In WWM Rose & Sons Ltd v HMRC [2022] TC08830, the First Tier Tribunal (FTT) dismissed an appeal against a VAT surcharge for late payment. An agreement to pay by direct debit payment did not change the statutory VAT due date. Time To Pay must be agreed before the due date.

WWM Rose & Sons Ltd (the Company), a VAT-registered company since 1976, normally paid its VAT under the National Direct Debit Scheme (NDDS).

  • The due date for the VAT return and payment for quarter 1/21 was 7 March 2021. The return was filed on 5 March 2021 and the VAT due was paid under the NDDS on various dates. A Time To Pay (TTP) arrangement was set up on 8 March 2021 with the first payment being due 1 April 2021.
    • On 12 March 2021, a Surcharge Liability Notice (SLN) was issued with a surcharge period of 12 March 2021 to 31 January 2022 as the TTP was not arranged before the VAT due date.
  • The due date for the period 01/22 was 7 March 2022. The return was filed on time but payment was not made due to cash flow difficulties.
    • On 10 March 2022, one of the company directors contacted HMRC to advise that the company was having difficulties in paying its VAT. He took this conversation to mean that a Time To Pay arrangement had been set up with HMRC and that the due date was now 10 March 2022. The VAT was actually paid on multiple dates under the NDDS.
    • On 17 March 2022, a surcharge penalty of £1,396.05 was issued in respect of late paid VAT for the 01/22 period and the surcharge period was extended to 31 January 2023.
    • On 18 March 2022, the director requested a review of the surcharge which upheld it. He then appealed the surcharge.

The FTT dismissed the appeal:

  • The due date was 7 March 2022 and payment was not made by that date. No TTP had actually been arranged on 10 March 2022 and even if it had been the due date had already passed.
  • Where Direct Debit (DD) payments are collected after the due date this does not move the due date to the date of DD payment, the due date remains the same. HMRC allow three days for DD payments to clear but this does not change the due date.
  • The company did not have a reasonable excuse for the late payment.
    • Given they had been registered for VAT since 1976 and had cash flow problems previously, and were already in the default surcharge regime, it should have been aware of their obligations and that continuing default would result in financial consequences. The company had failed to exercise reasonable foresight and due diligence.
    • No evidence had been produced of cash flow problems, and in any event, these problems were an ongoing hazard of the trade and so the company could not claim the excuse of insufficient funds.

Useful guides on this topic

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

Appeals: VAT
How do I appeal a VAT penalty?  How can I request a Statutory Review? How do I appeal an HMRC decision?   

Paying by instalments and VAT
How do the VAT rules apply to continuous supplies of goods and services?

External link

WWM Rose & Sons Ltd v HMRC [2022] TC08830

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