Experts are urging businesses to pay their VAT on time following a ruling at a recent tax tribunal, which ruled that a six-figure fine for missing a VAT payment by just one day was ‘proportionate’ for a struggling London firm.
Blue Ocean Associates appealed to the First Tier Tax Tribunal after being hit with a default VAT surcharge of over £250,000 for paying their quarterly VAT on March 1 2012 – just one day later than the February 29 due date.
The court found that Blue Ocean associates had ‘no reasonable excuse’ for missing the deadline and denied the firm’s claims that the surcharge was disproportionate because the company and its subsidiary undertakings recorded a loss of over £9 million in the financial year ending 31 December 2012.
The First Tier Tribunal decided that the default surcharge penalty fell in line with the amount of tax unpaid, and was in no way related to profitability – a principle long established in previous Upper Tribunal cases highlighted by the press.
In its decision, the Tribunal cited HMRC’s guidelines – that, regardless of profitability, a taxpayer receives the money to pay its VAT liabilities from the person to whom it makes its supplies, and therefore should in all cases be able to account for its VAT liabilities.