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Have you ever wondered how one small mistake by a tax agent could end up costing thousands of pounds? Here’s the incredible story that shows exactly what happens when crucial steps are missed—an eye-opening case that even a 10th grader can understand.
What Really Happened?
On 31 January 2023, a person (we’ll call him Mr. Wragg) filed his electronic tax return for the 2021/22 tax year. His tax bill was a whopping £54,528, much of which came from capital gains tax when he sold shares in a company (let’s call it TP). Just a few days later, on 3 February 2023, Mr. Wragg’s tax agents reached out to HMRC. They explained that although Mr. Wragg had sold his shares in TP, he wouldn’t receive the money until TP completed the sale of a property. The plan was simple: as soon as the sale went through, Mr. Wragg would pay the tax immediately.
A Simple Suggestion That Changed Everything
During that call, the HMRC operator made a smart suggestion: Mr Wragg should contact HMRC Debt Management and arrange a “time to pay” (TTP) agreement. This TTP plan would have allowed him to pay his tax bill in instalments instead of all at once. However, instead of setting up a payment timetable, Mr Wragg’s agents only called HMRC Debt Management on 24 February 2023. They mentioned that a warehouse sale was likely to happen on 3 March 2023 and that they would later appeal any penalty for the late payment.
What Went Wrong?
Here’s where things took a serious turn:
- No Payment Plan Set Up: Despite clear advice from HMRC, Mr Wragg’s agents did not secure a TTP arrangement. This was a critical misstep.
- Warnings Ignored: HMRC had clearly warned that without a TTP agreement, penalties would build up. But for reasons unknown, the agents didn’t follow through with arranging one.
- Lack of Funds Is Not an Excuse: The agents argued that Mr. Wragg didn’t have enough funds at the time and that their actions should be seen as a reasonable excuse. However, HMRC didn’t accept this argument.
The Outcome
Because no proper steps were taken to agree on a payment plan, HMRC eventually issued a late payment penalty. When Mr Wragg tried to appeal the penalty, he argued that both his lack of funds and his agent’s apparent negligence should count as a reasonable excuse. But the First-tier Tribunal (FTT) wasn’t convinced. They pointed out that neither Mr Wragg nor his agents took the simple yet vital step of arranging a payment timetable with HMRC. The tribunal noted that the advice from HMRC was crystal clear—without a TTP agreement, penalties would automatically be applied.
In the end, Mr. Wragg’s appeal was dismissed, and the penalty stood. This case, known as Wragg v Revenue and Customs [2024] UKFTT 1012 (TC), sends a powerful message: missing that one simple step can cost you dearly.
Key Takeaways
- Act Fast: If you’re in trouble paying your taxes, immediately contact HMRC Debt Management to set up a payment plan.
- Follow Advice: Always follow the advice given by HMRC operators—they know what they’re talking about!
- No Excuses: Lack of funds or even an agent’s mistake does not count as a valid reason to delay payments.
This case taught us valuable lessons about responsibility and communication with HMRC. Even a small oversight can lead to enormous financial consequences. So, always be proactive and make sure you’re on top of your tax matters—don’t let one missed step derail your financial future!