Businesses taking the view that once the cheque’s in the post the bill is paid run the risk of falling foul of HMRC if they use this approach with HMRC.
The company, Blue Ocean Associates, had appealed to the First Tier Tax Tribunal after being hit with a VAT default surcharge of £277,185 for paying their quarterly VAT payment on 1st March 2012 rather than on 29th February 2012, the date on which the payment was due.
The company, a representative member of a VAT Group, had no “reasonable excuse” for the default, but argued that the surcharge was disproportionate because while the total output liability of the VAT Group for the four quarters up to and including 03/12 was in excess of £4 billion, the company and its subsidiary undertakings recorded a loss of some £9 million in the financial year ending 31st December 2012.
Though every case is determined on its merits the Tribunal’s decision underlines how important it is for businesses to be on top of all their VAT payments to HMRC. This decision also suggests that it would be extremely hard to identify a situation in which the size of a penalty could be challenged on the basis of proportionality given the payment was just one day late.
Our tax experts can help you avoid getting into difficulties with HMRC over VAT whether you need a VAT review or help registering your business. Cases like this one serve as a warning to others, particularly businesses with significant VAT liabilities who need to make sure their tax affairs are in order.
To read more of our VAT related blogs take a look here.
