Key Facts
- •Foster & Sons Limited appealed against VAT default surcharges totaling £9,068.03 for late payments in accounting periods 08/21, 11/21, and 08/22.
- •Surcharges were levied at increasing rates (5%, 10%, 15%) due to prior defaults.
- •HMRC conducted reviews upholding the surcharges.
- •Foster & Sons argued the surcharges were incorrectly issued and that there was a reasonable excuse for late payments.
- •Foster & Sons' principal business address was changed in HMRC's systems to Tudor Court in January 2024, but they did not receive the surcharge notices sent to their previous address at Oakbank.
- •Oakbank address was a temporary workspace within an Amazon warehouse which was unmanned for several months in 2021.
- •Foster & Sons changed banking arrangements in May 2021, leading to unexpected delays in VAT payments.
- •HMRC provided evidence of posting surcharge notices to Oakbank; no mail was returned as undelivered.
Legal Principles
Liability for default surcharge arises under s 59 VATA for late filing or payment of VAT.
Value Added Tax Act 1994 (VATA)
Service of surcharge notice is crucial; deemed effected by proper addressing, pre-payment, and posting under s 7 Interpretation Act 1978, unless contrary proven.
s 98 VATA; s 7 Interpretation Act 1978
Reasonable excuse under s 59(7) VATA is a matter of fact considered in light of all circumstances; insufficiency of funds or reliance on others is not a reasonable excuse.
s 59(7) VATA; Rowland v HMRC [2006] STC (SCD) 536; Christine Perrin v HMRC [2018] UKUT 0156 (TCC)
Burden of proof rests with HMRC to demonstrate correct issuance of surcharges and with Foster & Sons to demonstrate reasonable excuse.
Case law and VATA
Outcomes
Appeal allowed in part.
HMRC failed to prove service of the surcharge notice for period 02/21. For subsequent periods, service was deemed proper despite Foster & Sons' failure to notify HMRC of the address change. No reasonable excuse found for late payments.
Surcharge for 02/21 period overturned.
HMRC did not prove the surcharge notice was sent.
Surcharges for periods 08/21, 11/21, and 08/22 upheld but rates adjusted.
Service of notices deemed proper; no reasonable excuse for late payments found.