TC09554 - [2025] UKFTT 00747 (TC)

Fecha: 30-Abr-2025

Discussion

Discussion

48.

We are permitted to intervene with HMRC’s conclusion on special reduction only if we find that HMRC’s decision in that respect was flawed when considered in the light of the principles applicable in proceedings for judicial review (paragraph 21(3)(b), (4)).

49.

We do not consider that HMRC took into account any irrelevant consideration. However, we did think that they failed to step back and observe the proverbial elephant in the room being the combination of the following facts:

(1)

this was a case where HMRC were holding onto nearly half a million pounds that it eventually accepted was owed to the Appellant (over six months later);

(2)

the Appellant had done all it possibly could do to assist HMRC in their investigation and did so very promptly;

(3)

the Appellant had repeatedly made HMRC aware of the cash flow difficulties it was experiencing whilst awaiting the VAT repayment;

(4)

the VAT paid late by the Appellant was less than half of the repayment that the Appellant was waiting for.

50.

Although paragraph 13(2) excludes from being a special circumstance for these purposes both a lack of funds and the fact that a late payment by taxpayer is balanced by a potential over-payment that might be repayable to the taxpayer, we consider that those exclusions should be read in a similar way to how the all the judges in the Court of Appeal in Steptoe addressed the question of a lack of funds in the context of a reasonable excuse defence, i.e. the statute “does not prevent the reason for an insufficiency of funds [or the fact that the Appellant is still awaiting a repayment from HMRC in relation to an earlier period] being put forward as a ‘[special circumstance]’” (emphasis added by us). Furthermore, it was quite clear from the Steptoe decision itself that the approach to statutory construction was not limited to the specific issue of lack of funds (as Lord Justice Scott said, “a corresponding point might well arise in connection with para. (b)”). We therefore consider that the facts summarised in the preceding paragraph are not precluded from being considered as a special circumstance, Furthermore, they are highly relevant to the present case and we consider HMRC should have taken them into account.

51.

For that reason, we consider that HMRC’s decision on special reduction was flawed, thereby permitting us to substitute our decision for that of HMRC.

52.

We recognise that the Appellant could not be said to have the right to repayment for the reasons discussed in UK Tradecorp. We also decline (in the absence of clearer evidence) to accept the thrust of the Appellant’s complaint (as reproduced at paragraph ‎46 above) to the extent that there is any suggestion that HMRC were deliberately withholding the March 2024 repayment so as to trigger a penalty for the Appellant’s late payment of its June 2024 VAT.

53.

However, for the same reasons that informed our decision on reasonable excuse, we do not consider that Parliament would have wanted a taxpayer in the circumstances of this case to have to pay penalties (over and above any interest payable for the late payment of VAT). We consider that this is precisely one of those cases where Parliament would consider it inappropriate for any penalty to be payable by the Appellant.

54.

Accordingly, if we had not found for the Appellant on paragraph 12, we would have allowed the appeal and reduced the penalty to nil under paragraph 13.