Reasonable excuse for late VAT payments?

The company paid the VAT due on its returns late for all periods between July 2020 and October 2021. This resulted in a 5% default surcharge for the period April 2021 and 10% and 15% surcharges for the next two quarters. The director said that lack of funds caused by Covid-19 meant it had a ‘reasonable excuse’ for the late payments and the surcharges should be cancelled. HMRC said the company had not provided a ‘causal link’ between the Covid-19 challenges and the late payments. Further the company had the cash flow capacity to pay the returns on time.

The company appealed.

It should be noted that although the default surcharge system was abolished for VAT periods beginning on or after 1 January 2023 and has been replaced by a system that penalises taxpayers who take longer to pay their dues the principle of ‘reasonable excuse’ will continue...