Refund due sooner

The taxpayer’s business was the removal of graffiti from buildings. Its services were outside the scope of the construction industry scheme (CIS) but some clients made CIS deductions from payments to the taxpayer which asked HMRC for refunds.

The Revenue offset the amounts against the company’s PAYE and corporation tax at the end of the tax year and then repaid excess often a year after the deduction had been made.

Cashflow problems caused the taxpayer to be late making its VAT payment for the 1/13 period incurring a surcharge. The firm claimed to have a reasonable excuse because the taxman had held on to its CIS deductions.

The First-tier Tribunal agreed that HMRC’s retention of money without legal basis constituted a reasonable excuse. The taxpayer’s appeal was allowed to the extent the due VAT was covered.

The tribunal also concluded that the decision in CCE v...