The appellant, MPMH Construction Limited, specialises in complex construction projects, mainly for refurbishment of NHS hospitals with major projects for NHS Greater Glasgow & Clyde.

The company appealed to the at the First Tier Tribunal (FTT) after receiving penalties from HMRC related to late VAT payments over the course of 2021 and 2022 related to invoices issued at the height of covid-19 pandemic.

HMRC had issued default surcharges for the VAT periods 02/21, 05/21, 08/21, 11/21 and 02/22 totalling £247,151.18 calculated at 15%, for late payment of VAT. The penalties were issued under section 59(1) (a) and (b) of Value Added Tax Act 1994 (VATA).

Where a default occurs and HMRC serves a surcharge liability notice (SLNE), then if the taxable person is again in default before the expiry of the first anniversary of the last day of the period referred to in the surcharge notice, then the taxable person becomes liable to a surcharge being the greater of the specified percentage or £30.