Polyteck Building Services Ltd v The Commissioners for HMRC
[2023] UKFTT 575 (TC)
Kattrak International Limited v The Commissioners for HMRC
10 November 2022
[2022] UKFTT 427 (TC)
First-tier Tribunal
A company's appeal against late VAT payment penalties was rejected because, even though they had problems with a direct debit and staff illness, the judge didn't think they did enough to make sure their payments were on time.
Key Facts
- •Kattruck International Ltd. appealed VAT default surcharges of £2,850.03 (period 06/21) and £2,767.27 (period 09/21).
- •The company's payments were late due to alleged confusion surrounding a cancelled direct debit instruction.
- •The appellant claimed that only one person handled payments, and staff illness contributed to the delays.
- •HMRC asserted that the appellant hadn't provided sufficient reasons for the late payments and hadn't taken reasonable steps to ensure timely payment.
- •The Tribunal found that the direct debit was cancelled by either the appellant or its bank, not HMRC.
- •The Tribunal noted that the appellant should have checked with its bank to ensure the direct debit was in place, especially after the 06/21 payment failure.
Legal Principles
A reasonable excuse for a VAT default surcharge must be proven by the taxpayer on the balance of probabilities.
Section 59(7)(b) Value Added Tax Act 1994
Insufficiency of funds and reliance on others are not reasonable excuses.
Section 71(1) Value Added Tax Act 1994
The 'reasonable excuse' test is objective, considering what a responsible trader would have done in the taxpayer's situation.
Rowland v Revenue & Customs Commissioners [2006] STC (SCD) 536; The Clean Car Company Ltd v The Commissioners of Customs and Excise [1991] VATTR 234
In assessing a reasonable excuse, the Tribunal should consider the taxpayer's assertions, proven facts, and whether those facts objectively constitute a reasonable excuse. The Tribunal should also consider when any reasonable excuse ceased and if the failure was remedied without unreasonable delay.
Christin Perrin v The Commissioners for Her Majesty’s Revenue and Customs [2018] UKUT 156 (TC)
Outcomes
The appeal was dismissed.
The appellant failed to establish a reasonable excuse for the late VAT payments. The cancellation of the direct debit, regardless of the cause, could have been resolved by the appellant with its bank. The appellant did not take sufficient steps to ensure timely payment.