Tribunal considers VAT penalty

31 Mar Tribunal considers VAT penalty

HMRC imposes a VAT default surcharge on businesses that submit late VAT returns. VAT registered businesses are required by law to submit their return and make sure that payment of the VAT due has cleared to HMRC’s bank account by the due date. The normal deadline for submission of a VAT return and making payment is one calendar month and seven days after the end of the relevant VAT quarter.

There is no penalty for a first offence, however a business that submits a VAT return late is issued with a surcharge liability notice that begins on the date of the notice and ends twelve months from the end of the latest period in default. If further VAT returns are submitted late during this period a penalty based on a 'specified percentage' ranging from 2% to 15% will apply. The penalty increases up to a maximum of 15% with each default.

A recent First-Tier Tribunal case examined a default surcharge for the taxpayers delay in paying VAT of over £46,000 for the quarter ending 31 May 2014. The taxpayer did not attend the Tribunal and was not represented. The Tribunal satisfied that the taxpayer had been notified of the date and venue of the appeal hearing and that it was in the interests of justice to proceed.

The VAT return for the quarter ending 31 May 2014 together with the payment due was received late by HMRC on 9 June 2014. This was 3 days past the filing deadline as the 7 June 2014 was a Saturday. A 5% surcharge was levied by HMRC.

The taxpayer did not dispute that the payment was late but argued that the proprietor of the Company attempted to make payment on Saturday 7 June 2014'but for some reason the payment was not authorised even though the money was in (their) account.'

In the Tribunal’s view, the taxpayer did not show a reasonable excuse for its late payment of VAT in period 04/14 and commented that'an oversight or a mistake albeit honestly made is not a reasonable excuse.'  Further, the taxpayer was clearly aware of the due date for payments having made two earlier payments late. The appeal was dismissed.

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