First Tier Tribunal decision in Susanna Posnett v HMRC

The First Tier Tribunal published its tax decision in August 2016 relating to to Susanna Posnett v HMRC ref: 2016 UKFTT 0557 TC.

Although the figures involved in this case do cause it to stand out from the crowd, this case provides a useful reminder of the importance of managing tax affairs in a timely manner.

The Facts

Susanna Posnett, a TV producer, was very busy with work, and had fallen into the habit of paying VAT liabilities late. For 7 consecutive quarters, she had submitted late VAT returns; because there was low liability, this resulted in total penalties (across all 7 quarters) collected by HMRC of less than £300.  In the following year, however, she disposed of some inherited land in Anglesey, selling to David Wilson Homes.  This sale was in excess of £10m and a significant VAT liability became due.  Yet again, however, Ms Posnett submitted her return late, this time by 5 days, and HMRC, using the default surcharge regime which punishes repeat offenders, assessed a penalty of 15% of the VAT due, leading to a penalty of £217,702.

A fair penalty?

Ms Posnett appealed the application of the penalty, but the tribunal found that she did not have a reasonable excuse for failing to submit a return on time.  Furthermore, the Tribunal found that she did not “act as would be expected of responsible trader conscious of and intending to comply with his obligations regarding tax”.  It also found that the penalty was not “plainly unfair”, stating that “the poor compliance history was a matter of which the Appellant, had she acted with proper regard to her statutory VAT compliance requirements, should have been aware”.  For these two reasons, the Tribunal rejected the appeal and the penalty was affirmed.

Conclusion

This case highlights the importance of taking tax seriously.  While tax compliance can often be seen as a relatively low priority for many businesses, there are significant risks if it is not dealt with properly and in a timely manner.  This is particularly important where you are undertaking something ‘out of the ordinary’, for example, as here, a major property transaction.  HMRC’s system of penalties on late VAT payment is well established and understood by tax advisers.  Given Ms Posnett’s history of late payments, increasing through the levels of 5% and 10% penalties to the most severe 15% penalty, she ought to have been aware of the risks of a significant HMRC penalty, and have taken steps to file and settle the VAT liability on time, so as to ensure this penalty was not imposed.

If you have upcoming property expenditure, or transactions, and are concerned about the VAT position, then talk to E3 Consulting at an early stage to see how we might help you fully understand and, if possible, mitigate any tax implications. The sooner timely advice is sought the greater the range of potential solutions and the more likely these can be achieved in a reasonable timescale and cost. Good advice pays for itself time and again.

E³ Consulting operate from offices in Southampton and London and work with clients that own, operate or invest in property across the UK and overseas.  If you would like to discuss any aspects of this case and its implications for you or your projects further, then please contact our team to see how we could help evaluate, evolve and enhance the available tax savings from any property expenditure.

Contact us on healthcheck@e3consulting.co.uk or by telephone on 0345 230 6450.