Gagajoo Gardens & Landscapes Limited v The Commissioners for HMRC [2026] UKFTT 1100 (TC)

[2026] UKFTT 01100 (TC)Case No TC 09967
FIRST-TIER TRIBUNAL
TAX CHAMBER
Hearing Heard on: 15 May 2026Date Judgment date: 29 July 2026
By remote video
Appeal reference: TC/2025/01167
Absence of the Appellant, VAT, default surcharges, sch26 FA 2021 penalties, late appeal, reasonable excuse, application of Martland, Perrin Principles applied, appeal dismissed
Before
TRIBUNAL JUDGE RABADIAMEMBER JANE CUMMINS
Between
GAGAJOO GARDENS & LANDSCAPES LIMITEDAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentNot in attendance and not represented for AppellantMs Hifsa Shabir, litigator of HM Revenue and Customs’ Solicitor’s Office for RespondentsDECISION

Introduction

[1]The form of the hearing was V (video) via the Teams platform. The documents to which we were referred are a 257-page document bundle (which included some authorities), HMRC’s Statement of Reasons and an Authorities bundle.[2]Prior notice of the hearing had been published on the gov.uk website, with information about how representatives of the media or members of the public could apply to join the hearing remotely in order to observe the proceedings. As such, the hearing was held in public.

Background

[3]Mr Clayton, the sole director and shareholder for the Appellant, filed an application on 13 March 2025 to appeal charges, penalties and interest issued to the Appellant in respect of defaults made on PAYE and VAT filings. This judgment deals only with penalties and default surcharges issued to the Appellant in respect of its VAT obligations. The Tribunal has no jurisdiction to consider appeals against interest charged by HMRC.[4]In respect of the default surcharges (for periods between 02/21 – 08/22), the Appellant did not dispute that the appeal was made late. The Appellant therefore requires the Tribunal’s permission to bring the appeal against the default surcharges.[5]The Appellant has been registered for VAT since 01 August 2008. The Appellant has been part of the default surcharge regime for VAT since 2014. These were charges levied against the taxpayer under the former penalty regime for late payment of VAT.[6]The default surcharges charged to the Appellant that are the subject of this appeal are as follows: Date Legislation Description Amount 16/04/21 s.59(5)(d) VAT Act 1994 02/21–Surcharge Assessment @ 15%, £417.17 16/07/21 s.59(5)(d) VAT Act 1994 05/21–Surcharge Assessment @ 15%, £668.84 17/10/21 s.59(5)(d) VAT Act 1994 08/21–Surcharge Assessment @ 15%, £837.03 19/01/22 s.59(5)(d) VAT Act 1994 11/21–Surcharge Assessment @ 15%, £680.96 21/04/22 s.59(5)(d) VAT Act 1994 02/22–Surcharge Assessment @ 15%, £287.62 17/07/22 s.59(5)(d) VAT Act 1994 05/22–Surcharge Assessment @ 15%, £977.08 19/10/22 s.59(5)(d) VAT Act 1994 08/22–Surcharge Assessment @ 15%, £656.82 £4,525.52[7]The Appellant also seeks to appeal VAT penalties issued to it under paragraph 5(1), and paragraph 8 schedule 26 Finance Act 2021 as follows: Tax Period Date of Penalty Description 05/23 10/08/23 First Late Payment Penalty £455.44 05/23 03/04/25 Second Late Payment Penalty £327.59 08/23 09/11/23 First Late Payment Penalty £271.46 02/24 10/05/24 First Late Payment Penalty £153.60 05/24 09/08/24 First Late Payment Penalty £178.02 08/24 11/11/24 First Late Payment Penalty £263.98 Total: 1,650.09[8]The request to appeal the penalties in paragraph 7 above and interest was made to HMRC via the Appellant’s agent, Connect Accountancy, by way of letter dated 19 November 2024 on the premise that the Appellant had a reasonable excuse. The letter sought to appeal all penalties and interest from 1 October 2023.[9]HMRC did not accept the reasons given and stated that the 4 penalties which fell into the tax period being appealed remained payable. The penalties considered in this letter were:(1) 9 February 2024 - £170.57(2) 10 May 2024 - £153.60(3) 9 August 2024 - £178.01(4) 11 November 2024 - £263.98[10]A statutory view of the appeal was requested on 10 January 2025. This letter stated that the request to appeal related to all penalties notified in HMRC’s letter to the Appellant dated 6 November 2024. A total of £47,564.29 was sought from the Appellant in that letter and the Appellant contended that it owed only the outstanding PAYE and VAT amounts in the said letter and none of the interest, surcharges and/or penalties were payable.[11]A review conclusion letter was issued on 27 January 2025. The penalty issued for period 11/23 was removed. The decision upheld all other penalties and surcharges. It is noted that the review letter incorrectly stated that the Appellant sought to review penalties from 1 October 2024. Connect Accountancy’s letter clearly stated that the penalties being challenged were all those from 1 October 2023. Given the dates of the penalties considered, it is presumed that this was a typographical error.[12]Mr Clayton wrote to HMRC again – this letter is undated. HMRC responded on 25 February 2025 to confirm that the decision in letters of 19 December 2023 (the correct date being 19 December 2024) and 27 January 2025 remained unchanged. Preliminary Issues Non-Attendance of Mr Clayton

