Judgment summary
This case concerns an appeal by Westbury Collections Ltd against VAT default surcharges imposed under section 59 of the Value Added Tax Act 1994 for late payment of VAT across multiple quarters between 08/20 and 11/22 (2).
The Tribunal heard evidence from Mr Anthony Browne, the Appellant's sole director, and considered whether the Appellant had a reasonable excuse for the late payments and whether the surcharges were disproportionate (22).
The Tribunal dismissed the appeal, finding that Mr Browne had made a conscious decision to prioritise business development over VAT compliance, which did not amount to a reasonable excuse, and that the surcharges, representing marginally less than 15% of the VAT paid late, were not disproportionate (63, 65, 66).
Background
Westbury Collections Ltd, a debt collection business, became VAT registered with effect from 14 February 2019 and submitted VAT returns quarterly (40).
Mr Browne, the sole director, retained responsibility for VAT compliance but did not complete returns in a timely fashion, with defaults occurring consistently throughout the relevant period (42).
Prior to the 08/20 quarter, the Appellant had already defaulted in three previous quarters, resulting in a help letter from HMRC, a surcharge liability notice, and a further default that would have attracted a surcharge but for the amount being below HMRC's £400 threshold for issuing surcharges (44).
The surcharges under appeal covered VAT quarters from 08/20 to 11/22, totalling £19,395.60, calculated at rates ranging from 5% to 15% depending on the number of prior defaults (20).
Core dispute
The Appellant argued that it had a reasonable excuse for the late VAT payments, citing the impact of the COVID-19 pandemic, personal difficulties including illness of Mr Browne's parents, issues concerning his fiancée, the sudden death of an employee, mental health issues among employees, and difficulties with a bookkeeper and changes of accountants (21, 46, 48).
The Appellant also argued that the surcharges were disproportionate, given that HMRC had ultimately been paid the VAT in full and that the Appellant had generated significant tax revenue for HMRC through other taxes (21, 51, 61).
A further issue arose as to whether the surcharge liability notice and subsequent surcharge notices had been properly served on the Appellant, with Mr Browne asserting he had not received them and only learned of the surcharges when the Appellant's HMRC online account was accessed years later (24, 45).
Court findings
The Tribunal found that all relevant notices had been properly addressed and posted to Mr Browne's home address based on HMRC's electronic records, and applying section 7 of the Interpretation Act 1978, concluded the notices must be treated as having arrived within a few days of despatch (45(7), 53).
Applying the four-stage test from Perrin v HMRC [2018] UKUT 156 (TCC), the Tribunal found that Mr Browne had made a conscious decision to retain VAT funds as working capital to grow the business rather than prioritise compliance, and that this did not constitute a reasonable excuse (57, 58, 63).
The Tribunal accepted that the personal difficulties cited by Mr Browne occurred and had some impact, but found that these arose mainly in 2021 and that, given the consistent pattern of non-compliance beginning in 2020, the late payments would not have been made on time even absent those difficulties (50, 64).
On proportionality, applying the guidance in HMRC v Trinity Mirror plc [2015] UKUT 421 (TCC), the Tribunal found nothing exceptional about the case that would justify a finding of disproportionality, noting that the surcharge amount was broadly comparable to the interest that would have accrued had interest been charged instead (66).
Outcome
The appeal was dismissed (3, 67).
The Tribunal found no reasonable excuse for the late payments giving rise to the surcharges and found the surcharges were not disproportionate (63, 65, 66).
The decision was initially issued as a summary decision on 22 May 2026, with full findings and reasons subsequently prepared following a request from the Appellant, treated as made in-time (5, 18, 69).
Major issues / areas of contention
- Whether the Appellant had a reasonable excuse for late payment of VAT under section 59 of the Value Added Tax Act 1994.
- Whether the VAT default surcharges imposed were disproportionate.
- Whether the surcharge liability notice and subsequent surcharge notices had been properly served on the Appellant.
- Whether an insufficiency of funds or a deliberate decision to use VAT as working capital could amount to a reasonable excuse.
- Whether personal difficulties and the COVID-19 pandemic excused the pattern of late VAT payments.