Long Life Fencing & Decking Limited v The Commissioners for HMRC [2026] UKFTT 887 (TC)

[2026] UKFTT 00887 (TC)Case No TC 09916
FIRST-TIER TRIBUNAL
TAX CHAMBER
Date Judgment date: 15 June 2026
Between
LONG LIFE FENCING & DECKING LIMITEDAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondent
Location: Decided on the papers
Appeal reference: TC/2026/00752
Decided by:
TRIBUNAL JUDGE MATTHEW DONMALL
The Tribunal determined the appeal on 9 June 2026 without a hearing under the provisions of Rule 26 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (default paper cases) having first read the Notice of Appeal dated 23 February 2026 (with enclosures), HMRC’s Statement of Case dated 25 March 2026 and document bundle. The Tribunal wrote to the Appellant’s representative on 17 April 2026 informing the Appellant that it could submit a reply if it wished within 30 days, but no reply was provided. There has been no request for an oral hearing.DECISION

Introduction

[1]This is an appeal against a late payment penalty (the Penalty) in the sum of £420.52 charged by HMRC in respect of the failure to pay the VAT payment for accounting period 1 July 2025 to 30 September 2025 by the due date of 7 November 2025.

The Statutory Framework

[2]Under section 25 of the Value Added Tax Act 1994, a taxable person shall account for and pay VAT by reference to prescribed accounting periods at such time and in such manner as may be determined by regulations.[3]The Value Added Tax Regulations 1995 duly provide for prescribed accounting periods and accounting for and paying VAT.[4]The standard length of the period covered by a VAT return is three months. Regulation 25(1) requires that every person who is registered must submit a VAT return “every period of 3 months ending on the dates notified either in the certificate of registration issued to him or otherwise, not later than the last day of the month next following the end of the period to which it relates”. There are provisions under which HMRC may allow a different length of period, for example monthly VAT returns under reg 25(1)(a). But unless HMRC allows or directs a different period, the standard three-month period applies.[5]When an unregistered taxable person becomes a registered taxable person, under regulation 25(1)(b) the first return must include the date from which the VAT registration takes effect, and HMRC may vary the length of that first period. (In this regard, I note to HMRC’s public guidance at VAT Notice 700 at 20.3.1, which explains how registered persons are allocated into a one of three groups of tax periods, with group 1 having tax periods ending on the last days of June, September, December and March. Therefore the first tax period may be for a shorter period, from the date of registration up to the commencement of the next three-month tax period.)[6]Regulation 40(2) provides that a person must pay such an amount of VAT as is payable not later than the last day on which he is required to make that return. Regulation 40(3) provides that the Commissioners may vary this by direction, and VAT notice 700/12 provides at 5 that the deadline for submitting the return (and therefore paying HMRC) is 1 calendar month and 7 days after the end of an accounting period.[7]Section 117 of the Finance Act 2021 provides for Schedule 26 of that Act, which makes provision for imposing penalties for failures to make certain payments on time. The Finance Act 2021 (Value Added Tax) (Penalties) (Appointed Day) Regulations 2022 appointed 1 January 2023 as the day on which Schedule 26 comes into force for the purposes of VAT payable by reference to prescribed accounting periods beginning on or after 1 January 2023.[8]Schedule 26 in turn provides:(1) Schedule 26 makes provision for penalties to be payable by a person who, in respect of VAT, fails to pay the VAT payable on the specified due date (para 1).(2) No penalty is payable if the tax due is paid in full before the end of the 15 day period (para 4), that being 15 days beginning with the day after the due date (para 10).(3) If the tax is not paid in full before the end of the 15 day period, then a first penalty is payable (unless a time to pay agreement is made as a result of proposals for paying the tax due made by the person before the end of the 15 day period, which does not arise here).(4) If the tax due is not paid before the end of 30 day period, then the amount of the penalty is A + B, where A is 3% of so much of the tax due as is unpaid at the end of the 15 day period, and B is 3% of so much of the tax due as is unpaid at the end of the 30 day period. (This rate of 3% was an amendment of the original 2%, by the Finance Act 2021 (Increase in Schedule 26 Penalty Percentages) Regulations 2025 which came into force on 31 May 2025.)(5) Paragraph 12 states: Reasonable excuse 12 (1) Liability to a penalty under this Schedule does not arise in respect of a failure to make a payment if the person satisfies HMRC (or on appeal, the tribunal) that the person had a reasonable excuse for the failure. (2) For this purpose— (a) an insufficiency of funds is not a reasonable excuse unless attributable to events outside the person's control, (b) where the person relies on another person to do anything, that is not a reasonable excuse unless the first person took reasonable care to avoid the failure, and (c) where the person had a reasonable excuse for the failure but the excuse has ceased, the person is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased.(6) Para 13 provides for HMRC being able to reduce a penalty due to “special circumstances”, but para 13(2) expressly provides that “In sub-paragraph (1) “special circumstances” does not include (a) ability to pay”.(7) Para 16 makes provision for HMRC being able to assess the penalty, and provides at sub-para 3: (3) Where HMRC assess a penalty they must notify the person and state in the notice— (a) the failure to pay the tax due, for which the person is liable to the penalty, (b) the amount of the penalty, and (c) how that amount has been calculated (including the period to which the penalty relates).(8) An assessment of penalty must be made within a time limit provided for in para 18, being the last day of the period of 2 years beginning with the due date of the VAT payment.(9) Para 19 provides for an appeal against a decision that a person is liable to a penalty or the amount of such, which is to be treated in that same way as an appeal against a VAT assessment (para 20). On appeal, the Tribunal may affirm or cancel HMRC’s decision.

