Sandra Krywald v The Commissioners for HMRC
[2024] UKFTT 895 (TC)
Derek Shaw Racing Limited v The Commissioners for HMRC
16 January 2024
[2024] UKFTT 83 (TC)
First-tier Tribunal
A company didn't pay deferred VAT on time because of COVID-19. While the judge understood their financial problems, the company didn't try hard enough to make a payment plan with the tax office. The judge said the tax office's offer was fair and the company should have worked with them. So, the company had to pay a penalty.
Key Facts
- •Derek Shaw Racing Limited (DSRL) failed to pay deferred VAT by 30 June 2021.
- •HMRC imposed a penalty under Schedule 19 of the Finance Act 2021.
- •DSRL argued for a reasonable excuse due to financial hardship caused by the COVID-19 pandemic.
- •DSRL's director declined HMRC's offer of an 11-month repayment plan, proposing a 49-month plan instead.
- •DSRL did not provide evidence of negotiations with other creditors or attempts to secure alternative financing.
- •The Tribunal considered the case using the framework set out in *Christine Perrin v Revenue and Customs Commissioners* [2018] UKUT 0156 (TCC).
Legal Principles
A penalty is imposed under Schedule 19 FA 2021 for failure to pay deferred VAT and failure to enter into payment arrangements by 30 June 2021.
Schedule 19, Finance Act 2021
A reasonable excuse must be established for both the failure to pay and the failure to enter into payment arrangements.
Schedule 19, paragraph 4(3), Finance Act 2021
Insufficiency of funds can be a reasonable excuse for failure to pay under Schedule 19 FA 2021.
Implied from the absence of s 71 VATA applying to Schedule 19 FA 2021.
The test for reasonable excuse is objective, considering the taxpayer's situation and attributes. Relevant precedent: *The Clean Car Company v The Commissioners of Customs and Excise* [1991] VATTR 234.
*Christine Perrin v Revenue and Customs Commissioners* [2018] UKUT 0156 (TCC) and *The Clean Car Company v The Commissioners of Customs and Excise* [1991] VATTR 234
The reasonable excuse must exist on 30 June 2021, the statutory payment deadline, not necessarily later.
Paragraph 4 penalty provision of Schedule 19 FA 2021
Outcomes
Appeal dismissed.
While the Tribunal accepted that DSRL had a reasonable excuse for failing to pay due to financial hardship caused by COVID-19, it found no reasonable excuse for failing to enter into payment arrangements. HMRC’s offer of an 11-month repayment plan was deemed reasonable, and DSRL's failure to engage in meaningful negotiation was considered unreasonable.