The First-tier Tribunal have dismissed an appeal against a VAT default surcharge (Diamond Bodycraft Ltd v HMRC [2023] UKFTT 100 (TC)).
A VAT payment was made two days late and a surcharge imposed. The company appealed on the grounds that it had a reasonable excuse and that, being only two days late, the surcharge was disproportionate.
Mrs Mitchell, the company director, argued that she had a reasonable excuse because her bank fob had failed and she could not access online banking and make a payment until a replacement had been provided. Furthermore, she had been suffering from long Covid. The tribunal considered the principles in The Clean Car Company Limited [1991] VATTR 234 and Perrin [2018] UKUT 156 (TCC) and decided:
- With regards to the faulty fob – “we find that the excuse is not objectively reasonable as we consider that a reasonable trader in the same position would have attempted to make payment by telephone or attempted to contact HMRC when it became clear that the payment could not be made on time”.
- With regards to Covid-19 – “The business was not prevented from filing its return on time and attempting to make the payment on time, so that any delays relating to COVID cannot be a reasonable excuse in respect of the delay in making payment”.
Considering the matter of proportionality, the tribunal was bound by the decision in Trinity Mirror that had stated that the objective “of the default surcharge regime is to impose a penalty for failing to pay VAT on time, and not to penalise further for any subsequent delay in payment … It would not be possible, therefore, in our view, for the fact that the payment was only one day late to render an otherwise proportionate penalty disproportionate”. There were no exceptional circumstances here to override that principle.
The appeal was therefore dismissed and the penalty upheld in full.
https://www.bailii.org/uk/cases/UKFTT/TC/2023/TC08722.html
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