It is well established these days (and confirmed in all the relevant bits of legislation) that lack of money is not a reasonable excuse against most HMRC penalties for non payment of tax. For example, in the penalty regime set out in FA 2009 the following phrase appears more than once:

"An insufficiency of funds is not a reasonable excuse unless attributable to events outside the taxpayers control".

It is therefore interesting to read the case of Stephen Brand v HMRC TC2434 in which he was charged a penalty because he failed to pay the relevant tax by the due date. Mr Brand said he had a reasonable excuse. He had sold a property but had not received the sale proceeds. He was planning to borrow the amount needed to pay the tax and applied to HMRC for time to pay. HMRC refused to allow him time to pay and he ended up paying it a month or so late.

The Tribunal acknowledged that he had realised a large gain but did not receive payment, leaving him with the obligation to pay his tax without any resources to do so. They accepted that if he had known that HMRC would not allow him time to pay he would have organised the borrowings earlier. The absence of funds was no fault of his and he had a reasonable excuse for assuming that HMRC would have dealt with his application for time to pay, leaving him insufficient time to raise the funds in order to make payment by the due date.

Although everybody would sympathise considerably with Mr Brand in these difficult circumstances, it is perhaps a surprise that his insufficiency of funds was found to be a reasonable excuse despite the statutory prohibition. It might be said that the insufficiency of funds was attributable to events outside his control and it is very encouraging that the Tribunal are taking such a sympathetic line.