In Farmyard Funworld Ltd v HMRC [2015] TC04741 the First Tier Tribunal (FTT) agreed that a lack of funds caused by an unexpected heatwave could constitute a reasonable excuse for a late VAT payment.


  • Farmyard Funworld is a small farm attraction and indoor soft play area for children.
    • The business is extremely weather dependent with takings fluctuating from £60 to £600 per day.
    • The business suffered a break in on 8th March 2015 resulting in the theft of £4,300 cash and £8,000 worth of damage.
    • Delays in receiving the insurance pay-out meant that money which had been set aside to pay the VAT was used to fund emergency repairs, however the owner (Mr McLennan) expected to receive sufficient takings to account for the VAT due.
    • A few days before the VAT due date of 7th April there was an unexpected heat wave which lead to a significant downturn in business turnover.
    • Payment of the VAT was made in two tranches on the 8th and 9th April and HMRC issued a default surcharge.
  • Mr McLennan appealed on the grounds that the break in and heat wave had caused an unexpected cash flow crisis which gave him a reasonable excuse.
  • HMRC countered that there was sufficient time after the break in for alternative arrangements to be made and that an insufficiency of funds is not a reasonable excuse in accordance with VATA 1994 s71(1)(a).


The FTT considered that:

  • It was possible for the reason for the lack of funds to constitute a reasonable excuse.
  • The break in was obviously not anticipated, however the business could have made alternative arrangements and should have made allowances for possible fluctuations in the weather when considering cash flow projections.
  • By itself neither the break in nor the weather would have constituted a reasonable excuse, but then nor would either by itself have caused the insufficiency of funds.
  • It was the combination of the cash flow problems caused by the break in compounded by the unexpected drop in takings which caused the insufficiency of funds.
  • A small business in these circumstances could not reasonably have been expected, when faced with this particular combination of difficulties occurring so shortly before the due date, to be able to avoid the lack of funds to pay the VAT by the due date.

The FTT therefore allowed the appeal.

Case reference: Farmyard Funworld Ltd v HMRC [2015] UKFTT TC04741