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HMRC internal manual

VAT Civil Penalties

HM Revenue & Customs
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Default Surcharge: Reviews and appeals: Insufficient funds letter



You asked for the decision [give brief details] sent to you on [date] to be reviewed. Your case has been passed to me to carry out the review.

If a reasonable excuse for paying your VAT late I will withdraw the default(s) / surcharge assessment(s).

Section 71(1) of the VAT Act 1994 excludes lack of funds from being a reasonable excuse for late payment. However, we will consider the underlying causes of the shortage of funds to see if these constitute a reasonable excuse. In order to assist this review you should provide as much relevant information as possible in support of your appeal. The following are examples of the type of evidence that may support your appeal

  • The amount and date of sales invoices raised for the period(s) in question and one month thereafter together with the dates and amounts of the monies received in respect of these invoices.
  • Details of any payments relating to earlier invoices received during the period under appeal, together with confirmation of which tax periods they relate to.
  • Details of your customer base including the percentage of business attributable to each client, and normal terms of contract.
  • Your annual accounts.
  • Details of any delays in payment, ie the percentage outstanding, length of delay and the normal payment patterns if any change has caused delay.
  • Details of any action taken to secure payment, and evidence that VAT payment is given a high priority.
  • Specific details of any bad debts and the periods to which they relate, and
  • Any other information which you feel is relevant to your appeal.

Please remember that your claim of reasonable excuse will not necessarily be accepted just because you have provided the information requested in this letter. Any decision to accept reasonable excuse will be based on all the circumstances of your individual case.

If you are in doubt as to what evidence should be supplied or you have any other queries about the appeal please do not hesitate to contact me at the above address.

If you have any further information that you want me to take into account as part of my review please send it to me straight away.

I expect to complete the review by [date] (this should be within 45 days of the date HMRC received the review request). When I have completed my review I will write to you with my conclusions.

If I cannot complete the review by [date] I will get in touch with you.

If you want to discuss the matter you can write to me at the above address or phone me on the above number.

You can find further information on reviews on the HMRC website at