Preliminary Issues

[13]The hearing was scheduled to begin at 10am. At that time, no-one was present to represent the Appellant. The Tribunal had been advised that Mr Clayton would be representing the Appellant and so made enquiries as to why he was not in attendance on behalf of the Appellant.[14]Mr Clayton informed Tribunal staff during a telephone call that he had emailed the Tribunal on 13 May 2026 to inform it that he had undergone a medical surgery on 5 May 2026 and was not in a position to attend and in the said email had sought an adjournment.[15]Mr Clayton was asked to forward a copy of the said email to the Tribunal as the Tribunal had no record of receiving such an email. Mr Clayton did not forward the email as requested and instead wrote a further email at 10.23am stating the following:
‘Good morning, I refer to the first-tier tribunal to be heard on 15th of May at 10am. Unfortunately, I had a further cancer lesion removed from my head on Tuesday at short notice. I am suffering with aftereffects and have not fully recovered. Under these circumstances can the hearing please be adjourned until my health has fully recovered. I will of course forward any medical information you require. Kind regards, Steven Clayton’
[16]The Tribunal was informed that this was the third hearing listed for this matter. At the first hearing Mr Clayton withdrew his appeal on behalf of the Appellant and did not attend. Mr Clayton then sought to re-instate the Appeal; the Appeal was reinstated and a further hearing was listed for 18 February 2026. At the second hearing Mr Clayton did not attend, and no prior notice was provided, nor has there been any reason provided for the absence. The Tribunal (the panel at this hearing being made up of Judge Rabadia and Member Roberston) adjourned the second hearing, and the matter was re-listed to be heard on 15 May 2026.[17]Considering all of the circumstances, the Tribunal was not satisfied that Mr Clayton had made attempts to contact the Tribunal and/or the Respondent of his inability to attend the third hearing listed in this matter.[18]HMRC made an oral application to proceed in the Appellant’s absence pursuant to Rule 33 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. It submitted that a large part of the Appellant explanations for reasonable excuse is to do with Mr Clayton’s medical history for which there is documentation in the bundle. Further, it would not be fair and proportionate to adjourn yet again for there to be a fourth hearing.[19]The Tribunal found that the Appellant was aware of the hearing taking place and did not communicate Mr Clayton’s inability to attend the hearing. In light of the information before it and bearing in mind the overriding objective, the Tribunal considered what would be fair and just for all involved; the Tribunal was satisfied that it was in the interests of justice to proceed with the hearing.[20]It should be noted that at the time of writing this judgment, the Appellant has not produced any documentary evidence to support the statements made in Mr Clayton’s email above.

