A rare win for a reasonable excuse

DDK Projects recently won its appeal against £25,000 in VAT late payment penalties, with a rare win using the argument of a reasonable excuse.

The company’s VAT payment was 32 days late, not due to negligence, but because of a series of unforeseen events: the sole director was unexpectedly required at home full-time following his partner’s traumatic childbirth, and the key bookkeeper was on compassionate leave. DDK only became aware of the missed payment when HMRC’s letter finally arrived, at which point the VAT was paid immediately.

The Tribunal found that, while each circumstance alone might not have been enough, the combination of personal and operational crises amounted to a “reasonable excuse” under the law. Crucially, DDK acted promptly to remedy the default as soon as they became aware of it.

This case is a timely reminder that the “reasonable excuse” defence for VAT penalties is not limited to single, isolated events. Tribunals will consider the full context and sequence of events, especially where a taxpayer takes swift corrective action once the issue is identified.

For finance professionals and business owners, the key takeaways are:

● Document all relevant circumstances if a payment is missed.
● Act quickly to resolve any defaults once discovered.
● Understand that a combination of factors may be accepted as a reasonable excuse.