TC09528 - [2025] UKFTT 01069 (TC)

In its notice of appeal, the Appellant stated as follows:

“A VAT late payment penalty of £12,133.70 was applied to our VAT account for the quarter ended 30 September 2024. As part of this appeal, we also request that the associated interest charges, including those on late Payments on Account instalments from August 2024 to October 2024, be removed.

We have a reasonable excuse for the late payment of VAT due to circumstances that were outside of our control. Once these ended we made the payment without delay.

We took reasonable care to ensure that we would pay our VAT liabilities on time by setting up a direct debit for payments to be taken automatically by HMRC. We value our compliance with VAT regulations and have a strong track record of timely submissions and payments.

The reasonable excuse for why we did not pay our VAT liability on time for the quarter ended 30 September 2024 is that we did not receive any notice informing us that we had been moved to the Payments on Account regime for that period onwards, meaning our direct debit would be cancelled as a result. In addition to this, we received no separate notice from HMRC that our direct debit was being cancelled. The combination of these factors meant that we had no way of knowing that our VAT payments would not be made on time via direct debit until after the fact.

Upon realising there was an issue we immediately acted to resolve the situation, contacting HMRC via telephone on 18 November 2024 when we discovered the issue and making a manual payment the same day to settle the outstanding liability in full.

We have since been informed by HMRC that a letter regarding Payments on Account instalments becoming due was sent to us on 3 May 2024. This letter did not arrive at our office. In HMRC’s review conclusion letter they state “this item was not returned by the post office there is no reason for us to suppose that you did not receive it”. We disagree with this statement and believe the letter may have been lost in the post. HMRC have not provided any tracking evidence to show that the letter was indeed delivered. Our initial penalty appeal letter written to HMRC was sent tracked delivery via the post office and this did not arrive, subsequently confirmed as lost in the post, which illustrates that not every letter posted arrives with the recipient.

Compounding the issue we were also not separately notified that our direct debit had been cancelled, or that we had overdue payments resulting from the missed Payment on Account instalments in August and September 2024 which would have alerted us there was an issue so we could make payment before a late payment penalty could be assessed.

Given the letter of 3 May 2024 did not arrive and the lack of any other communication, we had no reasonable way of making our VAT payments on time from the first instalment payment due date in August 2024 until 18 November 2024 when our usual VAT payment was not collected alerting us to the issue so that we could immediately pay the outstanding VAT balance.”

The Appellant also provided the Tribunal with:

In her witness statement, Ms Hesling stated:

The Appellant submitted that it has a structured approach to internal post management and that had any letter from HMRC relating to entry into the Payment on Accounts regime been received, it would have been acted upon by the Appellant.

The Appellant further submitted that it conducts a review of its cash position every Monday. Direct Debit payments are usually debited a number of days after the payment due date (which the Appellant understood to be 7^th November 2024 – which was a Thursday) so the fact that the payment of the 09/24 liability had not been taken by way of Direct Debit was not apparent when the cash review was conducted on Monday 11 November 2024. However, this missed payment was noticed during the review on Monday 18 November 2024, and the Appellant immediately contacted HMRC and made payment.