Application to appeal the Default Surcharges out of time

[21]Before the substantive case for the default surcharges can be considered, the Tribunal must determine whether it will allow the Appellant to bring its appeal in respect of these charges out of time.[22]The delay is between 2.5 years to over 4 years after the expiration of the statutory time limit.[23]The Upper Tribunal has given guidance on the approach to be applied when considering an application for permission to make a late appeal in Martland v HMRC [2018] UKUT 178 (TCC) (‘Martland’) at [23] – [47], the essence of which is summarised at [44]:
“44. When the FTT is considering applications for permission to appeal out of time, therefore, it must be remembered that the starting point is that permission should not be granted unless the FTT is satisfied on balance that it should be. In considering that question, we consider the FTT can usefully follow the three-stage process set out in [Denton v TH White Ltd [2014] EWCA Civ 906, [2014] 1 WLR 3926]: (1) Establish the length of the delay. If it was very short (which would, in the absence of unusual circumstances, equate to the breach being “neither serious nor significant”), then the FTT “is unlikely to need to spend much time on the second and third stages” – though this should not be taken to mean that applications can be granted for very short delays without even moving on to a consideration of those stages. (2) The reason (or reasons) why the default occurred should be established. (3) The FTT can then move onto its evaluation of “all the circumstances of the case”
. This will involve a balancing exercise which will essentially assess the merits of the reason(s) given for the delay and the prejudice which would be caused to both parties by granting or refusing permission.” (2) The reason (or reasons) why the default occurred should be established.[24]In deciding whether to give permission we have applied the three-stage approach in Martland.

Length of Delay

[25]We adopt the Upper Tribunal’s approach in the case of Romasave (Property Services) Ltd v Revenue & Customs Commissioners [2015] UKUT 254 (TCC) (“Romasave”). The Upper Tribunal in Romasave considered a delay of three months against a 30-day appeal window and held at [96] that:
“In the context of an appeal right which must be exercised within 30 days from the date of the document notifying the decision, a delay of more than three months cannot be described as anything but serious and significant.”
[26]HMRC submit that the appeals are nearly 3 years to over 4 years after the deadline; the delay is serious and significant. Mr Clayton on behalf of the Appellant does not address the length of delay in his application. We agree that such a lengthy delay can be nothing but serious and significant.

Reasons for delay

[27]Mr Clayton does not expressly address why he has submitted the appeal late. The reasons he provides are in respect of the substantive issue on penalties (that is, whether there was a reasonable excuse which would remove those penalties). We have considered these reasons and whether they could explain why the appeal itself was brought late.[28]Mr Clayton has cited a number of reasons:(1) He is the sole director and was diagnosed with sepsis in October 2023 which caused him to be house bound and experience fatigue, weakness and general pain for a pro-longed period. An ambulance was called on 21 October 2023. He remained in the hospital until 2 November 2023.(2) Mr Clayton’s marriage broke down and he separated from his wife in March 2024.(3) Mr Clayton underwent a knee replacement surgery on 31 August 2024 and was absent from work until 28 October 2024.(4) There was a lack of work and cashflow in the business.(5) The business had not fully recovered from the COVID period.(6) The Ukraine war meant that supplies were limited and costs rose which resulted in less work being undertaken.(7) Money was lost on existing jobs undertaken by the Appellant and costs could not be passed on.(8) Penalties and interest are unfair as HMRC has not taken into consideration the full extent of circumstances that were outside of the Appellant’s control.(9) HMRC has misapplied payments made.(10) A Time To Pay (‘TTP’) was set up as soon as Mr Clayton was in a position to deal with the matter.(11) Between 2020 – 2023 was a disastrous time for the Appellant.(12) The Appellant cannot afford to carry any unnecessary cost.(13) HMRC have consistently misallocated payments and the Appellant is spending a lot of time and money correcting this and cannot afford to enter into more communication.(14) Mr Clayton is feeling depressed.[29]In its response HMRC have stated:(1) On 20 June HMRC advised the Appellant that the appeal was out of time and sought reasons for the late appeal and additional evidence. A response was received on 23 June 2024 with medical records and reasons for late payments from 2020 to 2024. The email did not address the issue of the late appeal.(2) During a telephone call between Mr Clayton and HMRC, Mr Clayton cited COVID as a reason.(3) The medical evidence provided was for 2023, no evidence or explanation was provided for 2020-2023. Consideration of all the circumstances Whether the Appellant has established that there was a good reason for the delay

