“We have to decide on the evidence before us whether, on the balance of probabilities, the notices were sent. The evidence that they were not was that of Miss Pothecary, but we thought it was possible that the letters were received but misfiled or lost. On the other hand we had a computer printout which one might expect to be accurately kept, but in relation to which we had no evidence linking the entry to the posting of a letter. On balance, on that evidence, we are not satisfied that the letters were posted and therefore we are not satisfied that the notices were served on the taxpayer.”
“HMRC do not keep copies of all correspondence with taxpayers, particularly where the correspondence is in a standard form. This is entirely understandable, as the amount of storage required to do so (even in electronic form) is impractical. However, HMRC keep an electronic log of such correspondence. This is the case for SLNs. The bundle of documents placed before us in evidence did not include any extracts from HMRC's electronic log. Nor is there any correspondence included in the bundle which otherwise evidences the receipt by the Appellant of any SLNs. It falls on HMRC to prove that an SLN has been served. As there was no evidence before us of any kind showing that an SLN had been printed by HMRC and posted to the Appellant, it follows that HMRC have not satisfied us that an SLN was served on the Appellant, and we so find.”
“When considering a “reasonable excuse” defence, therefore, in our view the FTT can usefully approach matters in the following way: (1) First, establish what facts the taxpayer asserts give rise to a reasonable excuse (this may include the belief, acts or omissions of the taxpayer or any other person, the taxpayer’s own experience or relevant attributes, the situation of the taxpayer at any relevant time and any other relevant external facts). (2) Second, decide which of those facts are proven. (3) Third, decide whether, viewed objectively, those proven facts do indeed amount to an objectively reasonable excuse for the default and the time when that objectively reasonable excuse ceased. In doing so, it should take into account the experience and other relevant attributes of the taxpayer and the situation in which the taxpayer found himself at the relevant time or times. It might assist the FTT, in this context, to ask itself the question “was what the taxpayer did (or omitted to do or believed) objectively reasonable for this taxpayer in those circumstances?” (4) Fourth, having decided when any reasonable excuse ceased, decide whether the taxpayer remedied the failure without unreasonable delay after that time (unless, exceptionally, the failure was remedied before the reasonable excuse ceased). In doing so, the FTT should again decide the matter objectively, but taking into account the experience and other relevant attributes of the taxpayer and the situation in which the taxpayer found himself at the relevant time or times.”
“The test of whether or not there is a reasonable excuse is an objective one. In my judgement it is an objective test in this sense. One must ask oneself: was what the taxpayer did a reasonable thing for a responsible taxpayer conscious of and intending to comply with his obligations regarding tax, but having the experience and other relevant attributes of the taxpayer and placed in the situation that the taxpayer found himself at the relevant time, a reasonable thing to do?”
“Although this might not be viewed as of high significance, the COVID-19 pandemic hit Mareel hard. Whilst we struggled with the day to day running of the business there was a heavy impact to sales. As you can appreciate interest in sales dropped considerably with the unknown of the pandemic. This, in turn, meant a lot of interested parties withdrew contract options all together; potential sales we were relying on as a business, and had employed people ready to start. That considered, you will see that it wasn’t just our VAT repayments that were impacted at that time, it was also our PAYE. You will also note that whilst we have struggled, we have always repaid the debt owing and maintained permanent contact honouring any arrangements you agreed. This instance is of annoyance, I called and spoke to an agent prior to the return being submitted to explain our situation. Wages was and remains our highest priority, we don’t want to cause undue stress to our employees, so we have prioritised that and made it our main commitment. I was told by the agent to call back once the return was submitted to discuss it further. I asked at this point what the chances of delaying the payment would be and I was told it was ‘discretional’. Again, we are aware of the importance of repayment VAT, we take all reasonable steps to ensure we can afford to meet this commitment. Aware at the time of the return we would struggle, I called again to ask for 4-week extension. Rightly or wrongly, we made the decision to meet the wage commitments of 100+ employees, at that time over the VAT. We did this, firstly, to not put these 100+ people into hardship and ultimately unemployed but secondly, to ensure we could meet our work commitments and maintain an income.”
“65. We agree with the tribunal in Total Technology that the default surcharge regime, viewed as a whole, is a rational scheme. The penalties are financial penalties, calculated by reference to the amount of tax unpaid at the due date. Although penalties may vary with the liability of the taxable person for the relevant VAT period, and increase commensurately with an increase in such liability (and, consequently, such default), the penalties are not entirely open-ended. The maximum liability for a fifth or subsequent period of default is 15% of the amount unpaid. In common with the Upper Tribunal in Total Technology, we consider that the use of the amount unpaid as the objective factor by which the amount of the surcharge varies is not a flaw in the system; to the contrary, the achievement of the aim of fiscal neutrality depends on the timely payment of the amount due, and that criterion is therefore an appropriate, if not the most appropriate, factor. 66. However, we accept that, applying the tests we have described, the absence of any financial limit on the level of surcharge may result in an individual case in a penalty that might be considered disproportionate. In our judgment, given the structure of the default surcharge regime, including those features described in Total Technology, this is likely to occur only in a wholly exceptional case, dependent upon its own particular circumstances. Although the absence of a maximum penalty means that the possibility of a proper challenge on the basis of proportionality cannot be ruled out, we cannot ourselves readily identify common characteristics of a case where such a challenge to a default surcharge would be likely to succeed. 67. We should, in particular, not be taken to have endorsed the suggestion put forward by Mr Mantle that the exceptional circumstances that might give rise to a disproportionate penalty could include cases, such as Enersys, where there had been what was described as a “spike” in profits, such that for a particular VAT period the liability to account for and pay VAT was of a different order of magnitude that was normal for the trader concerned. Attempting to identify particular categories of case in this way is not, in our view, helpful. Whilst it might be tempting to seek to isolate, and thus confine, cases by reference to particular criteria, such cases, by reason of their exceptional nature, are likely to defy such characterisation.”