Gregorio Napoleone v The Commissioners for HMRC [2026] UKFTT 130 (TC)

[2026] UKFTT 00130 (TC)Case No TC09761
FIRST-TIER TRIBUNAL
TAX CHAMBER
Hearing Heard on: 09 December 2025Date Judgment date: 16 January 2026
[By remote video hearing]
Appeal reference: TC/2024/05993
PENALTIES – tax liability paid over six months late – insufficiency of funds due to existing financial commitments and failure to realise investments - whether circumstances attributable to events out with appellant’s control – no – whether there was a reasonable excuse – no - Paragraph 16, Schedule 56, Finance Act 2009. Appeal dismissed
Before
TTRIBUNAL MEMBER HANNAH DEIGHTON
Between
GREGORIO NAPOLEONEAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentRebecca Murray, Barrister, of Devereux Chambers, (“counsel for the Appellant/GN”) and Justin Moore, of Arnold Hill LLP, Accountants, for Appellant(“Mr Moore”)Vanna Jeewon, Litigator of HM Revenue and Customs’ Solicitor’s Office, (“counsel for the Respondents/HMRC”) for RespondentsDECISION

Introduction

[1]The form of the hearing was by video conference call on Microsoft Teams.[2]The documents to which we were referred were contained in a Document Bundle of 139 pages. The Respondents (“the Respondents/HMRC”) stated that they had submitted an Authorities Bundle on 10 March 2025 but neither the Tribunal (“the tribunal/we/us”) nor the Appellant, Gregorio Napoleone (“the Appellant/GN”) had received this. The legislation and cases to which it referred were set out in HMRC’s Statement of Case in the Document Bundle and it was acknowledged that these were familiar to counsel for the Appellant and the tribunal.[3]HMRC were requested to resend this to the Appellant and the tribunal immediately after the end of the hearing[4]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 to observe the proceedings. As such, the hearing was held in public.[5]This is an appeal against late payment penalties charged under Schedule 56, Finance Act 2009 (“Schedule 56 FA 2009”) in respect of the late payment of tax for the year ending 5 April 2022.[6]There was no dispute between the parties about the amount of the penalties which were £157,915, being a 30-day late payment penalty issued on 14 March 2023, and a 6-month late payment penalty of £61,369, issued on 15 August 2023, making a total of £219,284.

Preliminary Matters

[7]HMRC had conceded part of the appeal made by the Appellant and, accordingly, the original Document Bundle had been amended to reflect the matter still under appeal.[8]On 15 July 2025, the tribunal issued Directions requiring witness statements to be sent “to the other party” by 29 August 2025 and for documents, including witness statements, to be included in a bundle prepared by the Respondents to be provided to the Appellant and the tribunal by 12 September 2025.[9]In addition, in August 2025, the Appellant had filed a “Video Attendance Form” which confirmed that Counsel for the Appellant and GN would be attending and speaking at the hearing, both from the UK.[10]On the day before the hearing, on Monday 08 December 2025 at 1359, the Appellant emailed HM Courts and Tribunal Service attaching GN’s Witness Statement and advised that GN would no longer be in the UK to give evidence, as had been previously advised to the tribunal.[11]Accompanying GN’s Witness statement, was a “link” to documents supporting it in a supplementary document bundle of 81 pages (“the additional documents”). As these had not been sent in the required way through HMCTS, the Tribunal Judge could not access these additional documents until five minutes prior to the start of the hearing.[12]Counsel for the Appellant advised that GN, having travelled to Brazil on Friday 05 December 2025, did not have permission from the relevant authorities in Brazil to give evidence and confirmed that it would not be possible for HMRC to cross-examine him nor for the tribunal to ask any questions on his witness evidence and statement.[13]It was explained that the intention had been for GN to give evidence from the United Kingdom but that he had to visit Brazil, where he is chairman of a company with 2,000 employees and where there was an ongoing dispute with the trade unions. GN advised that it was customary in Brazil for figures such as company chairmen, to deal with these types of matters in person. GN stated that it would be prejudicial to his 2,000 employees if he had failed to travel to Brazil. Accordingly, he had chosen to be absent from the UK.[14]Although GN had chosen to be absent from the UK and travelled to Brazil for this reason, he was, nevertheless, able to observe the hearing.[15]HMRC objected to the late admission of the additional documents and cited Arif Abidi v HMRC [2025] UKFTT 863 (TC) and Wm Morrison Supermarkets v HMRC [2021] UKFTT 106 (TC) concerning the late submission of documents which in this case were filed and served less than 24 hours prior to the hearing.[16]HMRC had expected that any witness statement would have been received by 26 August 2025 and any documents by 12 September 2025, at the latest. Instead, they had less than 24 hours to review and consider both.[17]HMRC, furthermore, requested that the tribunal refuse admission of the witness statement on the grounds that the Appellant had failed to comply with the First-tier Tax Tribunal Practice Statement relating to Witness Evidence from Abroad, as HMRC had received no formal application from the Appellant.[18]The hearing was adjourned, and the tribunal considered the admissibility and weight to be given to the additional documents and GN’s witness evidence.[19]The witness statement should have been intimated to the Respondents by 26 August 2025 and any documents supporting it sent to them by 12 September 2025 at the latest. Leaving aside the issue of GN’s inability to give evidence and speak to his witness statement because he was in Brazil, it should have been evident in August 2025, when it had been envisaged that GN might give evidence, that any documents supporting a witness statement should have been competently submitted to the tribunal by 12 September 2025. No excuse was provided for the late submission of the additional documents, only an apology that the documents were late.[20]The tribunal could ascribe no weight to the Witness statement as it was submitted late and could not even be confirmed by the Appellant. There could be no examination, cross examination or re-examination by the parties and the tribunal could not ask any questions of the Appellant.[21]The tribunal, therefore, refused to admit the witness statement, as it was submitted late and as GN, could not give evidence or refer to the witness statement and could not be examined or cross examined and could not be questioned by the tribunal.[22]Previously, the tribunal had, within the Document Bundle, documents which included detailed descriptions by Mr Moore of the steps GN had taken in relation to paying his tax liability and the reasons why there had been a delay.[23]As the additional documents were also late, the Respondents had no opportunity to consider them and their relationship to the witness statement. We could also ascribe no weight to them.[24]Accordingly, for all these reasons and in terms of the overriding objective set out in Rule 2(1) of The Tribunal Procedure (First-tier tribunal) (Tax Chamber) Rules (the Rules”) to deal with cases fairly and justly and the failure of the Appellant to comply with Rules 2(4)(a) and (b) to help the Tribunal to further the overriding objective and cooperate with the tribunal generally, the tribunal refused to admit the additional documents as well as the witness statement.

