Late VAT payment for cash accounting scheme user

The company provided sets for theatre shows and supplied technical crews for concerts and events. It paid VAT late for most returns between April 2016 and July 2017 incurring a series of default surcharges.

The unusual aspect of this case was that the company used the cash accounting scheme but cited cash flow problems as the reason for its late payments. A scheme user accounts for output tax on a VAT return when customers pay their bills so it is difficult to see how cash flow could be a reason for paying VAT late. The reality was that the company had a profitability problem exacerbated by a bad debt resulting from a customer going into liquidation.

The First-tier Tribunal decided the taxpayer did not have a reasonable excuse for the late payments. On the final default which had been only one day late the director cited...