Brit smart meter biz blamed Apple's iPhone 7 launch for its late taxes
And you know what? The judge agreed with them
A British smart meter company that missed a series of VAT payments to the taxman insisted in a Leeds court that a Chinese typhoon and Apple's iPhone 7 delivery schedule was to blame.
A decision on the April tribunal was handed down last Friday.
Chameleon Technology UK, which makes "bespoke in-home displays for the global smart meter market", told the First-Tier Tax Tribunal that it was late handing taxes over to HM Revenue and Customs because Apple had block-booked a large number of freight flights from China immediately before the launch of the iPhone 7 in September 2016.
Appealing against an HMRC payment default surcharge of £17,600 on the company's £176k tax bill, Chameleon finance director Graeme Allison told tribunal judge Michael Connell and lay panel member Ann Christian that Typhoon Nida, "a severe tropical cyclone that struck Luzon, Philippines and Guangdong, China in late July", as well as the September 2016 launch of the iPhone 7, were to blame for the company's woes.
Typhoon Nida, also known as Severe Tropical Storm Nida, caused serious problems in China. Hong Kong's government weather observatory stated: "Business and schools were suspended in seven cities of Guangdong. Transportation services were paralyzed. Electricity supply to more than 16 000 households was affected in Shenzhen."
While HMRC had knocked £3,000 off Chameleon's tax penalty after the firm paid £30,000 in taxes on time, tax worker Gareth Hilton argued at the tribunal that the remaining cash penalty had to be paid regardless. He described VAT paid to the company by its suppliers but not yet due to HMRC as "an interest-free loan" from the taxman and said that cash flow problems "cannot be used a reasonable excuse" for not paying tax on time.
On Chameleon's behalf, Allison said the typhoon had "caused the manufacturing factory in China as well as the supply chain feeding the factory with parts to shut down for a number of days in early August". On top of that, he said Apple had "block-booked air freight flights which created a shortage of availability into the UK from China for the first two weeks of September 2016", causing a delay to Chameleon's delivery schedule.
Chameleon's managing director, Michael Woodhall, told the tribunal that his company's cash flow was £600,000 below its predicted target for August 2016 – and £1.4m over budget for the following month. He also said tax workers had failed to return calls seeking to explain the situation, including calls made "on a number of occasions in August and early September 2016".
HMRC employee Lesley Liddle, Chameleon's assigned case manager, was named as not having returned Woodhall's calls. His efforts to speak to HMRC's late payment department were refused partly because Chameleon's case had been personally assigned to Liddle and partly because Chameleon was still in a short-term "time to pay" VAT arrangement from the previous financial quarter.
Accepting Chameleon's arguments and dismissing HMRC's efforts to get its hands on the £17,000 penalty it had issued, Tribunal Judge Connell ruled:
Having considered the background facts and circumstances leading up to the default, the reason for the late payment were two unforeseeable and unexpected events outside the Company's control. It is clear from the facts that the Appellant had done everything it could to exercise reasonable foresight, due diligence and have due regard for the fact that its VAT was payable on the due date.
Adding that Chameleon had cleared its entire VAT bill "within just three weeks", the judge added that "their problems were not one of liquidity, but logistics".
"Had HMRC given the Appellant's request for a Time To Pay due and full consideration, an arrangement would or should have been put in place," concluded the judge. His full judgment, published earlier this month, can be read on the BAILII website. ®