Westbury Collections Ltd v The Commissioners for HMRC [2026] UKFTT 1107 (TC)

[2026] UKFTT 01107 (TC)Case No TC 09968
FIRST-TIER TRIBUNAL
TAX CHAMBER
Hearing Heard on: 14 May 2026Date Judgment date: 29 July 2026
Taylor House, London
Appeal reference: TC/2024/05446
Keywords: VAT Default surcharge; reasonable excuse; proportionality; appeal DISMISSED
Before
TRIBUNAL JUDGE KEITH GORDONMEMBER JULIAN SIMS
Between
WESTBURY COLLECTIONS LTDAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentMr Anthony Browne, director for AppellantMs Ope Abolude, litigator of HM Revenue and Customs’ Solicitor’s Office for RespondentsDECISION

Introduction

[1]The documents provided to the Tribunal before the hearing were as follows:(1) a hearing bundle with documents and a few authorities (236 pages); and(2) a bundle with further authorities (157 pages).

Outline

[2]The hearing concerned the Appellant’s appeal against VAT default surcharges made under the Value Added Tax Act 1994, section 59 in relation to the late payment of VAT. (It is the case that VAT returns were also submitted late for many if not all of the periods under consideration. However, we can decide this case focusing solely on the late payment of VAT.)[3]For the reasons set out below, we decided that the appeal should be dismissed.

Preliminary

[4]The hearing took place on 14 May 2026.[5]Our decision (dismissing the appeal) was communicated by the Tribunal to the parties on 22 May 2026 (by e-mail timed at 12.08pm). The decision was in the format known as a “summary decision” (in accordance with rule 35(3)(a) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009). At the foot of that summary decision was the following text: This document contains a summary of the findings of fact and reasons for the decision. A party wishing to appeal against this decision must apply within 14 days of the date of release of this decision to the Tribunal for full written findings and reasons. When these have been prepared, the Tribunal will send them to the parties and may publish them on its website and either party will have 56 days in which to appeal. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.[6]We are informed that, in addition, the standard guidance which explains a party’s appeal rights were also sent in that e-mail containing the decision.[7]The 14 days referred to expired on 5 June 2026.[8]About 30 minutes after the Tribunal’s e-mail of 22 May 2026, Mr Browne responded to the Tribunal (copying Ms Abolude). The precise wording of Mr Browne’s response does not need to be repeated here but can be broadly described as an expression of disappointment in the outcome.[9]About six minutes later, Mr Browne sent a further e-mail to the Tribunal (copying Ms Abolude). Again, it is not appropriate to repeat Mr Browne’s actual wording but it is fair to say that the initial disappointment had not subsided in that six-minute period. That second e-mail also contained an implicit criticism of the Judge and of Ms Abolude. We (Judge and Member) are capable of withstanding such verbal criticism. However, we wish to make it clear that the complaint so far as directed towards Ms Abolude was wholly inappropriate. Her role was to present HMRC’s case fairly and justly (a duty which she admirably discharged): it is not acceptable for a disappointed litigant to direct abusive comments towards his opponent.[10]On 1 June 2026, Mr Browne sent the Tribunal another e-mail (this time, seemingly not copying his correspondence to HMRC). This was far more moderately worded and, in essence, asked the Tribunal how an appeal may be undertaken.[11]On 4 June 2026, Mr Browne sent a further query to the Tribunal (and to Ms Abolude) asking again how to appeal against the decision.[12]On 10 June 2026, Mr Browne sent a further query to the Tribunal (and to Ms Abolude) asking again how to appeal against the decision.[13]The correspondence was sent to Judge Gordon on 16 June 2026 who issued instructions that afternoon.[14]We understand that Judge Gordon’s instructions were carried out and that the following was conveyed to the parties by e-mail on 18 June 2026. The Tribunal has seen Mr Browne's correspondence of 1, 4 and 10 June in which he has asked how he can appeal against the decision which was sent to him in summary form on 22 May 2026. Any appeal process can take place only if the Tribunal issues a full decision (an application for permission to appeal will have to be made within 56 days of receipt of that full decision). In the circumstances, the Tribunal is minded to treat Mr Browne's correspondence as a request for a full decision – that request would thus be treated as having been made in-time (i.e. within 14 days of 22 May 2026). If either party objects to that course of action, that party should write to the Tribunal (copying the other party), within seven days.[15]Mr Browne sent an e-mail to the Tribunal (seemingly without copying this to HMRC) on 19 June 2026 asking where these full decisions are published.[16]The Tribunal (again, on Judge Gordon’s instructions) then advised Mr Browne (and Ms Abolude) as follows:(1) Full decision notices are published on the National Archives website: https://caselaw.nationalarchives.gov.uk/(2) If he objects to the Tribunal issuing a full decision notice (he should say so by 25 June 2026).(3) However, without a full decision notice, he cannot appeal against the Tribunal's decision.(4) All correspondence to the Tribunal MUST be copied to HMRC.[17]On 25 June 2026 (at 11.43) Mr Browne sent the Tribunal (copying Ms Abolude) the following message by e-mail: Hi, I actually would like the full verdict to be published so that people can see how abhorrent HMRC and Tax Appeals/Justice have been in this case. Please let me know once that is done so that I can then appeal this. Kind regards, Anthony Browne | Westbury Collections Ltd[18]In accordance with the Tribunal’s provisional direction of 18 June 2026 which neither party objected to within the seven days specified, Mr Browne’s correspondence has been treated as an in-time request for a full decision.[19]We also make the observation that the tone of Mr Browne’s post-hearing communications were in stark contrast to the calm and respectful demeanour that he generally displayed at the actual hearing (although his disagreement with the application of the surcharge legislation to the Appellant was definitely apparent at the hearing).

