1st Glass & Mirror Company Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 29 October 2010 |
| Neutral Citation | [2011] UKFTT 30 (TC) |
| Date | 29 October 2010 |
| Court | First-tier Tribunal (Tax Chamber) |
[2011] TC 00907
[2011] UKFTT 30 (TC)
Guy Brannan (Tribunal Judge) (Chairman), Anthony Hughes (Tribunal Member)
Jo Martin for the Appellant
Bruce Robinson, HM Revenue and Customs, for the Respondents
Default surcharge - Whether reasonable excuse - The appellant challenged a default surcharge assessment issued in respect of the late payment of VAT for the period 02/10 - The surcharge was levied at 10% of the tax paid late and amounted to £576 - The appellant stated that it was a small company struggling to cope with the recession and had simply needed a few days grace in order to pay the tax due - It felt that the commissioners should be attempting to support small businesses in difficult financial times rather than imposing further financial burdens on them - The appellant explained that a number of its customers had gone into liquidation and that many of its large customers were the slowest payers - It also argued that the amount of the surcharge was disproportionate when compared with the nature of the failure in question -Held, that the appellant did not demonstrate that there was a reasonable excuse for the late payment of VAT within the meaning of s. 59 (7) of the Value Added Tax Act 1994 - Although an insufficiency of funds was not generally a reasonable excuse, the underlying causes of such an insufficiency could constitute a reasonable excuse - However, in this case, the appellant did not produce sufficient evidence to convince the tribunal of the underlying cause for the failure to pay the VAT on time - Accordingly, whilst recognising the difficulties faced by small businesses in the current economic climate, the tribunal concluded that this appeal should be dismissed - In considering the proportionality issue, the tribunal did not consider that a 10% penalty on a fourth default was disproportionate bearing in mind the purpose of the penalty which was to encourage taxpayers to pay their VAT on time.
1. This is an appeal against a default surcharge assessment in respect of the late payment of VAT for the accounting period 1 December 2009 to 28 February 2010. The amount of VAT paid late was £5768.15 and the default surcharge (levied at 10% of the tax paid late) is £576.81.
2. The Appellant did not dispute that the VAT had been paid late or that the correct rate for the surcharge in accordance with Value Added Tax Act 1994 section 59 subsec-or-para 4section 59 (4) Value Added Tax Act 1994 ("VATA") was 10% -- being the percentage for a third prescribed accounting period. Essentially, the first default by a taxpayer puts the taxpayer into the surcharge regime and a surcharge liability notice is issued. Subsequent defaults render the taxpayer liable to a surcharge. The second default results in the surcharge of 2%, the third default results in a surcharge of 5% and a fourth default (as in the case before us) results in a surcharge of 10% and further defaults are charged at 15%. There is a minimum surcharge of £30 for surcharges calculated at the 10% or 15% rates and HMRC does not issue a surcharge at the 2% and 5% rates if it calculates it to be less than £400.
3. In this case the due date of payment was Wednesday 31 March 2010. Electronic payments are required to be received within seven calendar days after the due date ie by Wednesday, 7 April 2010. Payment was received by HMRC on 23 April 2010.
4. In a letter dated 5 May 2010 Ms Martin indicated that contact had been made by the Appellant with HMRC in early April 2010 in respect of making a payment by BACS. She said that HMRC had informed the Appellant that there were technical difficulties with their BACS payments and that payments were being received later than normal. Ms Martin indicated that she had followed this up with a telephone conversation to confirm the BACs payments had gone through the Appellant's system and...
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