Polyteck Building Services Ltd v The Commissioners for HMRC
[2023] UKFTT 575 (TC)
ABG Fibre Services Ltd v The Commissioners For HMRC
14 October 2024
[2024] UKFTT 907 (TC)
First-tier Tribunal
A company was late paying its VAT because HMRC was slow paying them money it owed. Even though this was frustrating, the court said the company should have done more to make sure it had enough money to pay the VAT on time, and so the company had to pay penalties.
Key Facts
- •ABG Fibre Services Ltd (AFSL) appealed against default surcharges issued by HMRC for VAT periods 09/20, 12/20, and 03/21.
- •AFSL's business is installing telecommunications equipment.
- •AFSL's late payments were due to delays in receiving Construction Industry Scheme (CIS) repayments from HMRC.
- •HMRC took over 12 months to process AFSL's repayment claims.
- •AFSL argued that the delayed CIS repayments constituted a reasonable excuse for the late VAT payments.
- •HMRC rejected AFSL's claims for reasonable excuse.
- •The Tribunal granted permission for the late appeal.
Legal Principles
Default surcharge liability under section 59 Value Added Tax Act 1994 (VATA).
VATA s. 59
The 'reasonable excuse' defense under VATA s. 59(7).
VATA s. 59(7)
Insufficiency of funds and reliance on others are not reasonable excuses (VATA s. 71).
VATA s. 71
The objective reasonableness of the taxpayer's actions, considering their experience and circumstances (Christine Perrin v Revenue and Customs Commissioners [2018] UKUT 0156 (TCC)).
Christine Perrin v Revenue and Customs Commissioners [2018] UKUT 0156 (TCC)
A taxpayer cannot simply set off a future repayment against a present liability (NSF Utilities Ltd v HM Revenue and Customs [2018] TC06288).
NSF Utilities Ltd v HM Revenue and Customs [2018] TC06288
The need for evidence of inability to pay due to circumstances beyond control (Steptoe v Revenue and Customs Commissioners [1992] STC 757 CA).
Steptoe v Revenue and Customs Commissioners [1992] STC 757 CA
A prudent taxpayer should not rely on uncertain repayment claims to meet VAT liabilities (Quality Asbestos Services Ltd [2015] TC04742).
Quality Asbestos Services Ltd [2015] TC04742
Late appeal permission granted considering the approach in Martland v HMRC [2018] UKUT 0178 (TCC).
Martland v HMRC [2018] UKUT 0178 (TCC)
Outcomes
Permission granted for a late appeal.
The Tribunal considered the parties' ongoing correspondence and found that AFSL appealed promptly after the final review conclusion.
Appeal dismissed; surcharges upheld.
The Tribunal found that AFSL did not have a reasonable excuse for the late payments. AFSL failed to take reasonable steps to mitigate the known delay in receiving CIS repayments, such as seeking time to pay or altering its payment arrangements.