The First-tier Tribunal (FTT) has found that a man who delayed payment of tax because he was waiting to receive the proceeds of a share sale did not have a reasonable excuse for late payment.

The man’s tax liability for the relevant tax year was £54,528, much of which was a Capital Gains Tax liability arising from the sale of his shares in a company. His agent notified HM Revenue and Customs (HMRC) that he would not receive the proceeds of the sale, and would therefore be unable to pay the tax due, until the company had sold a warehouse. Neither he nor his agent sought a Time to Pay arrangement, even though HMRC suggested this to his agent. HMRC subsequently issued a penalty notice in the amount of £2,656.

In his appeal to the FTT, the man argued that the penalty notice should be set aside on the basis that he had a reasonable excuse for the late payment. The majority of the tax liability related to the share sale. It was part of the terms of the sale that the proceeds could be paid to him after the warehouse had been sold, and it had originally been hoped that this would be completed by the time his tax payment was due. Both he and his agent had notified HMRC of his position.

The FTT noted that, under Paragraph 16(2) of Schedule 56 of the Finance Act 2009, lack of funds is not a reasonable excuse unless it is attributable to events outside the taxpayer’s control. Finding that the terms of the share sale were entirely within the man’s control, the FTT observed that he could have refused to sell his shares on terms that left him without the funds to pay the corresponding tax.

The FTT did not consider that simply notifying HMRC of the position was sufficient grounds for a reasonable excuse. HMRC had advised the man’s agent to contact their Debt Management Department to agree a Time to Pay arrangement, but the agent, for unknown reasons, had not sought such an arrangement. Under Paragraph 16(2), where a taxpayer relies on another person to do something, that is not a reasonable excuse unless the taxpayer took reasonable care to avoid the failure. There was no evidence before the FTT that that this had been done.

Concluding that the man did not have a reasonable excuse for failing to pay on time, the FTT dismissed the appeal and upheld the penalty.