Legislation

[25]See Appendix A

Authorities referred to

[26]See Appendix B

Evidence

[27]GN was enrolled into self-assessment on 11 February 1999 and on 30 January 2023, his electronic return for the year ending 5 April 2022 was received by HMRC. He is a partner in Stirling Square Capital Partners (“SSCP”), a pan- European midmarket private equity firm, which he co-founded in 2002, which raises funds and by March 2025 was raising its Fifth fund.[28]SSCP had been growing successfully since inception, with each successive fund (the First through to the Fourth), being larger than its predecessor. The sequential growth of SSCP’s funds had been from US$250 million in the First fund, to €375 million in the Second fund, to €600 million in the Third fund, to €925 million in the Fourth fund.[29]Following SSCP’s usual operating cycle, investments in previous funds are sold, after a holding period of 4 to 6 years, and the proceeds are used to support capital commitments in subsequent funds, in a process of reinvestment.[30]Mr Moore explained that it was customary in private equity investment for the participating individuals or partnership to provide 1% of the funding and for institutions to provide 99%. In terms of return, however, whereas the participating 1% funders would receive that share, they would also be entitled to a further payment of up to 20% if a performance or return target or hurdle had been met.[31]The SSCP partners are also assisted by an external bank which finances a proportion of their capital commitment, with such “collateralised loans” being repaid proportionately upon investment disposals. GN’s “capital commitments, had increased from approximately €7.2 million in the First fund to approximately €442 million in the Fourth fund”.[32]Mr Moore advised that the capital commitments of GN and his senior partners had been growing in tandem, over time. These capital commitments were always intended to be supported by realised gains from earlier funds, bank borrowings and other personal income.[33]On 07 October 2021, SSCP realised an investment that provided GN with €19.4 million of gross proceeds, of which €6.6 million was immediately “withheld” to repay bank debt.[34]On the same date, SSCP called for commitments of €1,750,243 and on 25 October 2021 GN used €2 million of his then liquid funds to pay the down payment on a property purchase in Milan.[35]Throughout October 2021, SSCP had “reasonable expectations” that other investments would be sold in 2021 and 2023 which would have delivered attributable proceeds to GN of approximately €36.6 million.[36]On 3 November 2021, SSCP called for €1.375 million from GN and, on 17 December 2021, called for a further €487,081.[37]On 21 December 2021, GN made a payment of €143,662 to New York University pursuant to his family’s long-term donation commitments.[38]By 31 December 2021, around €7.4 million of the residual gross proceeds remained from the October 21 distribution with which to fund further liabilities.[39]In February 2022, Russia invaded Ukraine and kickstarted a regional conflict that up-ended the regular economic rebound that had just started emerging from the defeat of the Covid-19 pandemic. Interest rates rose to levels not seen in 15 years and mergers and acquisitions activity dropped to low levels so that SSCP found it very challenging to complete the investment disposals it had “rightly planned to execute, pre-Ukraine war, as business purchasers simply stayed on the sidelines of the mergers and acquisitions market”.[40]In addition, in 2022 and early 2023, “SSCP found itself requiring liquidity for itself and its portfolio and had to resort to additional drawdowns. For GN, these were in addition to his ‘personal commitments which he had incurred before the Ukraine war”.[41]In January 2022, GN paid just over €319,000 to HMRC and then on 23 April 2022 SSCP called on him for €2 million and then, on 29 November 2022, for a further €1.393m. On 21 December 2022, GN paid another commitment give to New York University of €156,204 and on 25 January 2023, SSCP called on GN for a further €1.93 million.[42]Accordingly, by the end of January 2023 “around €1.5 million would have been left from the gross distribution of October 2021” and “had it not been for the net outlays GN had to incur in the sixteen months through January 2023, linked to previously incurred commitments that could not be defaulted upon”, GN’s liquidity position would have been quite different.[43]These commitments were(1) approximately €1.6 million of mortgage payments across his London, New York and Milan properties;(2) approximately €200,000 of university fees and living expenses for GN’s children;(3) approximately €800,000 of living expenses; and(4) approximately €400,000 of property restructuring costs, against which GN received net income of approximately €900,000.[44]Accordingly, by the end of January 2023, immediately before the tax payment deadline, GN’s net finance position had turned into a negative €500,000.[45]GN and his tax advisers were mindful of a previous agreement, relating to the tax year ended 5 April 2020, which allowed repayment of tax liabilities over 5 months.[46]Accordingly, GN requested from HMRC a similar arrangement in February 2023, having advised HMRC that had been given “a new loan of £430,000 per month”.[47]The Appellant chose to calculate his own liability and, therefore, knew the sum to pay by the due date. Furthermore, as the return was filed online, the liability was automatically calculated at £4,276,119.43.[48]The “penalty date” is defined at Paragraph 1(4) Schedule 56 FA 2009 and means the date on which a penalty is first payable for failing to pay the amount (that is to say, the day after 30 days from the date specified in Section 59B(3) or (4) of the Taxes Management Act 1970 (“TMA 1970”) and in this case was 3 March 2023.[49]On 16 February 2023, the Appellant’s Agent, Arnold Hill & Co LLP (hereafter “the Agent”) telephoned the Respondents’ Debt Management Service in relation to the 2021/22 tax liability and advised on intending to make a Time to Pay (TTP) offer.[50]The Agent advised that the income/capital gains received by the Appellant in the previous tax year (2020/21) had been used to make repayments to his bank.[51]The Agent explained that the bank was providing the Appellant with new a loan of £430,000 per month, which the Appellant intended to use to pay off his 2021/22 tax liability of £4,276,119 through a TTP agreement. This would equate to an approximate period of ten months to repay the liability.[52]The Respondents advised that this proposal would be insufficient to clear the 2021/22 outstanding balance in a time period favoured by them and, therefore, the Agent would need to make an improved offer.[53]On 24 February 2023, the Agent proposed an offer for a TTP agreement to HMRC’s Debt Management Service for the tax to be paid over a period of nine months. This included monthly payments of £430,000 for eight months and a final payment clearing the balance in October 2023.