This case was decided on the papers in the First-tier Tribunal (Tax). This was part of the Covid-19 protocol and it meant that there was no hearing with the parties present. The Appellant had submitted a self-assessment tax return but had not sufficient funds to meet the tax that was due. The Appellant had appealed against three penalties. Because one of the penalties was issued after a time to pay agreement had been put in place, effectively deferring the tax due, the penalty was cancelled by the Tribunal, however other penalties issued prior to the time to pay agreement were upheld on the basis that at the time they were issued the tax was unpaid and the Appellant did not have a reasonable excuse for the insufficiency of funds that led to the problem.
This highlights that insufficiency of funds is not a reasonable excuse in itself for non-payment of tax and the penalties that may follow. To claim a reasonable excuse the taxpayer has to evidence an extraordinary event, the cause of which is outside their control that could lead to the funds not being available to meet tax liabilities.
As the case was decided on the papers, the Appellant did not “have his day in court”. A decision on the papers will speed getting a judgment up, but where there is a lot of evidence that needs explaining so as to establish context this type of resolution may not be in the interest of the taxpayer. Clearly, the Tribunal has to try and prevent backlogs of cases rising due to Covid-19, but Appellants should consult with their representatives to ensure that a non-hearing is right for them.