In Concept Multi-Car Limited (CMC) v HMRC [2020] TC07824, the First Tier Tribunal (FTT) upheld a company's VAT default surcharge there was no evidence that CMC attempted to set up a new direct debit instruction.

CMC was charged £4,090.90 as a VAT default surcharge by HMRC. This was a third default in the surcharge liability period and chargeable at 5% of the VAT due.

Prior to the surcharge being applied HMRC reported:  

  • CMC had entered the default surcharge regime from the October 2018 period onwards after its VAT return was received late by HMRC and the company's direct debit payment for the October 2018 period failed.
  • Payment for the January 2019 return was also late and a default surcharge was issued..
  • HRMC wrote a letter notifying CMC that the direct debit had been cancelled with CMC’s bank and asked CMC to issue a new direct debit instruction to its bank.
  • The payment of the April 2019 period was due on 7 June but payment was not received by HMRC until 11 June. A second default surcharge was imposed on CMC.  

CMC Appealed against the last default surcharge on the basis that it had a Reasonable Excuse for its failure: it claimed it has issued a new direct debit instruction when submitting its April 2019 return and so believed that payment would be taken. 

The FTT found that the company did not submit any supporting evidence for the direct debit failure.

It concluded in the absence of any evidence that CMC did not have a reasonable excuse and upheld the default surcharge amounts.  


VAT Penalties
When do penalties apply for VAT? What penalties are charged and how can they be mitigated?

Grounds for appeal: Reasonable excuse 
What is considered to be a 'reasonable excuse' when a taxpayer makes an appeal?

What are the steps in making an appeal? What should your appeal cover? What does recent case law say on this topic?

External link

Concept Multi-Car Limited v HMRC [2020] TC07824