[54]On 13 March 2023, the Agent’s TTP offer was rejected by the Debt Management Service on the basis that it would “take too long to clear the 2021/22 balance”.[55]On 14 March 2023, the Respondents issued a notice of penalty assessment under paragraph 3(2), Schedule 56 FA 2009 for 5% of the tax liability which remained unpaid at the penalty date.[56]On 21 March 2023, the Respondents wrote to the Appellant to advise of the outstanding debt and to inform him that there was no TTP agreement in place.[57]On 31 March 2023, the Agent made a revised TTP offer to the Debt Management Service. At this stage, the Appellant had made two voluntary payments towards his 2021/22 tax liability in the amount of £860,000.[58]The revised TTP offer included monthly payments of £430,000 with the final balance being cleared by the end of July 2023 or sooner. The Agent advised that the Appellant intended to raise funds for the final lump sum payment by selling his assets (two companies), although no documentation to evidence this was provided to HMRC.[59]On 06 April 2023, the Agent’s TTP offer was rejected by the Debt Management Service on the same basis that the offer would “take too long to clear” the 2021/22 balance.[60]As no TTP arrangement had been concluded between the Agent and the Debt Management Service and as the tax liability for the 2021/22 tax year remained outstanding, the Appellant’s debt was passed on to the Enforcement and Insolvency Service (EIS).[61]On 22 May 2023, the Agent advised EIS that the Appellant had obtained a loan from the bank in the amount of €6 million which would allow him to clear his outstanding balance for the 2021/22 tax year by the end of June 2023. The bank required to complete their necessary due diligence and negotiations and only did so on 7 August 2023.[62]EIS requested that the Agent send them a copy of the approved loan agreement but advised that because the Statutory Demand had already been issued, EIS were unable to place the case on hold.[63]In early August 2023, the Appellant became liable to a penalty assessment under paragraph 3(3), Schedule 56 FA 2009 for 5% of the tax liability which remained unpaid over five months after the penalty date.[64]On 15 August 2023, the Respondents issued the penalty notice to the Appellant.[65]The Appellant had continued to make voluntary payments towards his 2021/22 tax liability in the absence of any TTP agreement with the Respondents and on 07 August 2023, the tax liability was paid in full, over 6 months late.[66]On 13 September 2023, the Agent made an appeal to the Respondents in respect of the penalties charged.[67]The Agent’s letter advised that the Appellant had a temporary shortage of funds and had requested a TTP agreement. The letter further advised that:a. The Appellant’s TTP offer was unreasonably rejected by Debt Management Service on 06 April 2023.b. The same offer was later accepted by EIS without any modification, although there was no formal agreement in place.c. The Agent was in constant communication with the Respondents to resolve the matter.[68]On 05 August 2024, the Respondents wrote to the Appellant, upholding the decision to charge the penalties. The letter advised that no explanation for the shortage of funds had been provided by the Appellant and that the TTP proposal was unacceptable and subsequently rejected. The Appellant was offered a statutory review, or the option to appeal to the First-tier Tribunal, which was requested on 04 September 2024.[69]On 15 October 2024, the Respondents issued their review conclusion letter to the Appellant which upheld the decision to charge late payment penalties stating that repayment arrangements are on a concessionary basis, that GN had not been treated inconsistently and that no reasonable excuse had been established. They noted that GN’s income for 2021- 2022 was £1,047,897 and his Capital Gains were £9,793,371.[70]On 13 November 2024, the Appellant made an appeal to the First-tier Tribunal.[71]Throughout the period, GN had believed, in accordance, with a cash flow projection provided by the Chief Financial Officer (“CFO”) of SSCP that, between the periods of November 2021 to September 2024, he could expect cash flows from the sale of realisations from the Second, Third and Fourth funds in which he and his partnership were invested.[72]Only one of these sales was made, being the sale of a company called Itelyum, in October 2021. It had been forecast that by December 2022, GN would have “cumulative available cash resources” of €53,707,973 and increase from the same figure forecast for December 2021 of €25,233,208[73]The CFO projection was prepared based “on current outturn assumptions for the Stirling Square 2nd, 3rd and 4th funds as at November 2021”. Mr Moore confirmed that the CFO projections were always forecasts and not definitive or guaranteed amounts.[74]GN says that he had every expectation that he would have sufficient funds to meet his tax liabilities but, in February 2022, Russia invaded Ukraine and so the funds he was expecting to receive did not materialise.[75]Because of the Ukraine war and its consequences on the world economy including inflation and supply chain problems there were no “exits” from any other of the investments held within the Stirling Square funds prior to the time when the tax liability fell due in January 2023.[76]GN’s accountants advised that, “the capital commitments of GN and his senior partners had been growing in tandem over time. GN’s capital commitments increased from around €7.2 million in the First fund to approximately €42 million in the Fourth fund” and were always intended to be supported by realised gains from earlier funds, bank borrowings and other personal income.[77]Within the bundle of documents were copies of GN’s NatWest International Select Account for the periods 28 September 2021 to 27 October 2021; 04 January 2022 to 27 January 2022; 28 March 2022 to 27 April 2022; 28 June 2022 to 27 July 2022; 3 January to 27 January 2023; 31 October 2022 to 25 November 2022;and 30 March 2023 to 27 April 2023 (“the bank statements”).[78]The bank statements during these periods consistently should credit balances of no less than £20,000 due largely to substantial transfers from(1) an account ending 0218 amounting over the periods covered of £224,000;(2) CHAPS transfers from GN and a “CHAPS transfer” of cumulatively £275,000; and(3) payments from an Arnold Hill “drawings account” of £63,000. The tribunal was provided with no evidence of the source of funds or amounts in these accounts.[79]At this time the costs of GN’s mortgages on his UK, US and Italian properties increased, with the UK mortgage costs quadrupling[80]GN was, his Agents explained, “extended and exposed in all directions and had to actively look to the necessary credit and time to pay arrangements to meet his upcoming liabilities”.

