How do you Avoid a Default Surcharge VAT Penalty
Submit Articles Back to Articles
12th November 2013 - vat people
In the current climate many businesses are finding themselves
in a position whereby they do not have funds to pay the VAT bill at the
end of the quarter. With default surcharge penalties levied at up to
15%, how can you or your client avoid a penalty?
The recent case of Olive Business Solutions Limited considered
whether the taxpayer had a reasonable excuse and therefore was not
liable to the default surcharge penalty and whether the amount of
penalty was disproportionate.
The return was received by HMRC on the due date, 30 November
2012. Payment should have been made (electronically) by 7 December, but
was made by three installments, on 11 December, 24 December and 4
January 2013. A penalty of £16,337.28 (5% of the tax) was imposed.
HMRC state that a default surcharge can often be avoided if a
“time to pay” agreement is authorised provided that the taxpayer has
contacted HMRC, with a view to making a time to pay agreement, in
advance of the due date for payment.
In this case the Tribunal therefore concluded that as the
taxpayer had not contacted HMRC prior to the due date to discuss a time
to pay agreement a penalty was therefore due. The Tribunal chairman
stated that it is not “disproportionate to impose the penalty
prescribed by a régime which is not itself disproportionate in
circumstances where the person penalised has simply failed to avail
himself of the mechanism by which he could have escaped the penalty.”
The key message from this case, as with many before, is that if you or
your client are struggling to meet your VAT commitments at the due
date, it is imperative to contact HMRC prior to this date to agree a
payment plan to avoid any default surcharge penalties.
Should you have any questions with regards to the penalty
regime, please do not hesitate to contact our free helpline.
About the Author
VAT People are leading VAT and Customs Duty
consultants based in the
North West of England. We work with a wide range of businesses
throughout the UK as well as assisting our accountancy colleagues to
unravel the thorny VAT issues for their clients. We are one of the UK's
largest and most comprehensive sources of VAT and Customs advice, our
consultancy team having over 140
years of experience in VAT and Customs
gained in either HMRC or a Big 4 accountancy practice environment.
Call us on our VAT helpline 0800 077 4604 to discuss. All initial discussions are free with no-obligation.
Follow us @Scopulus_News
Article Published/Sorted/Amended on Scopulus 2014-01-02 11:10:24 in Tax Articles