Polyteck Building Services Ltd v The Commissioners for HMRC
[2023] UKFTT 575 (TC)
Russell Scheef v The Commissioners for HMRC
5 November 2024
[2024] UKFTT 1010 (TC)
First-tier Tribunal
A businessman missed a VAT payment and tried to argue that his other business failing was a good reason. The judge didn't think so, because he'd missed payments before and didn't contact the tax office in time to explain his problems, so he had to pay the penalty.
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.