The Appellant’s Submissions and Contentions

[81]The loan facility which was used to finally pay GN’s remaining tax liability was not finalised until after midnight on 3 August 2023 which resulted in the issuance of the 6-month late penalty, but it was paid the following day directly by the lender to HMRC.[82]When the tax payment was due, GN and his partners had back-to-back commitments in relation to SSCP and their own commitments as well as commitments to their bankers.[83]GN had a previous TTP agreement relating to the tax year ending 5 April 2020 “which had been suggested by HMRC to spread a tax liability evenly over 5 months”.[84]Accordingly, GN requested a similar arrangement in early February 2023 whilst progressing financing negotiations with banks to providing a loan to pay his tax liability. These negotiations took time and the whole loan position was not settled until August 2023.[85]Notwithstanding these events, GN tried to agree a TTP agreement based on his previous experience and in addition paid £430,000 per month whilst the tax liability was outstanding.[86]GN says that HMRC rejected the TTP agreement without considering the Appellant’s circumstances. They simply stated that 6 months was too long to clear the outstanding balance and took no account of GN’s discussions with Deutsche Bank to get a loan to pay the tax liability albeit that this took some time to arrange. This was only agreed in principle in June 2023 for €6.7 million and signed off on 3 August 2023. Accordingly, GN paid off the liability as soon as he reasonably could.[87]GN did not have the funds to pay his tax liability on time but the reasons for this were outside of his control.[88]GN refers to Schedule 56 FA 2009 Paragraph 16 which states:(1) Liability to a penalty under this Schedule does not arise in relation to a failure to make a payment if P satisfies HMRC or (on appeal) the First-tier Tribunal or Upper Tribunal that there is a reasonable excuse for a failure to make a payment—(2) For the purposes of sub-paragraph (1)— (a) an insufficiency of funds is not a reasonable excuse unless attributable to events outside P's control, (b)where P relies on any other person to do anything, that is not a reasonable excuse unless P took reasonable care to avoid the failure, and (c)where P had a reasonable excuse for the failure, but the excuse has ceased, P is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased.[89]GN was a responsible trader in trying to pay his tax liability as soon as possible and he also remedied the failure to pay as soon as possible after the excuse ceased; when he obtained a Deutsche Bank loan of €6.7 million.[90]GN says he was not given a chance to agree a TTP or to give a reasonable excuse. HMRC did not take account of his circumstances and only considered that he was unable to pay and then gave the matter over to their enforcement team, which caused some anguish to GN as they were threatening bankruptcy which would be detrimental to his employment within the financial services sector.[91]GN had always been a compliant taxpayer, but he simply did not have the money to pay his tax liability when it was due after 31 January 2023. Nevertheless, he worked as hard as he could to obtain funds and pay his liability as soon as possible.[92]HMRC did not request the loan agreement in relation to either the £430,000 per month facility or the loan agreement in relation to Deutsche Bank for €6.7m, first mentioned to HMRC on 22 May 2023, which was finally used to pay off the tax liability.[93]HMRC’s contention that GN’s personal bank statements showed positive cash balances is irrelevant in terms of the sums involved.[94]There is no basis for claiming that all the illiquidity GN was faced with was within his control and as it was outside his control the exemption at paragraph 16(2)(a) of Schedule 56 applies and he had a reasonable excuse.[95]HMRC are incorrect in stating that as a banker GN ought to have known better. What they have not addressed is the circumstances in which GN found himself following the events in February 2022 and its effect on his business and his personal circumstances.[96]GN was extended financially and exposed in all directions and had actively looked for the necessary credit and time to pay arrangements to meet his upcoming liabilities.[97]Accordingly, GN had a reasonable excuse, and his appeal should be allowed

The Respondents’ Submissions and Contentions

[98]The Respondents contend that Schedule 56 FA 2009 operates to protect the integrity of the Self-Assessment system by charging penalties to taxpayers who fail to meet the statutory deadline for payment of tax each year.[99]Paragraph 1 of Schedule 56 to FA 2009 provides that: “1(1) A penalty is payable by a person (“P”) where P fails to pay an amount of tax specified in column 3 of the Table on or before the date specified in column 4. “[100]Item 1 in the table under column 3 includes any amount of income tax or capital gains tax payable under section 59B TMA 1970 which also establishes the due date for payment of an income tax liability through Self-Assessment.[101]For taxpayers who do not fall within any of the exceptions within section 59B TMA 1970, section 59B (4) provides that the due date for payment is on or before 31 January following the year of assessment.[102]The ‘penalty date’ as defined at paragraph 1(4), Schedule 56 FA 2009 in relation to income tax and capital gains tax payable under section 59B TMA 1970 is the due date for payment. Where a person fails to make payment on or before the penalty date, then a penalty may be assessed under paragraph 3, Schedule 56 FA 2009.[103]Under paragraph 3(2), a penalty for 5% of the outstanding tax due to be paid may be charged if a person fails to pay by the penalty date. Under paragraph 3(3), a subsequent penalty for 5% of the outstanding tax due to be paid may be charged if a person fails to pay within 5 months of the penalty date.[104]In this case, the Respondents contend that the due date for payment was 31 January 2023 and that their records show that the Appellant was due to pay £4,276,119.43 in respect of tax due for the tax year ended 5 April 2022. The Appellant was 188 days (6 months) late in paying his outstanding liability.[105]Self-Assessment requires taxpayers to take responsibility for meeting their tax obligations, including ensuring that HMRC get payment of the correct amount of tax and National Insurance at the correct time. To support taxpayers with their responsibility HMRC publishes information and advice about their obligations and how they can adhere to them.[106]The tax liability, calculated by HMRC’s online system and which was computed from the figures the Appellant entered onto the system, is automatically entered onto the taxpayer’s account once the return is filed by the user. A period of 30 days is allowed before a late payment penalty is imposed to allow time to make payment or make alternative arrangements.[107]HMRC ordinarily expect all taxpayers to settle their tax bills on time, and the deadline is set out in the legislation. The Appellant had been required to complete a self-assessment tax return for several years and HMRC say he should be aware of his obligations under self-assessment. Filing the tax return and paying the tax due by the deadline forms part of his responsibility to meet these obligations.