Consideration of all the circumstances

[30]We note that documents show that HMRC sent an email to Mr Clayton on 17 June 2025 and followed up with an email chasing a response on 20 June 2025. We do not agree that the said emails sought representations from Mr Clayton as to his reasons for the lateness of the appeal. The email stated that:[31]“I must advise you that your appeal is out of time and I might be making an application to the tribunal to not allow the late appeal.” It does not invite representations as contended by HMRC nor let Mr Clayton know specifically that the late appeal is being objected to.[32]It is agreed that the response received from Mr Clayton does not address the lateness of the appeal.[33]On Mr Clayton’s reasons, it seems that he did not take any positive action to address his tax affairs until November/December 2024. The Tribunal notes that there is no suggestion that the Appellant did not receive notices of the penalties as and when they were issued.[34]It is noted that Mr Clayton does not specifically explain why he was late in filing the appeal. One may consider that Mr Clayton’s medical and matrimonial issues may have caused a delay in Mr Clayton filing an appeal on behalf of the Appellant.[35]However, on the basis that the company was still operating, as is demonstrated by the VAT filings exhibited within the document bundle, and correspondence concerning PAYE, it is not clear why Mr Clayton was unable to address the penalties at the time they arose notwithstanding that he was able to deal with other documentary requirements in respect of the Appellant’s tax affairs.[36]Accordingly, we do not accept that the Appellant has adequately explained that he had a good reason for the delay in bringing this appeal for the surcharges issued.

Balancing all of the circumstances

[37]In considering all the circumstances of the case, we are required to balance all of the circumstances of the case, including the merits of the reasons(s) given for the delay which we have discussed above and the prejudice which would be caused to both parties by granting or refusing permission.[38]We remind ourselves that particular importance is to be given to the need for "litigation to be conducted efficiently and at proportionate cost, and for statutory time limits to be respected" (Martland at [45], confirmed by the Court of Appeal in Medpro [2026] EWCA Civ 14).[39]The Upper Tribunal provided guidance in how the FTT should weigh up all the circumstances of the case in Martland at [45] and [46]:
‘45. … The FTT's role is to exercise judicial discretion taking account of all relevant factors, not to follow a checklist. 46. In doing so, the FTT can have regard to any obvious strength or weakness of the applicant’s case; this goes to the question of prejudice – there is obviously much greater prejudice for an applicant to lose the opportunity of putting forward a really strong case than a very weak one. It is important however that this should not descend into a detailed analysis of the underlying merits of the appeal … It is clear that if an applicant’s appeal is hopeless in any event, then it would not be in the interests of justice for permission to be granted so that the FTT’s time is then wasted on an appeal which is doomed to fail. However, that is rarely the case. More often, the appeal will have some merit. Where that is the case, it is important that the FTT at least considers in outline the arguments which the applicant wishes to put forward and the respondents’ reply to them. This is not so that it can carry out a detailed evaluation of the case, but so that it can form a general impression of its strength or weakness to weigh in the balance. To that limited extent, an applicant should be afforded the opportunity to persuade the FTT that the merits of the appeal are on the face of it overwhelmingly in his/her favour and the respondents the corresponding opportunity to point out the weakness of the applicant’s case. In considering this point, the FTT should be very wary of taking into account evidence which is in dispute and should not do so unless there are exceptional circumstances.’
[40]The Appellant will of course be prejudiced, if we refuse to grant it permission to notify the appeal late, in the sense that it will have lost its opportunity to contest the appeal but that assumes that it has a good case. As the UT cautioned in Martland at [46], we should be very wary of taking into account evidence which is in dispute and we consider that it would not be appropriate to do so in this case without hearing detailed evidence from HMRC and giving the Appellant an opportunity to challenge it. We are not persuaded that the Appellant’s case is overwhelmingly strong. In the circumstances, we are unable to give any weight to the merits of the substantive appeal.[41]We accept that if we refuse to admit the late appeal, the Appellant will be out of pocket. That, however, is a consequence of the failure to submit the appeals in time and it cannot be right that a delay which is this significant and for which there was no good reason should be overlooked.[42]In considering the prejudice to the parties, we take into account the particular importance of the need for litigation to be conducted efficiently and at proportionate cost, and for statutory time limits to be respected. This is a case where the delay was very serious and significant. The Appellant has provided no clear reasons as to why the appeal was brought late. Even if the Appellant’s arguments as to reasonable excuse for the substantive appeal were to be considered as reasons for the appeal being brought late, we have found that they do not amount to a reasonable excuse.[43]In all the circumstances, we consider that it is not appropriate to give permission for the Appellant to bring a late appeal against the default surcharges.

