SB Wakefield Limited v The Commissioners for HMRC
[2023] UKFTT 548 (TC)
Pracyva Ltd v The Commissioners for HMRC
18 December 2023
[2024] UKFTT 32 (TC)
First-tier Tribunal
A company appealed late VAT payments, citing financial and health problems. The judge sympathized but ruled the company didn't act reasonably: They asked for help too late, and didn't have a backup plan. One penalty stood; the other was dropped by the tax authority.
Key Facts
- •Pracyva Ltd appealed against VAT default surcharges for periods 9/21 (£32,164.12) and 12/21 (£41,116.73).
- •The surcharge for period 12/21 was cancelled by HMRC.
- •Pracyva experienced cash flow problems and health issues impacting the director's ability to manage the business.
- •A Time to Pay (TTP) agreement was sought on 8 November 2021 (after the due date for period 9/21).
- •Pracyva argued that a deferral request, even if after the due date but with subsequent HMRC agreement, should relieve the surcharge under s108 FA 2009.
Legal Principles
Section 108 FA 2009 applies if a taxpayer fails to pay tax, requests deferral, and HMRC agrees. A penalty is not due if the request is made before the penalty arises, even if HMRC's agreement is later.
Finance Act 2009, s. 108
A 'reasonable excuse' for late VAT payment is determined objectively, considering the taxpayer's circumstances and attributes.
Rowland v R & C Commrs (2006) Sp C 548; Perrin v HMRC [2018] UKUT 156 (TCC); The Clean Car Co Ltd v Customs and Excise Commissioners [1991] VATTR 234
Insufficiency of funds alone is not a reasonable excuse (s.71 VATA), but the underlying reasons for the insufficiency might be, if unforeseeable or unavoidable despite reasonable foresight and due diligence.
Value Added Tax Act 1994, s. 71; Customs & Excise Commrs v Steptoe (1992) STC 757
Outcomes
Appeal dismissed for VAT period 9/21.
The TTP request was made after the due date; s108 FA 2009 did not apply, and the taxpayer's circumstances did not constitute a reasonable excuse.
No decision needed for VAT period 12/21.
HMRC cancelled the default surcharge.
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