Reasonable Excuse

[108]Paragraph 16 of Schedule 56 FA 2009 specifically provides that a penalty does not arise in relation to a failure to make a payment if the person satisfies HMRC (or on appeal, a Tribunal) that there is a reasonable excuse for the failure, and they put right the failure without unreasonable delay after the excuse has ended.[109]Paragraphs 16 (2)(a) and (2)(b) provide that two situations are not capable of being considered as a reasonable excuse: An insufficiency of funds, unless attributable to events outside the Appellant’s control; and reliance on another person to do anything, unless the person took reasonable care to avoid the failure.[110]There is no statutory definition of “reasonable excuse”, which “is a matter to be considered in the light of all the circumstances of the particular case” (Rowland v HMRC at [19].[111]The Respondents consider a reasonable excuse to be something that stops a person from meeting a tax obligation despite them having taken reasonable care to meet that obligation. As

Judge Medd QC in The Clean Car Co Ltd explained:

“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?”
[112]The Respondents submit that the tribunal is required to approach the question of a reasonable excuse in line with the Upper Tribunal decision in Perrin v HMRC at [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.” (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.”
[113]The Respondents submit that whether a person has a reasonable excuse will depend on the particular circumstances in which the failure occurred and the abilities of the person who has failed. What is a reasonable excuse for one person may not be a reasonable excuse for another.[114]If there is a reasonable excuse it must exist throughout the failure period.[115]The Appellant asserts that the following facts may constitute a reasonable excuse for their failure to pay tax by the penalty date for the tax year ended 5 April 2022:a. The Appellant was unable to pay his 2021/22 due to a temporary shortage of funds which was outside the Appellant’s control and;b. The Agent accordingly made a TTP offer which was not accepted by the Respondents.[116]The Respondents contend that even if the facts asserted by the Appellant are true, they do not objectively constitute a reasonable excuse as he knew he had to pay his tax liability.

Shortage of Funds

[117]The relevant legislation is paragraph 16(2) of Schedule 56 FA 2009.[118]The Agent asserts that the Appellant was unable to pay his 2021/22 due to a temporary shortage of funds which was outside the Appellant’s control.[119]On 16 February 2023, the Agent had advised the Debt Management Service that the Appellant had used his income/capital gains from his 2020/21 tax year to repay money he owed to his bank who had then given him a loan of £430,000 per month. This, therefore, led to a shortage of funds.[120]The Respondents, therefore, submit that the Appellant’s decision to use his funds to repay his bank rather than his 2021/22 tax liability does not constitute circumstances that were outside of the Appellant’s control and thus, he does not have a reasonable excuse. Moreover, the Appellant has failed to provide any supporting evidence to refute this assertion, despite being requested to do so by the Respondents.[121]The Respondents contend that the Appellant has been enrolled on the Self-Assessment regime since 11 February 1999. It is, therefore, objectively reasonable to assume that the Appellant knew the date by which he was required to pay his 2021/22 tax liability and the consequences for not doing so.[122]Despite this, the Appellant made no financial arrangements prior to 31 January 2023 to ensure that his tax liability was paid on time.[123]Moreover, HMRC’s records indicate that the Appellant had previously received a 30-day late payment penalty for the tax year 2019/20. The Respondents contend they the Appellant should, therefore, have been aware of the penalty regime when failing to pay his tax liability on or before the due date.

Time to Pay Arrangement

[124]A period of 30 days is allowed before a late payment penalty is imposed to allow time to make payment or make alternative arrangements to pay.[125]Shortage of funds to pay tax owing is not regarded as a reasonable excuse. When the Respondents are satisfied that an individual cannot pay a tax liability by the due date, a TTP arrangement may be agreed within 30 days of the due date depending on the circumstances of the case.[126]Paragraph 10 Schedule 56 FA 2009 provides:
“Suspension of penalty during currency of agreement for deferred payment 10 (1) This paragraph applies if— (a) P fails to pay an amount of tax when it becomes due and payable, (b) P makes a request to HMRC that payment of the amount of tax be deferred, and (c) HMRC agrees that payment of that amount may be deferred for a period (“the deferral period”).”
[127]Therefore, where an individual fails to pay an amount of tax falling due but agrees a TTP arrangement with the Respondents, then a penalty is not due. However, if the tax is not paid in line with the conditions of the arrangement, then by further notice the Respondents may make that person chargeable to a penalty under Schedule 56 FA 2009 as if the arrangement had never been agreed.[128]The Agent had made TTP offers to the Respondents on both on 24 February 2023 and 31 March 2023. These offers were however not accepted by the Respondents, and the refusals were communicated to the Agent on 13 March 2023, 21 March 2023 and 06 April 2023 respectively.[129]Thus, the Respondents say that there was no TTP agreement in place between the Respondents and Appellant at any time. Although the Appellant continued to make voluntary payments towards his 2021/22 tax liability and attempted to secure a loan with his bank to pay the remaining debt, this, however, did not prevent a Schedule 56 penalty from being applied. Furthermore, the Respondents contend that they do not recognise an ‘informal payment agreement’ as a mechanism to prevent the penalty from being applied. The Agent was clearly advised by EIS on 22 May 2022, that they were unable to place the Appellant’s case on hold.

