Luxottica (UK) Limited v Commissioners for Her Majesty's Revenue and Customs
Decision date: 20 May 2011
Neutral citation: [2011] UKFTT 338 (TC)
Overall AI summary confidence: high
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
Luxottica miskeyed a VAT payment leading to a one-working-day late receipt by HMRC; HMRC imposed a 2% default surcharge of £22,700 as a second default. The tribunal held Luxottica had no reasonable excuse (reliance on its bank did not qualify) and that the 2% surcharge was not disproportionate. The appeal was dismissed.
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: high
The tribunal treated as dispositive that reliance on another person (including a bank) cannot constitute a "reasonable excuse" under s.71(1)(b), and in assessing proportionality of a default VAT surcharge the relevant considerations include the taxpayer's fault or "gravity" of the default, the duration of the outstanding VAT, and the surcharge relative to the taxpayer's size/turnover; if a penalty is disproportionate the tribunal must discharge it but has no power to mitigate an otherwise disproportionate penalty.
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 observed that the default surcharge regime is intended as a deterrent rather than compensation for loss of use of money, and noted (by reference to prior discussion in Enersys) that in exceptional cases a one-day late payment could be disproportionate although it found no such exception on these facts.