Russell Scheef v The Commissioners for HMRC

Decision date: 5 November 2024

Neutral citation: [2024] UKFTT 1010 (TC)

Overall AI summary confidence: medium

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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: medium

This appeal concerned a 15% VAT default surcharge of £12,486.74 assessed for period 01/23 after Mr Scheef filed the VAT return one day late and did not pay the VAT by the due date, following a history of earlier defaults. The Tribunal found that Mr Scheef’s financial difficulties, including the failure of his other business All Outdoor Limited and related debts, did not amount to a "reasonable excuse" under the VATA for the 01/23 late payment. The appeal was dismissed and the surcharge remains payable.

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

The Tribunal indicated that mere insufficiency of funds is not a reasonable excuse under s 71 VATA, although the underlying cause of an insufficiency of funds can in some cases constitute a reasonable excuse; on the facts here the cause did not. The decision also reflects that an experienced taxpayer who knows VAT is outstanding and has prior surcharges is expected to take proactive steps (including contacting HMRC before the due date) to avoid default.

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 expressed that genuine business distress does not automatically amount to a reasonable excuse where there is a pattern of non-payment and a failure to contact HMRC in a timely way. It also noted, as a factual consideration, that selling assets that increase assessed VAT liabilities without using the proceeds to pay VAT may affect the assessment of the taxpayer’s conduct.

Warning

- The chunk contains substantial duplicated passages; care was taken to avoid repeating duplicated content.

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