Interest

[130]Interest is automatically charged under Section 101 FA 2009, whatever the reason for the delay. Interest is not intended to be a penalty but compensates the Exchequer for late payment and prevents those who pay late having an unfair advantage over those who pay on time. Interest is a statutory charge and there is no right of appeal against it although customers can object to it. It is therefore outside the scope of the Tribunal’s jurisdiction.[131]The Respondents contend that for the Appellant’s appeal to succeed, he must demonstrate that a reasonable excuse existed which prevented him from complying with his Income Tax obligations. The Respondents submit that no reasonable excuse exists for the late payment and the penalties were correctly charged in accordance with legislation.[132]The Respondents contend that the purpose of Schedule 56 FA 2009 is to encourage timely compliance with payment obligations. In the absence of a penalty regime to encourage that compliance, it would be much more difficult to administer the tax system.[133]Penalties are in place to promote efficient operation of the taxation system and are intended as a measure of fairness, so that customers who file late do not gain any advantage over those who file on time.[134]The amount of the penalties charged is set within the legislation. HMRC has no discretion over the amount charged and must act in accordance with the legislation. By not applying legislation and imposing the penalty would mean that HMRC was not adhering to their own legal obligations.[135]Accordingly, the Respondents say they considered the circumstances described by the Appellant and submit that a penalty of the type charged in this case is directly appropriate to encourage future compliance with his filing obligations.

Conclusion

[136]The Respondents request that the Tribunal finds as a fact that the Appellant did not have a reasonable excuse for his failure to pay his tax on time, nor by the date the penalty arose and that the penalties imposed in the amount of £219,284.00 were correctly charged and that the appeal be dismissed.

Tribunal Analysis and decision

[137]Acts of war or natural disasters are events invariably outside the control of a taxpayer but these events are the type of risk inherent in any investment of the kind in which the SCCP funds invested, and which can lead to volatility. The Russian invasion of Ukraine in February 2022 was such an event.[138]The knowledge of the existence of such inherent risk and/or how to deal with the consequences or possible consequences of such an event when it occurs are within the control of a taxpayer.[139]In this case the consequences were known or could reasonably be predicted within seven months of the war starting as was reflected in the failure to realise the forecast sales.[140]GN, therefore, had a period of at least 5 months in which to anticipate the effects of the Ukraine war on the economic environment generally and in particular on his area of expertise, being running funds which bought and sold companies.[141]We considered that GN was aware of the date on which his tax liability would be due, the amount of his tax liability, and the existence of a penalty regime for late payment, given that he had received a 30-day penalty for the late payment of tax and in 2019- 2020 and had previously entered negotiations for a TTP arrangement relating to the late payment of tax by the due date.[142]GN expected that a ten month TTP agreement together with a bank loan providing payment with that period of his liability at the rate of £430,000 per month would be acceptable to HMRC but they considered it to be too long a period for repayment and had discretion to refuse to accept the offer of such an arrangement.[143]Whereas the majority of income taxpayers have some or all of their tax liabilities deducted at source other taxpayers have to consider whether further liabilities are due on their income and/or capital gains and make provision for them to ensure they have sufficient funds to make payment by the due date.[144]In February 2023, a month before the payment date GN had repaid a loan to his bankers, when he received the proceeds from the sale in October, but which reduced his available cash to repay his whole tax liability by the due date. On 16 February 2023 the Agent advised he had loan of £430,000 per month[145]GN had the funds to pay his tax liability, but it was his choice not to do so, and we agree with HMRC’s submission that this decision to treat repaying his bankers as a priority over paying his tax liability was within his control.[146]Accordingly, the exception to the rule that shortage of funds is not a reasonable excuse does not apply, and we do not consider that GN had a reasonable excuse[147]In the bank statements reference is made to a credit transfer from a “drawings account” and GN is in a partnership. Many partnerships, retain a proportion of their profits made on an ongoing or monthly basis so that they pay a lesser sum to each partner as “drawings” each month. The aim of this is to provide a reserve not only for the financial stability of the partnership but also to cover liabilities such as taxation.