TGS Construction Services v Commissioners for Her Majesty's Revenue and Customs

Decision date: 16 September 2010

Neutral citation: [2010] UKFTT 438 (TC)

Overall AI summary confidence: high

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Short overview

This short overview is intended to summarise the case, issues and outcome so far as they are supported by the judgment.

AI confidence in this short overview: high

TGS appealed a 15% VAT default surcharge imposed after it paid VAT late for the period to 30 April 2009. The tribunal found TGS’s late payment was directly caused by a major customer (Midas) failing to pay a significant overdue debt which TGS had reasonably expected and could not have prevented by reasonable foresight, and so constituted a reasonable excuse under s59(7) VATA; the surcharge notice was set aside.

Ratio decidendi

This summary is intended to identify the ratio decidendi, meaning the legal reasons for deciding and the binding part of the decision.

AI confidence in this ratio decidendi summary: medium

Where a taxpayer’s inability to pay VAT on time is directly caused by a third party’s failure to pay a substantial, overdue debt that the taxpayer reasonably expected and could not have prevented by reasonable foresight and due diligence, that circumstance may amount to a “reasonable excuse” under s59(7) VATA, excusing the default and avoiding the surcharge.

Obiter dicta

This summary is intended to identify obiter dicta, meaning observations made by the way that were not necessary to deciding the case and are not binding.

AI confidence in this obiter dicta summary: medium

The tribunal indicated that ordinary trading risks (such as customers paying late) do not automatically amount to a reasonable excuse absent specific unexpected events, and that a taxpayer’s diligence and communications with HMRC are relevant in assessing credibility; also, contacting HMRC about a “time to pay” after the due date does not constitute an effective arrangement.

Warning

Chunk contains repeated paragraphs and duplication of material. Chunk contains repeated paragraphs and some duplicated material; notes may be incomplete.

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