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Covid not judged reasonable excuse for unpaid VAT


The absence of the sole director due to Covid and the birth of his child was not a reasonable excuse for a missed VAT payment deadline.

5th Aug 2022
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Hawksmoor Construction Limited (Hawksmoor) was a small, single-director business that constructed domestic buildings. Its September 2020 VAT return was submitted on time, but part of the payment was received after the deadline, so therefore a surcharge liability notice was issued. As this was the first default, Hawksmoor did not have to pay a surcharge, but a 12-month surcharge period commenced.

Hawksmoor then defaulted again in the March 2021 quarter and subsequently paid a 2% surcharge.

These surcharges were not disputed by Hawksmoor.

A third default occurred for the June 2021 quarter, as the majority of the VAT due was unpaid at the deadline. A surcharge of 5%, amounting to £2,252.12, was imposed. Hawksmoor appealed against this third surcharge to the first tier tribunal (FTT) (TC08532).

Totally unprepared

Hawkmoor’s office manager, Rebecca Smith, represented the company.

The FTT first noted that Smith had not received the 41-page bundle HMRC had prepared for the hearing. Smith was offered a copy and some time to digest it, but opted to plough on without. Due to the nature of the dispute, the FTT was happy this would not prevent Smith from receiving a fair hearing.

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Replies (7)

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By Paul Crowley
05th Aug 2022 13:13

VAT is not like ordinary taxation
The trader used the VAT that had been received to pay other bills
I would have been disappointed if taxpayer succeeded
Teeming and lading anyone?
No mention whether client was on a cash basis, but assumed so given the comments made

Thanks (5)
Replying to Paul Crowley:
By carnmores
05th Aug 2022 17:36

aha teeming and lading I remember that from my training in the early 70's haven't heard it used much recently it's all Ponzi schemes now

Thanks (1)
Replying to carnmores:
By lionofludesch
05th Aug 2022 18:12

This isn't teeming and lading, though, is it ? It's preferring certain creditors.

And, more importantly, poor management. Why can't someone other than the director issue some sales invoices and rake in the resultant cash ?

Thanks (1)
Replying to lionofludesch:
By Hugo Fair
05th Aug 2022 19:59

"To say that they needed money relating to the September period to pay the June VAT was to admit they had used the June VAT to fund their business" ... seems to me to be close to teeming and lading, although not actually fraudulent.

But agree that poor (or almost non-existent) management is the heart of the issue.

Thanks (2)
By VATs-enough
05th Aug 2022 23:41

I have very little sympathy for the appellant, and the correct t result prevailed, however......

Hearing HMRC tell a business that it should have been better prepared during the pandemic and cover key staff ? Pot, kettle, black !

Thanks (12)
By sammerchant
08th Aug 2022 13:22

If you are comfortable with it, set up a Direct Debit.

Thanks (0)
Replying to sammerchant:
By Paul Crowley
09th Aug 2022 16:18

But that only works if the taxpayer does not use the VAT collected to pay other bills
This guy 'borrowed' the VAT money and used it for other purposes

Thanks (0)