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Contrasting Recent VAT Tribunal Decisions

By Gabelle LLP

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A default surcharge penalty imposed by HMRC was successfully appealed by the taxpayer in Trinity Mirror plc v Revenue and Customs Commissioners ([2014] UKFTT 355 (TC), published on 25 April 2014).

The taxpayer had been one day late in submitting its VAT return and paying its VAT liability and, in removing the default surcharge penalty entirely, the Tribunal made the following statement.

“A Surcharge of £95,900 later reduced to £70,906.44 was imposed on an otherwise compliant trader to penalise a one day default is plainly unfair. … In conclusion, the Tribunal finds that the penalty is disproportionate.  There is no provision which allows the Tribunal to mitigate or otherwise reduce the amount of the Surcharge and in the circumstances can only set aside the Surcharge.”

We reported on this issue in 2013 where, in the case of Enersys Holdings UK Ltd v Revenue and Customs Commissioners ([2010] UKFTT 20 (TC)) the Tribunal had found against HMRC in similar circumstances.  These cases demonstrate that the Tribunal will be generally sympathetic to taxpayers faced with disproportionately high penalties and even where the amounts are not as obviously excessive as in Trinity Mirror, Taxpayers should always consider challenging large surcharge penalty amounts imposed by HMRC for disproportionately minor defaults.

VAT and the mis-coding of products resulting in incorrect VAT figures

 April 2014 by Gabelle

Further recent decisions have been released from the First-tier Tribunal  and on the whole, the VAT cases have gone in HMRC’s favour.  The case of Panesar Enterprise UK Ltd and Sipp Food Ltd [2014] UKFTT 289 (TC) is a particularly interesting one.

Two companies were franchises of Burger King. When they were set up, they installed a software system recommended by Burger King. The system was pre-programmed to distinguish between standard and zero-rated sales. Unknown to the companies, some of the products had been mis-coded, resulting in incorrect VAT figures and under-declarations of output VAT. The companies appealed against assessments on the grounds that the under-declarations had not been caused by any fault of theirs, and neither company was in a position to pay the amount demanded. The tribunal said that a taxpayer could appeal against the fact of an assessment or against its amount, neither of which were challenged in this case. The only challenge here was that the error did not lie with the companies and that they could ill afford to pay the assessments. Neither of those grounds were issues which fell within the tribunal’s jurisdiction. HMRC’s application to strike out both appeals was allowed.

Published May 2014