Penalties issued pursuant to Schedule 26 Finance Act 2021

[44]The Appellant seeks to appeal the penalties noted at paragraph 7 above for the reasons stated at paragraph 27 above.[45]HMRC contend that the Appellant’s reasons do not amount to a reasonable excuse:(1) COVID and Ukraine war - it is accepted that COVID was an issue for businesses from March 2020 to May 2023; if the Appellant was able to put in place measures to permit trade to be continued then it is reasonable to expect that it would be able to put in place measures to meet its financial obligations which includes filing VAT returns and making payments for the same. In the Appellant’s case, it is not clear how the pandemic prevented payments for VAT being made on time. It is also not clear how the Ukraine war impacted the Appellant’s ability to make VAT payments on time. There is no record of the Appellant contacting HMRC during this time to discuss concerns and issues with payments.(2) Sepsis - in respect of Mr Clayton’s hospital admission in October 2023, it is accepted that this could impact one’s ability to make VAT payments and HMRC accordingly cancelled penalties levied for the period of 11/23. However, during the other periods, notwithstanding Mr Clayton’s health issues, the Appellant continued to trade with such health issues causing little or no impact as VAT due for periods 02/24, 05/24 and 08/24 were similar to previous quarters. Further if the Appellant had a reasonable excuse for the 08/23 period (which HMRC does not accept it does), the delay was not remedied within good time given that full payment of this liability had not been paid as of June 2025.(3) Mental health issues as a result of marital breakdown – HMRC sympathises with Mr Clayton but noted that the company continued to trade during this period with there being little to no impact on the amounts due for VAT.(4) Knee replacement – it has not been explained by the Appellant why a knee replacement on 31 August 2024 prevented the Appellant making the payment that was due by 7 October. It also does not explain why the VAT for the previous period was not paid which was due well before the knee replacement surgery.(5) Penalties and interest are unfair – the Upper Tribunal’s judgment in Barry Edwards v HMRC [2019] UKUT 137 (TCC) confirm that the penalties issued are fair and proportionate even where no additional tax is payable.(6) The Appellant experienced cash flow problems – insufficiency of funds does not constitute a reasonable excuse, there is insufficient evidence to show that issues with cashflow were beyond the Appellant’s control.(7) Misallocations by HMRC – in the absence of any specific instructions for allocation from the Appellant, any payments were attributed towards the VAT account were used to offset the oldest debts due. Once the Appellant made contact, HMRC allocated amounts in accordance with the Appellant’s requests.[46]The issues for the Tribunal in respect of these penalties are as follows:(1) Whether the first Late Payment Penalty and second Late Payment Penalty charged to the Appellant for 05/23 were correctly assessed.(2) Whether the first Late Payment Penalties charged to the Appellant for 08/23, 02/24, 05/24 and 08/24 were correctly assessed.(3) Whether the Appellant has established they had a reasonable excuse for the defaults and late payment of their VAT liability.(4) If a reasonable excuse exists, whether the relevant payment was received without any unreasonable delay once any excuse had ended.(5) Whether the Respondents’ decision in relation to special reduction of the penalties for 05/23, 08/23, 11/23, 02/24, 05/24 and 08/24 was flawed.

