Tribunal – VAT default surcharge
A VAT default surcharge is a penalty levied on businesses that submit late VAT returns. VAT registered businesses are required by law to submit their return and make sure that payment of the VAT due has cleared to HMRC’s bank account by the due date.
There is no penalty for a first offence, however, a business that submits a VAT return late is issued with a surcharge liability notice that begins on the date of the notice and ends twelve months from the end of the latest period in default. If further VAT returns are submitted late during this period a penalty based on a ‘specified percentage’ ranging from 2% to 15% will apply. The penalty increases up to a maximum of 15% with each default.
A recent Tribunal case examined an appeal by a taxpayer against two penalties for late submission of VAT returns. The first penalty related to the 07/13 at 10% and the second penalty related to the next quarter and the surcharge was calculated based on 15% of the VAT due.
The taxpayer admitted his liability in relation to the second quarter (10/13) as he had‘diarised the payment for 11 December rather than 7 December’ but did not seem to appreciate that the company was within the default surcharge regime for the 07/13 VAT return.
However, the Tribunal was clear that the taxpayer had not produced any reasonable excuse for the late payments and the taxpayer’s appeal was dismissed.