Consequence of default

A business will receive a warning after the first default ‐ the Surcharge Liability Notice (SLN). Do not ignore this notice. If you fail to pay the VAT due on the due date within the next five quarters, the surcharge will be 2% of the outstanding tax. The surcharge increases to 5% for the next default, and then by 5% increments to a maximum of 15%.  Each default, whether it is late submission of the return or late payment, extends the surcharge liability period, but only late payment incurs a surcharge.

If you can’t pay the VAT you owe by the due date or are having difficulties, contact the Business Payment Support Service immediately.

Special arrangements for small businesses

There are special arrangements if a business’ taxable turnover is £150,000 or less to help if there are short term difficulties paying VAT on time. HMRC send a letter offering help and support rather than a Surcharge Liability Notice the first time there is a default. This aims to assist with any short-term difficulties before a business formally enters the Default Surcharge system. If the business defaults again within the following 12 months a Surcharge Liability Notice will be issued.

Minimum surcharges

There is a minimum of £30 for surcharges calculated at the 10% or 15% rates. There will not be a surcharge at the 2% and 5% rates if it is calculated it to be less than £400. However, a Surcharge Liability Notice Extension extending the surcharge period will be issued and the rate of surcharge if you default again within the surcharge period will be increased.

Circumstances when HMRC will not levy a surcharge

There’s no liability to surcharge if a business:

  • submits a nil or repayment return late
  • pays the VAT due on time but submit your return late

HMRC will not issue a surcharge in these circumstances because there is no late payment involved. If a business had defaulted previously HMRC will issue a Surcharge Liability Notice Extension extending the surcharge period because the return is late, but they will not increase the rate of surcharge.

Time limit

A business’ liability to surcharge will expire if a business submits all of its returns and payments for tax periods ending on or before the end of the surcharge liability period on time.

Reasonable excuse

If a business has a reasonable excuse for failing to pay on time, and it remedies this failure without unreasonable delay after the excuse ends, it will not be liable to a surcharge.

There’s no statutory definition of reasonable excuse and it will depend on the particular circumstances of a case. A reasonable excuse is something that prevented the business meeting a tax obligation on time which it took reasonable care to meet. The decision on whether a reasonable excuse exists depends upon the particular circumstances in which the failure occurred. There is a great deal of case law on this particular issue. Please contact us should there be doubt about a reasonable excuse.

Disagreement over a surcharge

If you disagree with a decision that you are liable to surcharge or how the amount of surcharge has been calculated, it is possible to:

  • ask HMRC to review your case
  • have your case heard by the Tax Tribunal

If you ask for a review of a case, a business will be required to write to HMRC within 30 days of the date the Surcharge Liability Notice Extension was sent. The letter should give the reasons why you disagree with the decision.

Examples when a review may be appropriate are if a business considers that:

  • it has a reasonable excuse for the default
  • HMRC applied the wrong rate of surcharge
  • HMRC used the wrong amount of VAT when calculating the surcharge
  • there are exceptional circumstances which mean the default should be removed

A business will still be able to appeal to the Tribunal if it disagrees with the outcome of the HMRC review.

We are very experienced in dealing with disputes over Default Surcharges, so if you feel that one has been applied unfairly, or wish to explore your rights, please let us know.







VAT Latest from the courts – HMRC’s bad ‘phone service

By   18 August 2016
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As we know, late payment of VAT results in a Default Surcharge. Details of DS here

However, if a taxpayer has a reasonable excuse the DS will not be due. In the interesting recent case of McNamara Joinery Ltd here

The appeal was on the grounds that HMRC itself caused the default. The business was successful in the appeal on the grounds that its agent could not contact HMRC to arrange a time to pay agreement because of HMRC’s poor telephone service. Anyone who has attempted to contact HMRC by telephone will appreciate that this isn’t a one-off case!

Background

The appellant had a previous history of submitting returns on time, but making late payments late such that the period in question would give rise to a DS if the return or payment was late. Appreciating that the business would not have sufficient funds to meet the VAT payment due, it instructed its agent to contact HMRC on its behalf in an attempt to arrange a “time to pay” (TTP) agreement. The agent attempted to do this two days before the payment was due. However, there were significant problems with the telephone service and the agent was unable to get through as the line kept “going dead” (It appears from later comments made by HMRC that this was due to the volume of calls made at the end of the VAT period). A TTP agreement was subsequently reached, but only after the due date which HMRC argued was too late to avoid the DS.

Decision

On the subject of reasonable excuse, the FT Tribunal observed that “A reasonable excuse is normally an unexpected event, something unforeseeable, something out of the appellant’s control. Insufficiency of funds is not regarded as a reasonable excuse although the reason for the insufficiency might be. It is unfortunately part of the hazards of trade that debtors fail to keep promises to pay. These submissions cannot be regarded as establishing for the appellant a reasonable excuse for the late payment.”
It continued “However, faced with the problem of not having received promised payments, the appellant through its agent did all that it could do in the circumstances…., its agent tried repeatedly to contact HMRC by telephone but was unsuccessful until 12 February 2016 when a time to pay agreement was made and subsequently the arrangements made were adhered to. In the Tribunal’s view this repeated failure to contact HMRC was unexpected and unforeseeable”. Therefore the taxpayer had a reasonable excuse and the DS was removed.

The Judge did not accept HMRC’s submission that the appellant should have been aware that there was a likelihood that there would be a large volume of calls being made to HMRC on the days immediately prior to the due date and that as a result the appellant could reasonably have expected delays in being able to make contact. HMRC do not publish times when their lines are likely to be busy. Rather than expecting delays it is reasonable for a taxpayer to expect telephone calls to HMRC to be answered without delay. In the Tribunal’s view HMRC were in a better position than the appellant to know when there is a likelihood of a large volume of calls and they should have arrangements in place to deal with the higher volume of calls promptly.

So HMRC lost this case because they failed to answer the phone.

Lessons to be learned

  1. One cannot rely on HMRC answering their own phones, even though they are fully aware that there will be an increased demand at certain times. They do not have arrangements in place to deal with the known demand. They do not have a reasonable excuse for not dealing with taxpayers!
  2. When attempting to contact HMRC it is a very good idea to keep an accurate log.
  3. If it is likely that a business is experiencing cashflow issues, contact HMRC as soon as possible and do not leave it to the last moment.
  4. It is possible to arrange a TTP agreement with HMRC.
  5. A business should take advice from their advisers as soon as possible to avoid DSs. This may avoid both a TTP position and/or a DS.