Case law

[9]The Upper Tribunal in Perrin v HMRC [2018] UKUT 0156 (TCC) set out how the Tribunal might approach a “reasonable excuse” defence:(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.”[10]At [82] it went on:
"82. One situation that can sometimes cause difficulties is when the taxpayer's asserted reasonable excuse is purely that he/she did not know of the particular requirement that has been shown to have been breached. It is a much-cited aphorism that " ignorance of the law is no excuse", and on occasion this has been given as a reason why the defence of reasonable excuse cannot be available in such circumstances. We see no basis for this argument. Some requirements of the law are well-known, simple and straightforward but others are much less so. It will be a matter of judgment for the FTT in each case whether it was objectively reasonable for the particular taxpayer, in the circumstances of the case, to have been ignorant of the requirement in question, and for how long. The Clean Car Co itself provides an example of such a situation."

Background

[11]I find that the background facts are as follows:(1) The Appellant is a private limited company incorporated on 20 November 2024. On Companies House, the nature of its business is given as “Other construction installation”.(2) The Appellant registered for the purpose of VAT with effect from 01 June 2025.(3) The Appellant’s first VAT return covered a one-month period ending 30 June 2025. That VAT return was submitted and paid in time by 7 August 2025.(4) Following this first return period, there was no direction from HMRC allowing a VAT return period other than the standard three month period.(5) Accordingly, the Appellant’s next VAT return was in respect of the period 1 July 2025 to 30 September 2025. The Appellant was therefore obliged to submit its VAT return and pay the VAT due by 7 November 2025, one month and 7 days after the end of the period.(6) The Appellant did not submit its VAT return and pay the VAT for the period ending 30 September 2025 by 7 November 2025.(7) On 4 December 2025, the Appellant submitted its VAT return for the period ending 30 September 2025, with the box 5 net VAT to pay to HMRC being £7,008.67.(8) On 15 December 2025, incoming payment of the sum of £7,008.67 was cleared by HMRC.[12]In relation to the penalty: (1) HMRC’s statement of case asserts that the Penalty was issued on 11 December 2025. There is no copy of that Penalty notice in the bundle before me. HMRC’s explanation is:
“Because the penalty notices are computer generated by an automated process it is not possible to provide copies of the actual notices issued to the Appellant.”
Rather, an example notice is provided in the bundle, which covers why the VAT late payment penalty is issued, the amount of the penalty and how it is calculated. Additionally, there is a screenshot of a penalty details page from HMRC, which sets out that penalty was in the amount of £420.52, being the sum of 3% of the VAT due £7,008.67 = £210.26 at 15 days on 22 November 2025 and 3% of the VAT due £7,008.67 = £210.26 at 30 days on 7 December 2025. In these circumstances, I find that the Penalty was issued on 11 December 2025 in the sum of £420.52. (2) On 18 December 2025, the Appellant sought a review of the Penalty. A copy of that request is not in the bundle, merely a screenshot from a computer system indicating that this was the date that the request was “Received in Legal”. (3) On 2 February 2026, HMRC issued its review conclusion upholding the Penalty. This appears to have made at least two errors. First, it states “You asked us to review your late payment penalty for the penalty due on 8 November 2025” – but the Penalty was not in respect of a late payment of a penalty due on 8 November 2025, but late payment of the VAT itself. Second, it later states “This means you still need to pay the late penalty of £420.21 that we wrote to you about on 15 November 2025.”, however this date of 15 November 2025 is incorrect, given that HMRC state that the Penalty was issued on 11 December 2025. The Penalty could not have been issued on 15 November 2025, because it was calculated by reference to the VAT due of £7,008.67 as notified to HMRC by the VAT return submitted on 4 December 2025.