Relevant Law

[47]The relevant legislation to consider for this matter is Schedule 26 Finance Act 2021. In particular the following paragraphs are most relevant: Paragraph 5 - First penalty: tax remains due at end of 15 day period (1). A penalty is payable under this paragraph if—(a) the tax due is not paid in full before the end of the 15 day period, and(b) the 15 day time to pay condition is not met. (2). If the tax due is paid in full after the end of the 15 day period but before the end of the 30 day period, the amount of the penalty is amount A. (3). If the tax due is not paid in full before the end of the 30 day period, the amount of the penalty is— (a) if the 30 day time to pay condition is met, amount A, and (b) if the 30 day time to pay condition is not met, the total of amount A and amount B, (but see paragraph 7). (4). Amount A is [2%] of so much of the tax due as is unpaid at the end of the 15 day period. (5). Amount B is [2%] of so much of the tax due as is unpaid at the end of the 30 day period. Paragraph 8 - Second penalty: tax remains due at end of 30 day period (1). A penalty is payable under this paragraph if any amount of the tax due is unpaid at the end of the 30 day period. (2). The amount of the penalty is calculated by applying the penalty rate, during the further penalty period, to so much of the tax due as is from time to time unpaid. (3). The penalty rate is [4%] per annum. (4). The further penalty period is the period— (a) beginning with the day after the last day of the 30 day period, and (b) ending with the day on which the tax due is paid in full. (5). But if a time to pay agreement has effect during the further penalty period, the further penalty period does not include the period— (a) beginning with the relevant day, and (b) ending with the day on which the tax due is paid in full, (but see paragraph 9). (6). The relevant day is the day on which the person makes the proposals to HMRC for paying the tax due, as a result of which the time to pay agreement is made. Paragraph 12 – reasonable excuse (1). Liability to a penalty under this Schedule does not arise in respect of a failure to make a payment if the person satisfies HMRC (or on appeal, the tribunal) that the person had a reasonable excuse for the failure. (2). For this purpose (a) an insufficiency of funds is not a reasonable excuse unless attributable to events outside the personʼs control, (b) where the person relies on another person to do anything, that is not a reasonable excuse unless the first person took reasonable care to avoid the failure, and(c) where the person had a reasonable excuse for the failure but the excuse has ceased, the person is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased. (3). In this paragraph “tribunal” means the First-tier Tribunal or Upper Tribunal (as appropriate by virtue of paragraph 20(1)). Paragraph 13 – special reduction (1). If HMRC think it right because of special circumstances, they may reduce a penalty under this Schedule. (2). In sub-paragraph (1) “special circumstances” does not include— (a) ability to pay, or (b) the fact that a potential loss of revenue from a taxpayer is balanced by a potential over-payment by a taxpayer. (3). In sub-paragraph (1) the reference to reducing a penalty includes a reference to— (a) staying a penalty, and (b) agreeing a compromise in relation to proceedings for a penalty.[46]Percentages mentioned in the legislative paragraphs above refer to the percentages in place at the time that the penalties were issued to the Appellant.