The decisions under appeal

[20]The VAT periods that were subject to the appeal are as set out in the following table. VAT quarter VAT due Due date Return date Payment date(s) Surcharge percentage Surcharge 08/20 £8,523.24 7/10/20 21/9/21 21/9/21 5% £426.16 11/20 £10,769.60 7/1/21 20/2/23 9/3/2330/8/22 10% £1,076.96 02/21 £5,621.35 7/4/21 20/2/23 9/3/2330/8/22 15% £843.20 05/21 £9,805.14 7/7/21 11/7/22 11/7/22 15% £1,470.77 08/21 £12,183.00 7/10/21 11/7/22 11/7/22 15% £1,827.45 11/21 £14,807.93 7/1/22 20/2/23 9/3/2330/8/22 15% £2,221.19 02/22 £9,805.70 7/4/22 20/2/23 9/3/23 15% £1,470.86 05/22 £17,865.63 7/7/22 20/2/23 9/3/23 15% £2,679.84 08/22 £21,769.82 7/10/22 20/2/23 9/3/23 15% £3,265.47 11/22 £27,424.68 7/1/23 20/2/23 9/3/23 15% £4,113.70 Total £19,395.60

The Appellant’s grounds of appeal before this Tribunal

[21]In the notice of appeal sent to this Tribunal, Mr Browne (on behalf of the Appellant) cited the following as reasons why the Appellant should not have to pay the surcharges under appeal (spelling, capitalisation and punctuation as per the original). My business was incorporated on companies house on 1/2/19 but didnt start trading until 1/9/19. On 1/2/20, I signed a 1 year contract for serviced offices in Epsom. The UK went in to lockdown 2 months later. As we were a “start up” I was very concious of doing everything to protect the business, myself, employees and clients from having to close so did not have the money to pay VAT. At the same time I had numerous personal issues over a long period (letter dated attached). Due to all this, the company survived and HMRC have benefitted in £100,000.00 in VAT, PAYE, Corp Tax, Director Tax. So its ironic Im being charged for doing my utmost to help which HMRC have more than been paid for. Also our Xero was not connecting as our accountant who was based in the building left. He previously dealt with this and I had not much idea of how to deal with it, whilst working hard for new business to work during covid plus numerous personal issues. We/I should be seen as doing amazingly during this time to keep both myself and business from going under. HMRC have been paid the VAT & Westbury continues to make money for HMRC to this day!![22]We interpreted the above as suggesting that the Appellant was effectively raising two issues:(1) That the Appellant had a reasonable excuse for the late payments of the VAT.(2) That the surcharges were disproportionate.[23]Mr Browne confirmed at the hearing that he was content with that approach.[24]We also considered whether the Appellant had been properly served the relevant surcharge liability notice and the subsequent surcharge notices. The statutory scheme Obligation to pay VAT

