The First-Tier Tribunal (FTT) have released four decisions on reasonable excuse relating to VAT in the last month: we have briefly reviewed these in order to consider what the FTT considers is reasonable when it comes to late VAT filing or payment.

In Hardy Access Services Limited & Michael F Hardy Limited v HMRC [2017] TC06075 the FTT found that a Managing Director suffering from an undiagnosed serious illness which diminished his ability to manage the business was a reasonable excuse.

The company’s actions demonstrated that, had it known of the illness, it would have acted to ensure the taxes were dealt with on a timely basis.

Only two of the three VAT surcharges were discharged. The reasonable excuse was not accepted for the third surcharge, which was late for a different reason.

In Sky Throne Limited v HMRC [2017 ] TC06073, short notice hospitalisation for a surgical procedure was allowed as a reasonable excuse. The company accountant did manage to submit the VAT return on the due date, online whilst at the hospital, but could not access the banking facilities to make the payment. The payment was made first thing the following day.

In Spiral Packs (London) Limited v HMRC [2017] TC06088, the taxpayer understood that the National Direct Debit Service (NDDS) Direct Debit (DD) set up to make Time To Pay (TTP) VAT payments, covered a subsequent VAT payment. In fact, the NDDS DD only covers the TTP and a separate general Direct Debit (DDI) would have to be set up to cover the normal VAT payments.

The taxpayer was informed by HMRC that the NDDS DD did not cover the next VAT return, but when they enquired with the bank as to whether there was an active DD with HMRC, they were told that there was. The taxpayer paid the VAT by faster payment, as soon as it realised that the payment had not been made. If the payment had been made by DD, it would have been on time, but as it was made by faster payment, it was three days late.

The FTT concluded that the balance of argument lay narrowly in favour of the taxpayer and the company had a reasonable excuse.

Compare the favourable results of these three cases with Disaster Recovery Northampton Limited v HMRC [2017] TC06099. The company Director’s grounds of appeal were that “I got my days muddled up… I was only a couple of days late and I will set up a direct debit for future payments”.

Borrowing from Garnmoss Ltd v HMRC TC2001, the FTT said “We all make mistakes. This was not a blameworthy one. But the Act does not provide shelter for mistakes, only for reasonable excuses.” Disaster Recovery Northampton Limited had no reasonable excuse.


Grounds for appeal: Reasonable excuse

Penalties (VAT)

How to pay HMRC


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