Uncertain
Whilst the long-term effects of the UK leaving the European Union won’t become clear for several years, it’s no secret that a lot of businesses are blaming the uncertainty on many things. If a correlation can be shown, could a downturn in trade due to this uncertainty be held to be a reasonable excuse for late tax filing?
Tribunal. That is certainly what the taxpayer tried to argue in Caris Properties Limited v HMRC [2019] TC07481 (see Follow up ). It had appealed against a penalty for late filing of corporation tax on the basis that a downturn in the property market following the Brexit referendum had affected its cash flow. HMRC had imposed fixed and tax-geared penalties in excess of £35,000.
Decision. The question was whether or not the insufficient funds due to the alleged Brexit effect constituted a reasonable excuse. Previous cases have held that the reason for a lack of funds, e.g. serious illness, can mean there is a reasonable excuse. However, these cases concern late payment rather than late filing. The First-tier Tribunal could find nothing to suggest that a lack of funds, caused by any reason, would contribute to the late filing of a statutory return. It would appear, at least in part, that by delaying the filing of the return the company was hoping to put off the tax payment date. In reality, the payment dates are statutory and do not depend on when the return is filed.
Brexit?
Interestingly, the judge commented that any adverse impact on the industry due to the referendum result is part and parcel of the normal risk of carrying on the particular trade, in this case property dealing. The company should have reacted to the downturn by retaining enough to pay the tax due.
The Tribunal was not persuaded that any financial “Brexit effect” would prevent the late filing of a tax return. Remind clients that filing returns late does not move the payment deadline.