Key Facts
- •Russell Scheef appealed a VAT default surcharge of £12,486.74 for the 01/23 period.
- •The surcharge was imposed due to late payment of VAT, following nine earlier defaults.
- •The 15% surcharge rate was due to the multiple prior defaults.
- •Scheef's other business, All Outdoor Limited, failed in 2023, contributing to his financial difficulties.
- •Scheef argued that the failure of All Outdoor Limited constituted a reasonable excuse for the late payment.
- •HMRC argued that insufficient funds are not a reasonable excuse under s 71 VATA.
Legal Principles
A default surcharge arises under s 59 VATA for late VAT returns or payments.
Value Added Tax Act 1994 (VATA), s 59
A reasonable excuse for late payment or filing can negate the surcharge under s 59(7) VATA; insufficiency of funds or reliance on another person are specifically excluded from reasonable excuse under s 71 VATA.
Value Added Tax Act 1994 (VATA), s 59(7), s 71
The Tribunal must consider all circumstances to determine reasonable excuse, considering the taxpayer's situation and actions objectively. The approach outlined in *Christine Perrin v HMRC* [2018] UKUT 0156 (TCC) should be followed.
Christine Perrin v HMRC [2018] UKUT 0156 (TCC)
While insufficiency of funds is not a reasonable excuse, the underlying reasons for the insufficiency might constitute a reasonable excuse (Steptoe).
Customs and Excise Commissioners v Steptoe [1992] STC 757
Outcomes
Appeal dismissed.
The Tribunal found that the difficulties caused by the failure of All Outdoor Limited, while sympathetic, did not objectively constitute a reasonable excuse for the late VAT payment. Scheef should have taken steps to avoid the default or contacted HMRC before the due date. His prior pattern of non-payment was also considered.