A default surcharge penalty imposed by HMRC was successfully appealed by the taxpayer in Trinity Mirror plc v Revenue and Customs Commissioners ( UKFTT 355 (TC), published on 25 April 2014).
The taxpayer had been one day late in submitting its VAT return and paying its VAT liability and, in removing the default surcharge penalty entirely, the Tribunal made the following statement.
“A Surcharge of £95,900 later reduced to £70,906.44 was imposed on an otherwise compliant trader to penalise a one day default is plainly unfair. … In conclusion, the Tribunal finds that the penalty is disproportionate. There is no provision which allows the Tribunal to mitigate or otherwise reduce the amount of the Surcharge and in the circumstances can only set aside the Surcharge.”
We reported on this issue in 2013 where, in the case of Enersys Holdings UK Ltd v Revenue and Customs Commissioners ( UKFTT 20 (TC)) the Tribunal had found against HMRC in similar circumstances. These cases demonstrate that the Tribunal will be generally sympathetic to taxpayers faced with disproportionately high penalties and even where the amounts are not as obviously excessive as in Trinity Mirror, Taxpayers should always consider challenging large surcharge penalty amounts imposed by HMRC for disproportionately minor defaults.