TC00084 Cannon Express & Logistics Limited v Revenue & Customs [2009] UKFTT 116 (TC) (27 May 2009)

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URL: http://www.bailii.org/uk/cases/UKFTT/TC/2009/TC00084.html
Cite as: [2009] UKFTT 116 (TC)

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Cannon Express & Logistics Limited v Revenue & Customs [2009] UKFTT 116 (TC) (27 May 2009)
VAT - OTHER
Vat - other
    [2009] UKFTT 116 (TC)
    TC00084
    Appeal Number: Man/07/1435
    FIRST TIER TRIBUNAL TAX
    VAT – ASSESSMENT – FLAT RATE SCHEME – Appellant traded as courier – unaware of the change in the flat rate scheme from April 2004 – continued to apply the previous rate resulting in an under-payment of VAT – No deliberate attempt by the Appellant to avoid its responsibilities – Appellant believed that HMRC partly to blame for the default – no substantive challenge to the legality of the assessment – Appeal dismissed
    DECISION NOTICE (WITH FULL REASONS)
    Rule 35(2) The Tribunal Procedure (First Tier Tribunal) (Tax Chamber) Rules 2009
    CANNON EXPRESS & LOGISTICS LIMITED Appellant
    - and -
    THE COMMISSIONERS FOR
    HER MAJESTY'S REVENUE and CUSTOMS Respondents
    Tribunal: MICHAEL TILDESLEY OBE (Chairman)
    ROBERT GRICE (Member)
    Sitting in public at Birmingham on 16 March 2009
    Kevin Cannon director for the Appellant
    Kim Tilling of the Solicitor's office of HM Revenue & Customs, for the Respondents
    © CROWN COPYRIGHT 2009

     
    DECISION
    The Appeal
  1. The Appellant was appealing against an assessment for VAT dated 15 November 2007 in the sum of £8,758 plus interest for periods 12/04 to 06/07.

  2. The assessment was made because the Appellant failed to apply the new flat rate percentage of nine per cent from 1 April 2004 for its business as a courier resulting in an under-payment of VAT.

  3. The Appellant contested the assessment on the ground that HMRC did not notify it of the change in the flat rate percentage. In the Appellant's view, HMRC should accept its part in the Appellant's default and reduce the assessment accordingly.

  4. The Tribunal heard evidence from Kevin Cannon and Janet Cannon for the Appellant. Mr and Mrs Cannon stated that they took their responsibilities for VAT seriously and were not aware of the change in the flat rate percentage for couriers.

  5. Andrew Pollock and Elizabeth English gave evidence for the Respondents. Mr Pollock was a member of a team informing couriers of the new percentage rate. His evidence dealt with the correspondence and telephone conversations with the Appellant. Mrs English was a member of the same team as Mr Pollock. Her testimony dealt with the making of the assessment. A witness statement of Glyn Denson was produced in response to a direction issued by the Tribunal on 16 March 2009. Mr Denson confirmed that VAT notice number 2/2004 setting out the changes in the percentage rates for couriers was sent with the VAT return for the period ending September 2004. A bundle of documents was received in evidence.

    6. The Facts Found
  6. The Appellant was registered for VAT from 9 January 2003. The Appellant's business was as a courier. On 30 March 2004 HMRC approved the Appellant's application of 23 March 2004 to join the flat rate scheme with effect from 1 January 2004.

  7. HMRC changed the flat rate percentage from 5.5 per cent to 9 per cent for couriers with effect from 1 April 2004. HMRC notified traders of the change in a letter dated 1 March 2004 and in Business Brief 07/04 dated 2 March 2004. HMRC also put details of the change in VAT Notes No.2 2004 which was issued to traders with the VAT returns due for period ending September 2004.

  8. The Appellant continued to account for VAT under the old percentage of 5.5 per cent up to and including 12/06 which resulted in an underpayment of VAT due.

  9. On 23 February 2007 HMRC advised the Appellant that it had not applied the correct flat rate percentage in its VAT calculations. HMRC invited the Appellant to make a voluntary disclosure. The Appellant decided to complain to HMRC about its treatment. HMRC did not uphold the Appellant's complaint resulting in the issue of an assessment on 15 November 2007.