Discussion

[47]In considering the appeal, we have given consideration to all oral and written evidence before us, even if it has not been specifically referred to in this judgment.[48]The Appellant does not dispute receipt of correspondence. As such the Tribunal is satisfied that all HMRC correspondence was received by the Appellant within the timeframes specified by HMRC.[49]It also seems that the Appellant is not disputing the validity of the penalties and charges issued. Rather it is Mr Clayton’s position that the Appellant had a reasonable excuse as to why payments were delayed. There is no statutory definition of what is a reasonable excuse. The judgment in The Clean Car Company [1991] BVC 568 confirms that:
‘One must ask oneself: was what the taxpayer did a reasonable thing for a responsible trader conscious of and intending to comply with his obligations regarding tax, but having the experience and other relevant attributes of the taxpayer and placed in the situation that the taxpayer found himself at the relevant time, a reasonable thing to do? Put in another way, which does not I think alter the sense of the question; was what the taxpayer did not an unreasonable thing for a trader of the sort I have envisaged, in the position that the taxpayer found himself, to do’
[50]In considering if the Appellant had a reasonable excuse, we are reminded of the approach the Tribunal should take in considering the Appellants explanations as described by the Upper Tribunal in Christine Perrin v HMRC [2018] UKUT 0156 (TCC) at paragraph 81:
‘81. When considering a “reasonable excuse” defence, therefore, in our view the FTT can usefully approach matters in the following way: (1) First, establish what facts the taxpayer asserts give rise to a reasonable excuse (this may include the belief, acts or omissions of the taxpayer or any other person, the taxpayer’s own experience or relevant attributes, the situation of the taxpayer at any relevant time and any other relevant external facts). (2) Second, decide which of those facts are proven. (3) Third, decide whether, viewed objectively, those proven facts do indeed amount to an objectively reasonable excuse for the default and the time when that objectively reasonable excuse ceased. In doing so, it should take into account the experience and other relevant attributes of the taxpayer and the situation in which the taxpayer found himself at the relevant time or times. It might assist the FTT, in this context, to ask itself the question “was what the taxpayer did (or omitted to do or believed) objectively reasonable for this taxpayer in those circumstances?” (4) Fourth, having decided when any reasonable excuse ceased, decide whether the taxpayer remedied the failure without unreasonable delay after that time (unless, exceptionally, the failure was remedied before the reasonable excuse ceased). In doing so, the FTT should again decide the matter objectively, but taking into account the experience and other relevant attributes of the taxpayer and the situation in which the taxpayer found himself at the relevant time or times.’
We take the approach of considering each of the reasons given by Mr Clayton on an accumulative basis. Mr Clayton contends that he had some physical and mental health issues that prevented him from making VAT payments on time on behalf of the Appellant.[51]The difficulty we find in this explanation is that the Appellant was able to continue its trade, attend to other documentary obligations such as filing the VAT returns on time and presumably also pay employees on time. Mr Clayton has not established that he was prevented from making payments on time for this reason, if he was able to submit VAT filings on time for the same periods and attend to all of the other matters one would expect a company director to do. The limited medical evidence also does not support Mr Clayton’s statements that he was unable to attend to the payment of VAT throughout the relevant periods. As has already been discussed, the penalty for the period during which he was hospitalised for Sepsis has been cancelled. His knee operation does not coincide with payments dates and there is no other medical evidence presented to support the assertion that health issues prevented payments being made. Mr Clayton also argued that there were financial difficulties in the business due to him effectively being a sole trader and various external circumstances. Mr Clayton is of course not a sole trader, given the Appellant is a registered company with employees. The VAT returns exhibited in the document bundle demonstrate that there was little to no change in VAT filings for the relevant periods. There is no other documentary evidence such as bank statements, correspondence with the bank, invoices or such alike to demonstrate what the purported financial constraints were for the Appellant. The only evidence we have is incomplete company accounts for the Appellant for period ending 31 August 2024. However, with little to no explanation as to how the figures were derived in these accounts the Tribunal is unable to place much wight on this document. As such we do not consider that the Appellant has established that there were financial difficulties which prevented the payments being made on time or at all.[52]Whilst insufficiency of funds cannot be considered a reasonable excuse, the underlying reason for lack of funds could amount to a reasonable excuse where the insufficiency was not reasonably avoidable (Steptoe v R&C Commrs [1992] STC 757). However, the Appellant has not established that there was an insufficiency of funds, let alone that there was any underlying reason for an insufficiency that was not reasonably avoidable.[53]The case of Perrin requires the Tribunal to consider what a reasonable person would have done in the Appellant’s position. The Tribunal is of the view that a reasonable taxpayer would have attempted to make contact with HMRC prior to any default to discuss the Appellant’s financial difficulties. This did not happen.[54]It is also noted that it was not until November/ December 2024 that the Appellant made any attempt to contact HMRC with regard to the defaults. We do not consider that such delay was objectively reasonable in the circumstances.[55]The Tribunal also agreed with HMRC in that the Appellant cannot expect HMRC to make allocations of payments until and unless specific instructions have been provided. No evidence has been presented to show that instructions prior to the Time To Pay agreement were sent to HMRC asking it to divert from the standard practice of offsetting payments against the oldest debt first.[56]The Tribunal does not accept that the penalties and interest are unfair. It is clear that the Appellant has for a long time taken a cavalier approach to its VAT obligations, which is not what a reasonable tax payer would do. The Upper Tribunal in the case of Barry was very clear that the regime in place is fair and proportionate and the Tribunal has seen no circumstance in this specific matter that would warrant a digression from this principle. As such no issue it taken with HMRC’s approach in respect of special reductions.[57]For the reasons explained, the Tribunal dismisses the Appellant’s appeal in full.

Right to apply for permission to appeal

[58]This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. Release date: 29 July 2026