Elderly taxpayer wins VAT tribunal due to poor memory

An elderly man with poor memory had a reasonable excuse for sending his tax return late, a tribunal has ruled.

Michael Selway, who is 78 and managing director of Award Framers International Limited (Award Framers International Limited v HMRC) argued that a penalty of £1,127 for paying VAT three days late was disproportionate.

Selway said that the late filing of the VAT return and payment of tax was due to a “genuine mistake” about when the financial quarter ended, and his poor memory.

When he realised his mistake, the business immediately submitted the returns and paid the amount due (£7,514.94) by bank transfer.

HMRC argued that there is an automatic penalty for late tax returns regardless of how late they are. It also disagreed that Selway had made a genuine error and said he had not taken appropriate steps to ensure that the company met its VAT payment obligations. It also argued that “genuine error” and reliance on third parties are not reasonable excuses for late payment of VAT.

However, Tribunal judge Dr K Kahn in the first-tier tribunal ruled that Selway’s age and failing memory was a reasonable excuse for the late tax return and his appeal should be allowed.

Whilst this case may help in a defence against HMRC's imposition of penalties, each case is judged on its own facts and merits. HMRC are increasingly using penalties as a way of raising revenue. The best way of avoiding having to defend against penalties is not to be late with filing or payment.

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