Poor telephone service pays dividends for taxpayer
HMRC failed to make a VAT penalty stick in a recent First Tier Tax Tribunal hearing, McNamara Joinery Ltd v HMRC, because of its woeful telephone service.
McNamara Joinery Ltd’s VAT return and payment for the period to 31st December 2015 were both due by 7th February 2016. Whilst the return was filed before that date, the VAT due of £4,906.28 was paid on 26th February and was therefore late. Similar occurrences had happened on three previous occasions, so HMRC levied a 10% surcharge penalty of £490.62.
An appeal was lodged by McNamara Joinery’s agent which stated:
“As agent I am taking this appeal to the First Tier Tribunal due to telephoning HMRC in time for an extension to pay the VAT due to cash flow problems for the quarter to 31st December 2015.
I myself tried to telephone on 5th February 2016 however the line kept disconnecting. After the weekend the same applied [until] on 12th February 2016 I finally got through and arranged for a two- week extension. The call is logged with HMRC.
My client’s VAT returns are never late and when there is cash flow problems it is always dealt with and not ignored. I feel the decision was unfair and only adds to my client’s future cash flow problems.”
Despite HMRC acknowledging the agent’s attempt to make contact on the days prior to the deadline, the Revenue asserted that contact was not made on or before 7th February. Furthermore, and quite incredibly, HMRC maintained that both client and agent should have been aware that there was a strong likelihood that there would be a large volume of calls being made to taxpayers on the days immediately prior to the deadline date and, as a result, they could reasonably have expected delays in being able to make contact!
The question for the Tribunal was whether McNamara Joinery had a reasonable excuse for defaulting. A reasonable excuse is normally an unexpected event, something unforeseeable and out of the taxpayer’s control. Insufficient funds is not regarded as a reasonable excuse, although the reason for the insufficiency might be. It is unfortunately part of the hazards of running a business that debtors fail to keep promises to pay.
The Tribunal did not accept HMRC’s absurd submission that both client and agent should have known that the Revenue’s helpline was going to be busy because they do not publish times when the lines are likely to be busy. The judge went on to say that rather than expecting delays it is reasonable for a taxpayer to expect telephone calls to HMRC to be answered without delay. HMRC were in a better positon than the company to know when there was a likelihood of a large volume of calls and they should have arrangements in place to deal with those calls promptly.
The appeal was therefore allowed.
Leave a Reply