Key Facts
- •Hana Services Limited appealed two default surcharges for VAT periods 03/21 (£666.36) and 09/21 (£2,043.33).
- •HMRC's records showed the appellant's address as an old flat, while the appellant moved to a house in 2020.
- •The appellant received the surcharge notice for 03/21 but claimed not to have received the notice for 09/21.
- •The appellant argued that their accountant informed HMRC of the address change, but HMRC had no record of this.
- •The appellant also claimed that late payments and returns were due to Covid-19 impacting their accountant and causing financial difficulties.
- •HMRC attributed payments to the earliest defaults, and the appellant did not specify which liabilities payments should be attributed to.
Legal Principles
Default surcharge regime under section 59 of the Value Added Tax Act 1994 (VATA 1994).
VATA 1994, section 59
HMRC's discretion to allow extra time for filing and payment via electronic means.
VAT Regulations 1995, SI 1995/2518, regs 25A(2), 40(2)
Reasonable excuse for late payment; insufficiency of funds and reliance on others are not reasonable excuses.
VATA 1994, section 59(7), section 71(1)
Service of notices by post; deemed effective unless contrary proved.
VATA 1994, section 98; Interpretation Act 1978, section 7
Validity of surcharge dependent on service of surcharge liability notice.
Customs and Excise Commissioners v Medway Drafting [1989] STC 346
Objective test for reasonable excuse: would a responsible trader have acted reasonably in the same circumstances?
The Clean Car Co Ltd v C & E Commissioners [1991] VATTR 234
Outcomes
Appeal dismissed for period 03/21.
Valid surcharge liability notice was served, and no reasonable excuse for default existed (insufficient funds and accountant errors due to Covid are not reasonable excuses).
Appeal allowed for period 09/21.
Surcharge liability notice was not properly served as it was sent to the incorrect address (old flat, not the new house).