Discussion

[13]HMRC bear the burden of proving that the liability for the Penalty arose, and that it was properly notified and in time.[14]On liability for the Penalty, the facts as found above are sufficient to satisfy the statutory tests. There was £7,008.67 due as of the end of the 15-day period after 7 November 2025, and after the end of the 30-day period, and so liability to a penalty arose (there is no proposal for a Time to Pay agreement). The calculation of that Penalty was appropriately calculated.[15]As regards notification of the Penalty, although I have not been provided with the actual notice of the Penalty, I am satisfied that on the balance of probabilities the appropriate notification was given. The Penalty was notified to the Appellant and stated the amount and how it was calculated. It was made within the statutory time limit.[16]That being so, it is for the Appellant to establish that it had a reasonable excuse under para 12. I address this question in the staged approach indicated by Perrin.[17]First, the basis on which the Appellant asserts it had a reasonable excuse. Its grounds of appeal are as follows: The appellant company is newly VAT-registered, and its director has no previous experience of running a VAT-registered business. The company’s first VAT return covered a one-month period ending 30 June 2025. The director mistakenly believed that subsequent VAT returns might be due on a six-monthly or annual basis, as he had never filed VAT returns before and had not yet received any correspondence from HMRC confirming the next VAT period or deadlines. The director did not become aware that the VAT return was due until receiving HMRC’s notification that the return was overdue. Upon receiving this correspondence, he immediately brought the company’s bookkeeping up to date and filed the outstanding return without delay… … The appellant fully accepts the allocation of a penalty point under the new penalty regime. However, he respectfully submits that the financial penalty should be cancelled. The late filing arose from a genuine misunderstanding by a first-time VAT-registered trader who had not yet been informed of his ongoing filing periods. As soon as he became aware of his obligations, he acted immediately, rectified the position in full, set up arrangements to ensure future compliance, and took reasonable steps to seek confirmation from HMRC. Given the company’s prompt corrective action, good faith, and the director’s lack of prior experience or notification of the filing schedule, the appellant submits that this constitutes a reasonable excuse and respectfully asks the Tribunal to cancel the late-filing penalty.[18]Under para 12, the reasonable excuse must be for the failure to pay the VAT on time. For that reason, the points about prompt corrective action after it was discovered that the VAT was overdue are not relevant. Rather, the Appellant’s basis for a reasonable excuse are that:(1) The Appellant was a newly VAT registered business;(2) Its director had no previous experience of running a VAT-registered business;(3) The director mistakenly believed that subsequent VAT returns after the initial one-month period “might be due on a six-monthly or annual basis”;(4) The director did not receive correspondence from HMRC confirming the next VAT period or deadlines;(5) The late filing arose from a genuine misunderstanding.[19]Second, HMRC does not dispute any of these five facts identified at paragraph 19 above, and I am satisfied that they are proven. In respect of the fourth point, about correspondence confirming the next VAT period, regulation 25 provides that the VAT certificate of registration may notify when the periods of 3 months end. However, I have not been provided with a certificate of registration and make no findings in that regard.[20]Third, I must decide whether, viewed objectively, those proven facts do indeed amount to an objectively reasonable excuse for the default. In my judgment they do not. It was not objectively reasonable for the Appellant’s director to have been ignorant of the fact that the Appellant would be required to file a VAT return and pay the VAT for the three-month period ending September 2025 by 7 November 2025. The requirements of the law that the standard period for a VAT return is three months, and that a return must be made and the VAT paid within one month and seven days of the relevant period ending, are, in the phrase used by the Upper Tribunal in Perrin, well-known, simple and straightforward. The fact that the director did not receive correspondence from HMRC as to the next VAT period or deadline does not give rise to a reasonable excuse. Further, the Appellant’s contention is that the director was in effect unsure about the subsequent VAT periods after the first return (“might be due on a six-monthly or annual basis”) but there is no evidence that he undertook to check what the correct position was, whether by contacting HMRC, consulting with a tax adviser, undertaking his own research or otherwise. I accept HMRC’s contention that the Appellant could also have completed a simple online search to check how often VAT returns are meant to be submitted. I also accept HMRC’s contention that VAT filing obligations are readily accessible through HMRC’s published guidance and online services, and that a responsible trader exercising reasonable care would have taken proactive steps to familiarise themselves with those requirements.

Conclusion

[21]For these reasons, I dismiss the appeal.

Right to apply for permission to appeal

[22]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: 15 June 2026