The statutory scheme

[25]A VAT-registered entity, such as the Appellant, is required to make periodic returns for VAT purposes and, if it owes VAT in relation to any such period, to make payment to HMRC.[26]The Appellant is required to account for VAT on a quarterly basis, with quarters ending on 28/29 February, 31 May, 31 August and 30 November. As it pays its quarterly VAT electronically, the due date for payment of any VAT is the seventh calendar day of the second month following the quarter end. (This represents a seven-day extension granted by HMRC under a direction given under the powers of regulation 40(3) and (4) of the Value Added Tax Regulations 1995.) Therefore, for the quarter ended 31 August 2020, the net VAT payable for that quarter was due to be paid to HMRC by 7 October 2020.

VAT default surcharge

[27]The default surcharge was introduced as section 19 of the Finance Act 1985, which was later consolidated as section 59 of the Value Added Tax Act 1994. It has subsequently been repealed but only in relation to periods after those applicable to this case.[28]In summary, and so far as is potentially relevant to this case, section 59 operated as follows:(1) A taxpayer is “in default” if, in respect of a VAT period, the taxpayer is late in submitting the return for the period and/or in paying the VAT due for that period as shown on that return (subsection (1)).(2) Subject to certain exceptions that were not considered to be relevant in the present case, HMRC may serve a notice on the Appellant known as a surcharge liability notice (SLN) if a taxpayer is in default in relation to a VAT period. That SLN must specify a period (the surcharge period) which commences on the date of the notice and which ends on the first anniversary of the end of the VAT period for which the Appellant is in default (subsection (2)).(3) A surcharge period will be extended if a further SLN is served by reason of a further default in relation to a VAT period that ends at or before the last day of the surcharge period stated in an existing SLN (subsection (3)).(4) For any VAT period within the surcharge period, where there is a default and the taxpayer has outstanding VAT for that period, then the Appellant becomes liable for a surcharge equal to the higher of: (a) £30 (which is applied by HMRC only if the 10% or 15% rate is applicable); and (b) a percentage of the outstanding VAT for that period (subsection (4)).(5) The percentage for these purposes is 2% for the first such period; 5% for the second; 10% for the third; and 15% for the fourth and any subsequent periods (subsection (5)).(6) The meaning of outstanding VAT is given by subsection (6).(7) A default can be treated as not occurring if, for example, the taxpayer can show reasonable excuse for the default (subsections (7) and (8)).(8) For such purposes, however, an insufficiency of funds to pay any VAT due is not a reasonable excuse (section 71(1)(a)).

The case law on reasonable excuse

[29]In Perrin v HMRC [2018] UKUT 156 (TCC), a case where a tax return was submitted late, the Upper Tribunal gave the following guidance in relation to claims for reasonable excuse:
“81. 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.”
[30]That case built on the decision of the VAT Tribunal in The Clean Car Co Ltd v HMCE [1991] VATTR 234 which posed the following question:
“One must ask oneself: was what the taxpayer did a reasonable thing for a responsible trader 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 in at the relevant time, a reasonable thing to do?”
[31]Although an insufficiency of funds cannot found a reasonable excuse, this does not preclude the Tribunal from looking at the reasons for any such insufficiency when determining whether a reasonable excuse exists (HM Customs & Excise v Steptoe [1992] STC 757, [1992] BVC 142).

