Both the taxpayer and H M Revenue & Customs accepted that a VAT return was received on time on 6 November 2015 but when HMRC originated a direct debit on 11 November 2015 it was returned unpaid because the amount of £27,000.71 exceeded the balance of cleared funds available in the account by £1,784.61 and there was no overdraft facility.
H M Revenue & Customs issued a default surcharge notice in the sum of £540.01 on 13 November 2015.
The tribunal found that at the time the direct debit was rejected by the bank it was clear that the taxpayer had overpaid PAYE of around £3,500 and the tribunal noted that H M Revenue & Customs accepted that there was a delay of over a year in refunding the PAYE overpayment. H M Revenue & Customs offered no explanation for the delay.
The inspector of taxes in a letter to the taxpayer had stated that “a reasonable excuse is normally an unexpected or unusual event that is either unforeseeable or beyond the person’s control”.
The tribunal considered that a delay of almost a year by H M Revenue & Customs in refunding the PAYE overpayment to them is an event that falls within that definition.
Therefore the tribunal found that, although the payment was made late, the appellant has established a reasonable excuse for the late payment and it followed that the appeal against the surcharge notice was upheld.