Similar to the Kofteros case, in this case the taxpayer appealed against surcharges applied during the period a Time-to-Pay (TTP) arrangement was in force.

Background

The taxpayer had VAT defaults for periods in 2007 and 2008. These defaults fell below the de minimus limit, so a surcharge was not applicable. However, further VAT defaults by the taxpayer resulted in a surcharge issuing for subsequent VAT periods in 2008 and 2009. Prior to the payment date for the VAT period in 2008, the taxpayer agreed a TTP with HMRC and so, a surcharge imposed for the VAT period in 2008 was withdrawn.

The taxpayer did not dispute that these surcharges had been lawfully imposed but rather disputed the fact that HMRC had never informed him that the TTP only operated for the VAT period in 2008 and that new arrangements were required for subsequent periods. Further it was alleged, subsequent to the TTP arrangement being agreed, that HMRC advised that surcharges would not be incurred under the arrangement.

HMRC alleged that a TTP was not a “rolling agreement” and that the taxpayer should have been more inquisitive of surcharge notices received during the default period. Further HMRC produced a bundle of telephone logs which referenced the original arrangement but with no reference to the execution of further arrangements.

Decision

In giving judgment the learned judge first examined the bundle of telephone logs produced by HMRC and found that as a matter of fact the telephone calls had been misleading and that the logs themselves were inconclusive in relation to certain details. The judge found as fact that the taxpayer had been informed by HMRC to ignore any surcharge notices as long as he was adhering to the terms of the TTP arrangement. There was no evidence produced that the TTP arrangement had at any time been breached.

The judge explicitly stated that the onus was on HMRC to prove default of any payment or breach of any arrangement made. Further the judge found as a fact that the taxpayer had been misled by HMRC into believing a TTP arrangement was in place throughout the periods of default and therefore the taxpayer had a reasonable excuse for the defaults.

The full text of the case is available at http://www.bailii.org/uk/cases/UKFTT/TC/2012/TC01974.pdf