SB Wakefield Limited v The Commissioners for HMRC
[2023] UKFTT 548 (TC)
Polyteck Building Services Ltd v The Commissioners for HMRC
28 June 2023
[2023] UKFTT 575 (TC)
First-tier Tribunal
A company was late paying its VAT. It tried to say it was because of money problems and not getting a notice, but the judge said that wasn't a good enough reason because its money problems weren't new and it didn't ask for help in time. So, the company had to pay the penalty.
Key Facts
- •Polyteck Building Services Ltd. (Appellant) appealed against a VAT default surcharge of £20,165.61 (reduced from £52,665.61) for the period 03/21 (January 1 to March 31, 2021).
- •The due date for payment was May 7, 2021, but payment was made between May 7 and 11, 2021.
- •Appellant claimed non-receipt of the surcharge notice, cashflow difficulties due to the pandemic, and ongoing discussions with HMRC Debt Management as reasons for late payment.
- •HMRC argued that the surcharge was correctly issued, the Appellant had no reasonable excuse, and the Time-to-Pay (TTP) arrangement was refused as their cashflow issues were not new or sudden.
Legal Principles
Default surcharge is imposed under s. 59 VATA for late VAT return submission or payment.
Value Added Tax Act 1994 (VATA)
HMRC bears the initial burden of proving default; Appellant must prove reasonable excuse.
Perrin v R & C Commrs [2018] BTC 513
Insufficiency of funds is not a reasonable excuse (s. 71 VATA); neither is reliance on another person.
Value Added Tax Act 1994 (VATA)
Reasonable excuse is an objective test considering a responsible trader's actions in the given circumstances.
The Clean Car Co Ltd v C&E Commissioners [1991] VATTR 234
Notices are deemed served if posted to the last known address unless the contrary is proven (s. 98 VATA).
Value Added Tax Act 1994 (VATA)
A TTP arrangement must be in place *before* the due date to avoid penalties (Finance Act 2009, s. 108).
Finance Act 2009
Outcomes
Appeal dismissed.
The Appellant failed to prove a reasonable excuse for late payment. The late payment was not due to unforeseen or unavoidable circumstances. The Appellant contacted HMRC too late to secure a TTP arrangement, and the cashflow issues were not new or sudden.