Judgment summary
This is an appeal against a late payment penalty of £420.52 charged by HMRC for the Appellant's failure to pay VAT due for the accounting period 1 July 2025 to 30 September 2025 by the due date of 7 November 2025 (1).
The Tribunal determined the appeal on the papers on 9 June 2026 under Rule 26 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009, having read the Notice of Appeal dated 23 February 2026, HMRC's Statement of Case dated 25 March 2026 and the document bundle. No reply was received from the Appellant and no oral hearing was requested.
The Tribunal set out the statutory framework under section 25 of the Value Added Tax Act 1994, the Value Added Tax Regulations 1995, and Schedule 26 to the Finance Act 2021, together with the case law in Perrin v HMRC [2018] UKUT 0156 (TCC) on reasonable excuse.
Having found the facts and applied the Perrin staged approach, the Tribunal held that the Appellant did not have a reasonable excuse for the late payment and dismissed the appeal (21).
Background
The Appellant is a private limited company incorporated on 20 November 2024, with its Companies House business nature given as "Other construction installation" (11(1)).
The Appellant registered for VAT with effect from 1 June 2025 (11(2)). Its first VAT return covered a one-month period ending 30 June 2025, and was submitted and paid in time by 7 August 2025 (11(3)).
Following this first return, there was no HMRC direction allowing a return period other than the standard three-month period, so the next return covered 1 July 2025 to 30 September 2025, with submission and payment due by 7 November 2025 (11(4)-(5)).
The Appellant did not submit the return or pay the VAT by that date. It submitted the return on 4 December 2025, showing box 5 net VAT due of £7,008.67, and HMRC cleared payment of that sum on 15 December 2025 (11(6)-(8)).
HMRC's Statement of Case asserted the Penalty was issued on 11 December 2025, calculated as 3% of £7,008.67 (£210.26) at 15 days (22 November 2025) and a further 3% (£210.26) at 30 days (7 December 2025), totalling £420.52 (12(1)). No copy of the actual penalty notice was in the bundle, HMRC explaining that such notices are computer generated and copies could not be provided (12(1)).
The Appellant sought a review on 18 December 2025, and HMRC issued its review conclusion upholding the Penalty on 2 February 2026, though the Tribunal noted at least two errors in that review letter regarding dates (12(2)-(3)).
Core dispute
The dispute was whether the Appellant was liable for the late payment penalty under Schedule 26 to the Finance Act 2021, and if so, whether the Appellant had a "reasonable excuse" under paragraph 12 of that Schedule for failing to pay the VAT due by 7 November 2025.
The Appellant argued that its director, having no prior experience of running a VAT-registered business, mistakenly believed that subsequent VAT returns might be due on a six-monthly or annual basis, and had not received correspondence from HMRC confirming the next VAT period or deadlines, giving rise to a genuine misunderstanding (17)-(18).
HMRC's position, reflected in the Tribunal's discussion, was that VAT filing obligations were well-known, simple and straightforward, and that a responsible trader exercising reasonable care would have taken proactive steps to ascertain them (20).
Court findings
The Tribunal found that HMRC bore the burden of proving the Penalty liability arose and was properly notified and in time (13). It found the facts sufficient to satisfy the statutory tests: £7,008.67 remained unpaid at the end of both the 15-day and 30-day periods after 7 November 2025, so liability to the Penalty arose, and the Penalty was appropriately calculated (14).
Although the actual Penalty notice was not in the bundle, the Tribunal was satisfied on the balance of probabilities that appropriate notification was given, stating the amount and calculation, and made within the statutory time limit (15).
Applying the Perrin staged approach to the reasonable excuse defence, the Tribunal identified the facts relied upon by the Appellant (18) and found HMRC did not dispute them, so they were proven (19).
However, viewed objectively, the Tribunal held these facts did not amount to a reasonable excuse. It was not objectively reasonable for the director to have been ignorant that a VAT return and payment were due for the three-month period ending September 2025 by 7 November 2025, as the standard three-month period and one month and seven day payment deadline were well-known, simple and straightforward requirements. The absence of correspondence from HMRC about the next VAT period did not amount to a reasonable excuse, and there was no evidence the director took steps to check the correct position, such as contacting HMRC, consulting a tax adviser, or conducting research (20).
Outcome
The Tribunal dismissed the appeal, upholding the late payment penalty of £420.52 (21).
Major issues / areas of contention
- Whether the Appellant was liable for a late payment penalty of £420.52 under Schedule 26 to the Finance Act 2021 for failing to pay VAT due for the period 1 July 2025 to 30 September 2025 by 7 November 2025.
- Whether HMRC properly notified the Penalty within the statutory time limit, despite not producing a copy of the actual notice in the bundle.
- Whether the Appellant's director's belief that subsequent VAT returns might be due on a six-monthly or annual basis, arising from inexperience and lack of HMRC correspondence, amounted to a reasonable excuse under paragraph 12 of Schedule 26.
- Application of the Perrin v HMRC staged test for assessing a reasonable excuse defence.
- Whether ignorance of the standard three-month VAT accounting period and payment deadline could constitute a reasonable excuse.