![TC09668 - [2025] UKFTT 01255 (TC)](https://backend.juristeca.com/files/emisores/logo_7HSuEAV.png){kind=logo}
The facts
The facts
There is no dispute about the facts.
The appellant has been registered for VAT since 1 November 1979 and was required to file VAT returns monthly. The appellant was in a repayment position with HMRC.
The VAT returns for periods 02/23 to 09/24 inclusive were all filed after the due date for filing (ie 17 returns). The first three of those returns were filed on 5 July 2023 and the remaining 14 were filed on 25 November 2024.
The Schedule of Late Submissions Points and Penalties (“the Schedule”) is annexed hereto. The appellant received five penalty points (the maximum) and then 12 individual financial penalties of £200 each.
The first Late Submission Penalty Notice was issued on or about 15 April 2023 and then monthly thereafter until on or about 15 November 2024.
Every Notice included the following wording:
“If you reach the maximum number of points, we charge you a financial penalty of £200.00. To avoid receiving late submission penalty points in the future, you need to submit your returns on time.”
The Notices also said that the maximum number of points when filing monthly was five points and those points would be removed once six returns had been filed on time. It explained where more information could be found online and also gave details as to how to contact HMRC.
On 6 December 2024, the appellant wrote to HMRC appealing the last two points and the 12 financial penalties totalling £2,400 arguing that:
The appellant was a SME company run by the managing director (“MD”) and an assistant. That assistant, or trainee since she lacked experience (the “trainee”), was responsible for “everyday accounting and numerous other duties”.
Due to lack of sales there was very little income.
The MD had “only just been made aware” that the online software (“the ANNA software”) used by the appellant had “failed to correctly submit” 14 returns (periods 09/23 to 09/24 inclusive). The returns had been uploaded to the ANNA software each month but the final stages of completing the submission including paying a monthly fee of £4.20 had defaulted.
It had taken some time to work out what had gone wrong.
The total amount of VAT due to be repaid was £12,125.46.
The error was attributable to the trainee who had not told the MD about the penalty letters and had “tried to figure it out herself” (because she feared losing her job) but she now understood the ANNA software.
On 8 January 2025, HMRC issued a Review Conclusion letter upholding the two points and the 12 financial penalties (ie periods 09/23 to 09/24). HMRC explained that they did not accept that the appellant had a reasonable excuse for the late filing because:
It was the MD’s responsibility to ensure VAT compliance and, where a task was delegated to an employee, that included having processes and procedures in place to check that there had been compliance.
There had been no response to the Late Submission Penalty Notices.
It was the appellant’s responsibility to ensure that the accounting systems and software that were used worked.
The fact that no repayments of VAT had been received should have alerted the MD to the fact that there was a problem.
On 24 February 2025, the Tribunal received an undated letter which stated that it was an appeal. The Grounds of Appeal were:
Due to covid, the appellant had had very few sales, currently had no work in progress and thus had very little income.
The two directors of the appellant were both 81 and the trainee was their granddaughter and if the appeal failed the trainee would have to be made redundant and the appellant might have to close down.
It was the trainee’s “lack of knowledge” of the ANNA system that had caused the late returns; she had made the returns but had not realised that they had not actually been filed.
In the Reply the appellant amplified the Grounds of Appeal to the effect that:
The MD had concentrated on running the business and in the absence of any complaints, including from HMRC, had assumed that the accounting system was working well.
The MD was only alerted to the problem with 14 of the returns (the appellant has only ever appealed periods 09/23 to 09/24) when the trainee showed him the Penalty Notices.
“…the problem has only occurred coincidentally at the very same juncture that the new ANNA system was introduced”.
The trainee was adamant that she had filed the returns timeously and it was only after further investigation that they identified the fact that the problem lay with the software that they had used, ie the ANNA software. They had then filed all 14 returns together.
The appellant does have a reasonable excuse for the late filing because they had never had a problem before they started to use the ANNA software.
HMRC had suffered no loss; the only loss was to the appellant since it had not received repayments of VAT totalling £12,125.46 by the end of period 09/24.
On 7 October 2025, the appellant wrote to HMRC asking for detailed information about whether, and to what extent, HMRC were aware of other taxpayers having issues with the ANNA software. HMRC responded on 10 October 2025 stating that they did not keep statistics relating to each individual software provider.
On 14 October 2025, the appellant wrote to the Tribunal with a copy of a letter that had been sent to HMRC enclosing an adverse review of the ANNA software that had been found on Trustpilot. The appellant stated that “out of 4,259 reviews…450 of those were 1 star reviews, some of which included complaints regarding VAT submissions”.
In the interests of fairness, since ANNA software are not represented in this appeal I point out that, in the link to Trustpilot that was included in the letter, 84% of the reviews were 5-star reviews.
The appellant relied on a reply to the review from ANNA software which included the following sentence:
“Occasionally, VAT submissions can fail due to connection issues between HMRC and our software, even if everything appears to be in order on your side. While these problems are rare, they can be particularly disruptive when they occur.”
In the letter, the appellant argued that since the trainee had been unaware of any problems and
“….it was only upon looking onto the GOV website after receiving late penalty letters that she became aware of this issue and resolved it immediately by resubmitting all 14 returns on 26th November 2024.”
the appeal should succeed because there must have been a malfunction.
The Law
I have explained the late submission points and penalties regime in terms of Schedule 24 FA 21.