The case law on proportionality

[32]The question as to the proportionality of the VAT default surcharge scheme was considered by the Upper Tribunal in HMRC v Trinity Mirror plc [2015] UKUT 421 (TCC). Referring to the earlier cases of HMRC v Total Technology (Engineering) Ltd [2012] UKUT 418 (TCC) and Enersys Holdings UK Ltd v HMRC [2010] UKFTT 20 (TC), the Upper Tribunal held as follows: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.

The witness evidence

[33]We had a witness statement from Mr Browne on behalf of the Appellant. This was supplemented by him with oral evidence. He was subject to cross-examination by Ms Abolude and he also answered questions from the Tribunal.[34]There was little factual dispute between the parties: for example, there was no dispute that the VAT defaults had occurred as alleged by HMRC; the main questions for us were whether:(1) the Appellant had a reasonable excuse for the late VAT payments that gave rise to the surcharges under appeal; and(2) if not, whether the surcharges should be set aside on grounds of proportionality.[35]Mr Browne gave his oral evidence calmly. Furthermore, he was very candid in what he said. Accordingly, in the main, we accepted Mr Browne’s evidence. However, there were some areas of fact where we did not accept Mr Browne’s evidence:(1) first, in relation to the question whether he had received the surcharge liability notice and surcharge notices which (per HMRC’s records) had been posted to his home address; and(2) secondly, as to the impact of external factors on the Appellant’s ability to comply with its VAT obligations and to pay the VAT it owed in a timely manner.[36]We emphasise that we have no reason to suggest that Mr Browne was being dishonest or even reckless as to his recollection. However, some of his perceptions were at odds with his repeated acknowledgements that he de-prioritised his VAT compliance in favour of developing his business. As explained further below, we found those candid acknowledgements more credible. Thus, in respect of those two areas (identified at ¶‎35(1) and ‎(2) above), we did not accept Mr Browne’s recollections as reliable.[37]There were also areas where Mr Browne’s evidence was slightly unclear (for example, the extent (if at all) to which he used the unpaid VAT as working capital within the business): it was clear that the VAT was retained and formed a part of the working capital but it is unclear to what extent the funds were actually used by the Appellant. However, again, we do not attribute this to any lack of candour on Mr Browne’s part. Instead, we consider that he genuinely did not know the true situation. He clearly set aside the unpaid VAT so that it was available to the Appellant for use in its growing business, but it was unclear to him and to us whether he actually dipped into it.[38]Based on the totality of the oral and written evidence, we make the following findings of fact.

