Polyteck Building Services Ltd v The Commissioners for HMRC
[2023] UKFTT 575 (TC)
WWM Rose & Sons Ltd v The Commissioners for HMRC
31 May 2023
[2023] UKFTT 470 (TC)
First-tier Tribunal
A company didn't pay its taxes on time and tried to say they had a good reason. The judge said their reason wasn't good enough because they didn't ask for more time before the deadline and their money problems weren't unexpected. So they had to pay a penalty.
Key Facts
- •W. W. M. Rose & Sons Ltd. appealed against a VAT default surcharge of £1,936.05 for late payment of VAT for the period 01/22 (1 November 2021 to 31 January 2022).
- •The due date for payment was 7 March 2022. The VAT return was submitted on time, but payment was made via NDDS on multiple dates after the due date.
- •The Appellant, Mr. Ian Rose, contacted HMRC on 10 March 2022 to explain difficulties in paying on time, claiming cashflow problems due to equipment supply issues.
- •HMRC argued the Appellant had ample opportunity to request a Time to Pay (TTP) arrangement before the due date and that insufficient funds are not a reasonable excuse for late payment.
- •The Appellant claimed a TTP arrangement was agreed on 10 March 2022, believing this to be the due date, and that supply chain issues caused their cashflow problems.
Legal Principles
A default surcharge is imposed under s. 59 Value Added Tax Act 1994 (VATA) for late payment of VAT.
Value Added Tax Act 1994
HMRC has the initial burden of proving a default occurred. Once established, the burden shifts to the taxpayer to show a reasonable excuse.
Perrin v R & C Commrs [2018] BTC 513
Insufficiency of funds is not a reasonable excuse for late VAT payment (s. 71 VATA).
Value Added Tax Act 1994
A Time to Pay arrangement must be agreed *before* the due date to avoid a surcharge.
Finance Act 2009, s. 108
The test for a reasonable excuse is objective: would a responsible trader, with the taxpayer's experience and circumstances, have acted reasonably?
The Clean Car Co Ltd v C&E Commissioners [1991] VATTR 234
Outcomes
Appeal dismissed.
The Appellant failed to pay VAT by the due date of 7 March 2022. They did not establish a reasonable excuse for the late payment. Contacting HMRC on 10 March 2022 to discuss payment difficulties did not constitute a TTP agreement made before the due date. Cashflow problems, while acknowledged, did not constitute an unforeseeable or unavoidable circumstance under Steptoe.