Financial crisis a reason for late tax payment 

Sometimes bad economic news can be good news for taxpayers. A judge has ruled that the recession was a reasonable excuse for a family business to not pay a VAT bill on time.

Scrimsign Micro Electronics, which makes electronic displays, was hit by thousands of pounds worth of default charges after failing to make VAT payments before deadlines in 2012, the Times reported.

The company, whose turnover reduced by about 50% after the economic downturn in 2008, had had its appeal rejected by HMRC.

However, a judge at the first tier tribunal [Scrimsign Micro Electronics Ltd vs HM Revenue and Customs] has ruled that Scrimsign should be exempt from the charges as its late payments were due to “factors flowing from the general effects of the recession”.

Judge Gordon Reid, QC, said the company was badly hit by the global financial crisis, losing about £10,000 in each of the two years leading up to December 2011.

The company, based in Irvine, North Ayrshire, managed to stay afloat after securing credit agreements with some of its suppliers.

“However, their own customers have not been so understanding,” the judge said, adding that many customers had started delaying payment.

Between July and December 2012 the company, which employs five people, was hit with three surcharge notices for failing to pay VAT bills on time.

Keith Scrimshire, the company’s managing director, contacted HMRC and explained that it was experiencing “severe financial difficulties” because of the economic climate.

But tax officials refused to accept that the company had a reasonable excuse for late payment as it had failed to show that its financial problems were caused by factors “outside its influence or control” and not just the “normal hazards of trade”.

Judge Reid said: “I accept that Scrimsign was placed in difficult financial circumstances which arose because of a combination of factors flowing from the general effects of the recession.”

The judge allowed the appeal and removed surcharges, amounting to £3,000.

 

Source: accountingweb- Financial crisis a reason for late tax payment

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