[148]We consider that making a provision or some other type of reserve or arranging sufficient borrowings to pay tax liabilities when they due are the reasonable things to do for a “responsible trader conscious of and intending to comply with his obligations regarding tax”.[149]No evidence was provided that GN did such things.[150]Evidence was led as to the substantial financial commitments that GN had and which his accountant, Mr Moore, stated he “had to pay”. The tribunal asked whether, as GN was in a partnership, it would be open to him to request his other partners to pay some of his commitments, in order to release funds to pay his tax liability, either from their own resources or from loans they might have available, which Mr Moore confirmed might be potentially possible.[151]This, based on the evidence before us, was not an option followed by GN who was short of funds when required to pay his tax liability.[152]GN was not willing to default on or renegotiate on mortgage payments for his three properties in London, New York and Milan nor on his family commitment to New York University and instead preferred payment of some or all his financial commitments over his commitment to pay his tax liabilities. That was his choice but a choice within his control.[153]It was evident from the NatWest bank statements that GN had other accounts which topped up his “personal bank account”, but no evidence was submitted as to the balances in these accounts or their source of funds.[154]We conclude, therefore, that GN’s approach to paying his tax liabilities was predicated on the funds in which he was invested selling their businesses, only one of which actually took place in October 2021 and that he made no retention of funds to pay for future tax liabilities. His income and capital gains for 2021- 2022 were a combined amount of £10,841,268.[155]GN’s approach to payment of his tax liabilities, which came last in his preferences for payment, were also only based only on forecasts so that there was no certainty of payment. The CFO’s projections had also forecast sales in June 2022, September 2022 and December 2022.[156]We consider that by the end September 2022 the impact of the Ukraine war on the forecast sales of investments and their failure to complete was known or becoming apparent as the payment date approached in January 2023.[157]If he was intent on his maintaining his non-tax liability commitments, this would have required him, in the absence of having made sufficient reserves, to investigate the likelihood of obtaining a loan to pay his tax liability in advance of the due payment date but this did not take place until almost seven months later. It was within his control to do so but instead he relied on a TTP agreement and a monthly loan arrangement which had no certainty of being acceptable to HMRC.[158]HMRC are not required to agree to a TTP and for the reasons given they decided not to do so. When they were eventually considered a shorter period of repayment and were advised that steps were being taken to obtain a further loan to repay the tax liability, GN was told on 22 May 2023 that it was too late to place the matter “on hold”. In any event, that loan was not provided until August 2023.[159]Taking all these factors together, we do not consider that GN,(1) with experience of completing his own tax returns since he became enrolled in self-assessment;(2) making tax liability payments, including a previous late payment which exposed him to the penalty regime, as well as his(3) his commercial experience as a chairman of at least one company employing 2000 employees; and(4) his professional experience of participating in a partnership which has successfully raised various funds of increasing value with his knowledge of the mergers and acquisitions market on which their profitability relied, acted as a reasonable trader conscious of and intending to comply with his obligations regarding tax.[160]We have taken into account the experience and relevant attributes of GN and the situation in which he found himself at the relevant time or times but do not consider it was objectively reasonable for GN to continue to meet his financial commitments as they arose, having made no cash reserve or provision for his tax liabilities or an earlier loan to pay his tax liabilities, with the increasing that otherwise he was unlikely to have sufficient funds to pay his full tax liability on the due date if, as it transpired, a TTP could not be agreed.[161]The decision not to have such a cash reserve or provision or an earlier loan were all matters within his control and so GN did not have a reasonable excuse.[162]We accept that GN has been a diligent taxpayer and clearly when he was unable to agree with HMRC on a TTP arrangement took immediate steps to obtain a loan which he did, in difficult economic circumstances, as soon as this was practicable bearing in mind the position of lenders who were similarly affected by consequences of the Russian/Ukraine war.[163]As we do not consider that GN had a reasonable excuse, we cannot consider whether he remedied the failure without unreasonable delay after the reasonable excuse ceased.[164]The Appellant did not challenge the Respondents’ refusal to consider “special circumstances” under the Penalty legislation and there was no challenge to the amounts of the penalties which we find were correctly calculated and charged.[165]The appeal is dismissed.