Findings of fact

[39]The Appellant’s business is that of debt collection.[40]It became registered for VAT with effect from 14 February 2019. It submits its VAT returns on a quarterly basis.[41]Mr Browne is the Appellant’s sole director.[42]Although the Appellant had an accountant, the accountant was not asked to carry out the Appellant’s VAT compliance; Mr Browne retained responsibility for the Appellant’s VAT returns. However, Mr Browne did not complete these returns in a timely fashion and they were consistently late throughout the relevant period. As Mr Browne said, “[VAT] was not top priority at the time – priority was getting staff come in – we had a huge amount of work.”[43]As for the late payments of VAT, Mr Browne was asked whether he had sought a time-to-pay arrangement with HMRC. His response was somewhat circumspect in this regard. He initially responded by commenting that HMRC would probably not have answered the phone had he called them. He was asked whether he tried and he responded that he might have done so. However, he continued to explain that seeking a time-to-pay arrangement did not actually occur to him and, even if he had thought about it, he would not have called HMRC as he would have thought he would not get through to them. He finally confirmed that he did not call HMRC to seek a time-to-pay, adding that HMRC did not call him either. We formally conclude that Mr Browne did not consider contacting HMRC to seek their agreement to a time-to-pay arrangement.[44]Prior to the 08/20 quarter, the Appellant had defaults in relation to three previous quarters (involving both the late payment of VAT and the late submission of the relevant VAT return):(1) Following the defaults in relation to the 08/19 quarter, HMRC issued the Appellant with a letter setting out ways that might help the Appellant to comply with its VAT obligations.(2) Following the defaults in relation to the 11/19 quarter, HMRC issued the Appellant with a surcharge liability notice (effectively bringing the Appellant into the default surcharge regime until such time as there are four consecutive quarters with full compliance).(3) Following the defaults in relation to the 05/20 quarter, HMRC would have issued a 2% surcharge based on the late payment of the VAT payable of £4,287.24. However, as the amount payable was less than £400, it was HMRC’s practice not to issue the surcharge. Nevertheless, that default meant that the next surcharge would be charged at 5%.(4) As the Appellant did not submit timely VAT returns, HMRC initially assessed the VAT they estimated to be due for each quarter and issued surcharge notices based on the amount of the VAT assessment at the appropriate percentage. Once the relevant VAT return was submitted for any particular quarter, the assessments were withdrawn and the surcharge notices were reissued to show the appropriate percentage of the actual VAT liability for the quarter (as per the Appellant’s return).[45]Mr Browne argued that he had not received any of the VAT surcharge correspondence (the liability notice and the subsequent surcharge notices – both the original ones and the ones recalculating the amounts due when these became known following the submission of the relevant returns). His case was that he learnt about the surcharges only when the Appellant’s online account with HMRC was accessed several years later.(1) In this regard, we saw and accept the evidence showing the information obtained by HMRC following the interrogation of their electronic database. That interrogation sought incidents of various notices relating to the VAT surcharge being sent either to particular premises in the KT4 postcode area or to the location of the Appellant’s serviced office premises. Whilst HMRC do not keep carbon copies of such correspondence, there is an electronic record of the nature of the documents sent, the date and intended destination address. The interrogation gave positive results for the liability notice and subsequent surcharge notices being issued to the KT4 address specified. Based on those records, we further accept that each of the notices was properly addressed and posted via Royal Mail to the KT4 address.(2) Mr Browne accepted that that KT4 address was his home address, from which he initially conducted the business (and where, during the pandemic, he continued to spend a lot of time).(3) We were not provided with any documentary evidence to show a wholesale breakdown in the postal system in that area across a three-year period.(4) We would have been prepared to accept that an occasional piece of correspondence might go astray in the post. And we also accept that, during the pandemic, the postal system undoubtedly experienced some delays.