MPMH Construction Limited v The Commissioners for HMRC
[2024] UKFTT 746 (TC)
JFS London Ltd v The Commissioners for HMRC
2 October 2023
[2023] UKFTT 852 (TC)
First-tier Tribunal
A company tried to avoid paying extra charges for late tax returns, saying the pandemic caused problems. The judge didn't accept their excuse because they could have planned better or asked for more time to pay. They have to pay the extra charges.
Key Facts
- •JFS London Ltd (JFS) appealed against VAT default surcharges totaling £1,790.45 for periods 10/20 and 01/21.
- •Surcharges were imposed under s 59 Value Added Tax Act 1994 (VATA) due to late VAT return filing and payment.
- •JFS claimed a "reasonable excuse" due to pandemic lockdowns, staff illness, and limited IT infrastructure.
- •HMRC rejected JFS's requests for review.
- •JFS's business involved selling household articles and had been VAT-registered since 1 October 2007.
- •JFS had previously met tax obligations on time.
- •Despite restricted access to premises, online sales continued during lockdowns.
- •A call to HMRC was alleged but not verified by HMRC records.
Legal Principles
Liability for default surcharge arises under s 59 VATA for late VAT return filing or payment.
Value Added Tax Act 1994 (VATA), s 59
A "reasonable excuse" negates default surcharge liability (s 59(7) VATA). Insufficiency of funds or reliance on another person is not a reasonable excuse (s 71 VATA).
Value Added Tax Act 1994 (VATA), s 59(7), s 71; Rowland v HMRC [2006] STC (SCD) 536
The Tribunal considers "reasonable excuse" based on proven facts and objective reasonableness in light of the taxpayer's situation (Christine Perrin v HMRC [2018] UKUT 137 (TCC)).
Christine Perrin v HMRC [2018] UKUT 137 (TCC)
The burden of proof is on HMRC to show the surcharge is due, then on the taxpayer to show a reasonable excuse.
Case Law
VAT returns must be submitted by the last day of the month following the period (Regulation 25(1) VAT Regulations 1995). Payment is due by the same date (Regulation 40 VAT Regulations 1995).
VAT Regulations 1995, Regulations 25(1) and 40
Outcomes
Appeal dismissed.
The Tribunal found that the facts, while acknowledging pandemic difficulties, did not objectively constitute a reasonable excuse. JFS was in the default surcharge regime and should have had systems in place or contacted HMRC for a time to pay arrangement. Reliance on another person is not a reasonable excuse.