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.