In Trinity Mirror plc5 the FTT was faced with a surcharge penalty issued to Trinity Mirror Plc (Trinity). On two occasions Trinity filed its VAT return and made VAT payments one day late. HMRC issued a surcharge liability notice to Trinity equal to 2% of the outstanding VAT, because the second default had occurred within the surcharge period that had commenced due to the first default. Trinity appealed the surcharge liability notice on the basis that it was contrary to the EU principle of proportionality.

The FTT noted that, as it has no power to mitigate or reduce the amount of the surcharge notice, its only options were to affirm it or set it aside. Accordingly, the FTT held that, although the regime relating to surcharge notices was on the whole proportionate, the particular notice issued to Trinity was not and should therefore be discharged. It considered the intention of the legislation was to impose different penalties depending on the nature of a particular breach; accordingly the gravity of the breach should be considered. It held that the penalty imposed on Trinity was high for a breach of low gravity.

Of perhaps wider importance was the FTT’s dismissal of HMRC’s contention that discharging the surcharge notice would make the whole regime disproportionate. In doing so, the FTT stated that its role was to determine the proportionality of the particular surcharge, not to seek to create a perfect system.

To read the decision click here.