Right to apply for permission to appeal

[166]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: 16th January 2026 Appendix A Legislation Taxes Management Act 1970 (“TMA 1970”) Section 7 TMA 1970 Section 8 TMA 1970 Section 9 TMA 1970 Section 49D TMA 1970 Section 59B TMA1970 Section 115 TMA 1970 Section 7 Interpretation Act 1978 Finance Act 2009 (“FA 2009”) Section 101 FA 2009 Paragraphs 1 (1), (4) & (5) Schedule 55 FA 2009 Paragraphs 3 to 6 Schedule 55 FA 2009 Paragraph 16 Schedule 55 FA 2009 Paragraph 20 Schedule 55 FA 2009 Paragraph 22 Schedule 55 FA 2009 Paragraph 23 Schedule 55 FA 2009 Paragraph 1 Schedule 56 FA 2009 Paragraph 3 Schedule 56 FA 2009 Paragraph 9 Schedule 56 FA 2009 Paragraph 10 Schedule 56 FA 2009 Paragraph 13 Schedule 56 FA 2009 Paragraph 15 Schedule 56 FA 2009 Paragraph 16 Schedule 56 FA 2009 Section 103 FA 2020 Appendix B Authorities Referred to The Clean Car Company Ltd [1991] BVC 568 Rowland v HMRC [2006] STC (SCD) 536 Garnmoss Ltd TA Parham Builders [2012] UK FTT 315 (TC) Hok Ltd v HMRC [2012] UKUT 363 (TCC) HMRC v Donaldson [2014] UKUT 536 Christine Perrin v Commissioners for HMRC [2018] UKUT 0156 (TCC) Barry Edwards v HMRC [2019] UKUT 131 (TCC) Arif Abidi v HMRC [2025] UKFTT 863 (TC) WM Morrisons Supermarket PLC v HMRC [2021] UKFTT 106 (TC)