A number of tax tribunals have recently found in favour of businesses who have struggled to meet their tax demands due to circumstances outside their control which have affected their capability of paying on time.
Prior Roofing Limited won a dispute against HMRC as the tribunal ruled that it had suffered an ‘exceptional collapse’ in its turnover but that the directors had reacted well and done what they could but the collapse was out of their control.
Another case saw a carpentry business win a case against HMRC when the Tribunal decided that the owner of the business had reacted to the recession in a ‘fair and businesslike’ way as his business was overtaken by the recession and the immediate and devastating impact on the demand for new houses.
This could mean that businesses who find they are hit by fines from HMRC over late payments for VAT or construction industry companies who face the loss of their gross invoice payment entitlement because they have paid just one tax bill more than 14 days late may be able to negotiate with HMRC.
Kinsella Tax Investigations say:-
“HMRC are infamous for their hard understanding of the ‘reasonable excuse’ rule in payment of taxes. Seeing that the Tribunal has ruled in the taxpayers’ favour in recent weeks is a positive sign for struggling businesses.”
However, business would have to prove they hold a good record of meeting their tax demands on time and that any cash flow problems were down to events out of their control.
Businesses that have a history of paying tax liabilities late are not likely to be successful at Tribunals.