  10. Mrs English calculated the assessment by reviewing the Appellant's actual VAT returns for the said periods. She referred to the guidance in Public Notice 733 (Flat Rate Scheme) which stated that box 6 of the VAT return should specify the VAT inclusive takings for the VAT period. The appropriate flat rate percentage should then be applied to the VAT inclusive takings and declared in box 1 of the VAT return. In the Appellant's case the applicable flat rate percentage was 9 per cent. Mrs English calculated the VAT due by applying the correct percentage rate to the VAT inclusive takings declared by the Appellant which was then compared with what the Appellant actually declared. Mrs English concluded that the Appellant had under declared its VAT for the periods 12/04 to 12/06. The Appellant had applied the correct percentage rate for quarter ending 03/07, and over declared for the quarter ending 06/07, when the Appellant used a 10 flat rate percentage. Mrs English assessed the VAT due at £8,758 which took account of the overpayment in quarter ending 06/07.

  11. The Appellant was a responsible small business, meeting its VAT liabilities on time. The Appellant was unaware of the changed flat rate percentage for couriers until February 2007. The Appellant joined the flat rate scheme in March 2004, just before the rate was changed, which meant that it did not receive the advance notice of the change sent to all courier businesses on 1 March 2004. The Appellant could not recall receiving Public Notice 733 and update 1 on the flat rate scheme and VAT Notes No 2 2004 which was issued to traders with the VAT returns due for period ending September 2004. Public Notice 733 and update 1 were sent to the Appellant in May 2004 following a telephone enquiry to HMRC National Advice Line on an input tax claim on a capital item. The Appellant pointed out from April 2004 that it had submitted 13 VAT returns using the 5.5 per cent rate. Further during the same period the Appellant submitted three claims for recovery of VAT with the September 2006 claim resulting in a rebate. HMRC did not query the accuracy of the returns nor challenge the use of the 5.5 per cent rate when meeting the Appellant's VAT repayment claims.

    12. Decision
  12. Section 73 of VAT Act 1994 empowers HMRC to raise assessments for unpaid VAT where it appears to HRMC that the taxpayer's returns are incomplete or incorrect or to recover VAT which has been wrongly repaid or credited as input tax to the taxpayer. Under section 73 HMRC is required to consider fairly all material placed before them by the Appellants, and on that material, come to a decision which is reasonable and not arbitrary as to the amount of tax due.

  13. In this Appeal Mrs English knew that the Appellant's VAT returns were inaccurate because the incorrect flat rate percentage had been applied to calculate the VAT due. Mrs English used the VAT inclusive takings declared by the Appellant in its returns to calculate the VAT due. The Tribunal is satisfied that Mrs English's assessment was based on reliable facts and sound legal principles.

  14. The Appellant did not challenge the accuracy of the assessment. The Appellant considered that it had been unfairly treated by HMRC, in that HMRC should have alerted the Appellant earlier to its error in applying the 5.5 flat rate percentage. The Tribunal accepts that the Appellant was a responsible small business and that its error was an honest oversight. The Tribunal considers that on balance it received Public Notice 733 in May 2004 and VAT Notes No.2 2004 but in all probability did not appreciate the significance of the documents. Public Notice 733 was sent to the Appellant in respect of its input tax claim for capital expenditure not for the purpose of highlighting the change in the flat rate percentage for couriers. The Tribunal understands the sense of grievance held by the Appellant, particularly as HMRC did not query the correctness of its VAT returns. Unfortunately for the Appellant, its sense of grievance did not undermine the accuracy of the assessment. Also since VAT was a self assessed tax the Appellant had the ultimate responsibility to keep up to date with changes in VAT.

  15. The Tribunal finds that the assessment dated 15 November 2007 in the sum of £8,758 plus interest for periods 12/04 to 06/07 was made to best judgment and correct. The Tribunal dismisses the Appeal. The Tribunal makes no order for costs.

    16. MICHAEL TILDESLEY OBE
    TRIBUNAL CHAIRMAN
    RELEASE DATE: 27 May 2009
    MAN/
    Notes
  16. The Tribunal directed that the costs regime which operated prior to 1 April 2009 applied to this Appeal

  17. A party wishing to Appeal this decision to the Upper Tribunal must seek permission by making an application in writing to the Tribunal within 56 days of being provided with full written reasons for the decision. An application for permission must identify the alleged error(s) in the decision and state the result the party making the application is seeking.

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URL: http://www.bailii.org/uk/cases/UKFTT/TC/2009/TC00084.html