Nations Recruitment Limited v The Commissioners for HMRC
Decision date: 18 May 2023
Neutral citation: [2023] UKFTT 494 (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
This appeal concerned a 10% VAT default surcharge imposed on Nations Recruitment Ltd for late payment of VAT for period 03/22. The Tribunal found the company had no reasonable excuse: its predictable cashflow model and deliberate use of collected VAT to pay wages, combined with failure to follow HMRC advice or adopt available mitigations, meant the surcharge was properly imposed. The appeal was dismissed and the £523.23 surcharge upheld.
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 decisive that predictable business cashflow shortages caused by deliberate use of collected VAT to fund normal operations will rarely amount to a "reasonable excuse" under s.59(7)(b) VATA; where reasonable foresight, due diligence or available finance could have avoided the insufficiency of funds, the inability to pay is not a reasonable excuse.
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 judgment suggested (obiter) that an underlying cause of inability to pay might in some rare cases constitute a reasonable excuse, but only where the cause is outside the normal course or predictable hazards of the taxpayer’s business. It also noted that small traders facing late payments from larger customers might mitigate risk by measures such as adopting cash accounting.