In Swanfield and others v HMRC [2017] UKUT 88 (2 March 2017) the UT found that taxpayers could allocate payments between VAT periods.
The appellants had ran into financial difficulties and had entered the surcharge regime. They sought to make payments of current VAT liabilities rather than historic liabilities with a view to avoiding default surcharges in respect of current periods. They contended that default surcharges in excess of £290 000 would not have arisen if HMRC had allocated payments made by the appellants to current rather than historic VAT liabilities.
The appellants argued that a taxpayer’s liability to VAT arises on making a supply which creates a debt and that there is no principle preventing a taxpayer from allocating a liability that will become due at a later stage. The UT agreed on the first limb; when a taxpayer makes a supply a liability to output tax arises...
