Mr Gary Knapper v Commissioners for Her Majesty's Revenue and Customs

Facts

Mr Gary Knapper appealed against two default surcharges imposed by HMRC under section 59C of the Taxes Management Act 1970 in respect of the late payment of income tax for the 2007/08 tax year. It was common ground that his return had been filed on time, showing a liability of £1,645.78 due on 31 January 2009, and that the tax was not paid by that date. He entered a "time to pay" arrangement of £140 a month from March 2009, made three payments reducing the debt to £1,225.78, and then defaulted; surcharge liability notices of £82.28 and £61.28 issued on 16 February 2010. His case was that in July 2007 he had left BT to work for an Irish company, Cubic Telecom Ltd, providing his services through his own company Exocom Ltd, and that he had also brought in Mr Mattarini to work on the project. The arrangement was terminated with effect from 31 January 2008, the payments he received fell far short of what he had expected, and he used what remained to pay Mr Mattarini's salary, PAYE and National Insurance in full, leaving himself in lasting financial difficulty. HMRC maintained that inability to pay could not be a reasonable excuse. The appeal was heard in Reading on 16 February 2011 and, after an adjournment for documentary evidence, again on 11 May 2011, HMRC being unrepresented on both occasions.