(5) As noted, we have no reason to suggest that Mr Browne was being dishonest or even reckless as to his recollection; however, we were not persuaded that formal VAT notices issued by HMRC covering twelve VAT quarters (over and above the help letter) would all go astray when being sent to a residential address. Furthermore, in the absence of any specific evidence in relation to any particular document or period, we have no basis to conclude that any individual item failed to be delivered to Mr Browne’s home.(6) We note and accept what Mr Browne said about debt collectors coming to his home to enforce payment of the surcharges despite him repeatedly making it clear that they were under appeal. However, the enforcement part of HMRC’s operation works very differently from the automated default surcharge process. Therefore, we were unable to extrapolate Mr Browne’s unfortunate experience in relation to the premature (and repeated) visits by debt collectors to conclude that there was a fundamental failure in the automated issue of notices concerning the default surcharge.(7) Accordingly, by application of the Interpretation Act 1978, section 7 we have to conclude that each of the notices must be treated as having arrived within a few days of despatch at Mr Browne’s home address.[46]In relation to the potential reasonable excuse, Mr Browne identified a number of factors that were affecting his business.[47]Clearly, the pandemic had a significant impact on Mr Browne and the Appellant. Prior to February 2020, Mr Browne had run the Appellant’s business from a spare room at his home. With effect from 1 February 2020, the Appellant entered into a 12-month agreement for a serviced office. With the onset of lockdown a few weeks later in March 2020, we accept that Mr Browne had more limited access to this office (the contract for which he was unable to cancel) and therefore the Appellant incurred what was to some extent a wasted cost. However, we do not accept that Mr Browne was completely precluded from accessing any financial data that might have been inaccessible online, particularly as restrictions started to ease in May and June 2020. As Mr Browne explained, he repeatedly had to take the server back and forth between his home and the office.[48]Over and above the impact of the pandemic and the difficulties that that undoubtedly created, additional difficulties experienced included:(1) serious illness of both of Mr Browne’s parents;(2) various personal issues concerning Mr Browne’s fiancée (now wife);(3) the sudden death of an employee;(4) dealing with mental health issues of employees in the wake of the pandemic; and(5) difficulties involving a bookkeeper and changes involving his accountants.[49]We accept that these difficulties occurred and we respect Mr Browne’s request that we are discreet about the precise details of some of these events. Furthermore, we do not doubt that each of these personal difficulties had a significant impact on Mr Browne and we fully accept that these all imposed a further burden on Mr Browne who was building up a new business as the Appellant’s sole director.[50]However, the five situations listed at ¶‎48(1) to ‎(5) above all arose in 2021 (or, in relation to one of Mr Browne’s parents, possibly starting in late 2020). Indeed, it was in the week before Christmas 2021 when the employee died. And it was late November 2021 when Mr Browne had difficulties with the bookkeeper which delayed the Appellant’s ability to use its Xero software, and those difficulties were resolved within a matter of days.[51]Furthermore, we also observe that the Appellant continued to trade successfully throughout this period, notwithstanding all of these difficulties (both personal and national). As a result of this successful trading, the Appellant has paid significant sums to HMRC by way of other taxes. In the notice of appeal, the Appellant refers to “over £100,000”. Orally, Mr Browne repeatedly asserted that the total amounts paid to HMRC over the 7-year life of the company so far have exceeded £1m. At one point, Mr Browne suggested that HMRC had “made £3-4m”, which we consider to be an over-estimate (given that Mr Browne had also said that the Appellant had collected £13m on behalf of clients during this period). Either way, we accept that the Appellant’s activities have generated significant funds for the Exchequer.[52]Nevertheless, as candidly admitted by Mr Browne several times in the hearing and in his witness statement, this was a case of prioritising. This was not a case of the Appellant not having available funds to pay the VAT. Instead, it was simply a case of Mr Browne choosing to devote his attention to developing and maintaining the business rather than spend time complying with the Appellant’s VAT obligations.

