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VAT Penalty Disputes - Important Update
by Peter Smallwood on 23 November 2011
A recent VAT Tribunal hearing concerning a client who has a default surcharge penalty as a result of submitting a VAT return 3 weeks late (after having submitted a number of previous VAT returns late) was adjourned because part of the argument in support of the client’s appeal was that the penalty was disproportionate.
In the case of Total Technologies Engineering Limited (TTE), that was heard in July 2011, the Tribunal concluded that a penalty of £4,260 for a return submitted one day late was disproportionate. This Judgement has been appealed by HMRC and is currently the lead case being considered by the Upper Tier Tribunal on the issue of proportionality.
In January 2010, in the case of Enersys Limited, the Tribunal concluded that a penalty of £131,881 in respect of a VAT return that was one day late was disproportionate.
The whole issue of what is, or what is not, proportional is clearly uncertain – as is the question of whether the First Tier Tribunal is able to deal with the issue of proportionality.
It’s definitely worthwhile for any business with a VAT default surcharge to seek specialist advice on whether or not they should appeal the matter to the Tribunal. The case may take several months to be resolved pending the outcome of the TTE appeal.
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