Service of default liability notice and surcharge notices

[53]For the reasons set out at ¶¶‎44 and ‎45 above, we conclude that all relevant notices were served on the Appellant at the relevant times.[54]We acknowledge what Mr Browne argued in his submissions to us that, now in the 2020s, it might have been possible for HMRC to communicate with him via e-mail and not rely on the post. We make no comment on whether HMRC should have done so. The point is that they have chosen to send the statutory notices by post and it is our conclusion that all of the notices were duly sent and delivered to the Appellant.[55]Mr Browne argued also that, had he seen the correspondence, he would have taken steps to prevent the defaults from continuing (and thus the surcharges from increasing). However, we found that hard to reconcile with Mr Browne’s admission that he deliberately held onto the VAT a little longer so as to enable him to pay his staff (and, by doing so, grow the Appellant’s business).

Reasonable excuse

[56]We now consider the steps set out in Perrin.[57]For the reasons explained above, we do not actually accept that the unfortunate circumstances cited by Mr Browne were actually the operative causes of the late payments of the VAT. Instead, our finding is that Mr Browne took the conscious (even if not fully informed) decision to keep the VAT as part of the Appellant’s working capital whilst he built up his business. As previously noted, it is unclear to us whether those funds were actually drawn on to cover other outgoings of the company.[58]Accordingly, we have to decide whether Mr Browne’s strategy of developing his business at the expense of VAT compliance amounts to a reasonable excuse.[59]We accept that Mr Browne might have taken a different course of action had he been aware of the consequences of letting the VAT compliance go. And we accept that he probably did not read the paperwork that we have found was sent to him by HMRC to remind him of his VAT obligations and to offer him assistance in this regard.[60]We also accept that Mr Browne had no intention of permanently depriving the Exchequer of the VAT that the Appellant owed. He simply preferred to keep hold of the VAT as additional working capital: as he said in cross-examination, he “did everything to keep the business”. With the benefit of hindsight, Mr Browne considers that the Appellant has “benefited massively” from that strategy.[61]We also recognise the sincerity with which Mr Browne believes that the government departments should encourage the creation and development of businesses such as the Appellant’s and his belief that it makes no sense to punish a successful business such as his by charging over £19,000 in surcharges for VAT that HMRC have been paid in full. (He said he would have had no objection to paying 8% interest on that VAT given that it was paid late. Interest was not charged. However, we observe that, on the facts of this case, it is possible that the surcharges come to roughly the same amount as any interest would have amounted to. )[62]However, we cannot accept that any of that amounts to a reasonable excuse. We acknowledge that VAT obligations represent a distraction for a growing business. However, the legislation requires them to be complied with. We see no reason why, if he did not want to set aside some time to prepare and submit the Appellant’s VAT return each quarter, Mr Browne could not have passed the financial data to an accountant or to ask the Appellant’s bookkeeper to submit the quarterly VAT returns. It is clear from the financial results that the Appellant was able to afford to do either of those.[63]Regrettably for the Appellant, Mr Browne chose to devote his “work” time on all matters other than VAT compliance. The choice is understandable but not one that we would encourage; in any event, a conscious decision to focus on business development at the expense of compliance with the Appellant’s statutory obligations cannot amount to a reasonable excuse. Accordingly, we find that there was no reasonable excuse for the Appellant’s failures.[64]In relation to the particular difficulties listed at ¶‎48(1) to ‎(5) above, we accept that (to varying extents) these caused additional and unwelcome distractions for Mr Browne and his entrepreneurial endeavours. However, given the preceding and consistent history of non-compliance during 2020 and what Mr Browne himself said about his priorities, we do not accept that (had those additional difficulties not arisen) any of the later VAT payments would have been made on time.[65]Thus, none of the defaults can be saved on the basis of reasonable excuse.

Proportionality

[66]Again, we understand why Mr Browne considers the surcharges to be disproportionate. However, we have to decide whether the surcharges are disproportionate as that term is viewed under the law. In the light of the Upper Tribunal’s guidance in Trinity Mirror, we must conclude that the charging of under £20,000 in relation to the defaults set out above (representing marginally less than 15% of the VAT that was paid late without any reasonable excuse) is not disproportionate. There is nothing remotely exceptional about the case in the sense envisaged in Trinity Mirror. Indeed, our conclusion (were we to have had any doubts, which we do not) would be reinforced by the fact that, as already noted, the amount payable is (at least broadly) comparable to the amount of interest that would have been payable to HMRC had late payment interest been charged instead: Mr Browne saying that he would have been content to pay 8% per annum on the withheld VAT.

Final observations

[67]For the above reasons, we must dismiss the appeal.[68]However, we should add (as we did in the summary decision) that we greatly appreciated the candour with which Mr Browne gave his evidence. We also acknowledge his efforts in creating what appears to be a successful and growing company. We realise Mr Browne is disappointed by the outcome and how he might view the decision as punishing a successful company (and one that had no desire not to pay the VAT or any of the other taxes it might owe). However, ultimately, Mr Browne made a commercial decision (quite possibly without knowledge of all the relevant facts) to prioritise business development over VAT compliance. Regrettably for the Appellant, that means that it has incurred these surcharges.

Right to apply for permission to appeal

[69]This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. Release date: 29 July 2026