[2011] UKFTT 207 (TC)
TC01072
Appeal number
TC/2011/00598
VAT-
default surcharge - appeal out of time - permission granted for appeal out of
time - whether reasonable excuse – no - penalty of £916.35- whether
proportionate- yes- appeal dismissed
FIRST-TIER
TRIBUNAL
TAX
Robert
Ward T/A WPS Electrics Appellant
-
and -
THE
COMMISSIONERS FOR HER MAJESTY’S
REVENUE
AND CUSTOMS Respondents
TRIBUNAL:
Ms B Dhaliwal (Judge)
Ms S Gable
Sitting in public at Holborn
Bars on 11 March 2011
Mr Robert Ward as the
Appellant
Mr O’Leary, instructed by the
General Counsel and Solicitor to HM Revenue and Customs, for the Respondents
© CROWN COPYRIGHT
2011
DECISION
1. Having
heard from both parties, The Tribunal decided that that the Appellants
explanations for the late payment of their VAT payment, did not amount to a
reasonable excuse.
2. The
appeal is dismissed.
The issues
This is an appeal against the default surcharge of
£916.35 in relation to the late payment of VAT for the period date 01/05/10 to
31/07/10. Payment of £8778.97 was due on 31/08/10 and payment was made on
15/09/10.
The questions that the Tribunal were required to consider
were:-
a) whether the appeal was out of time and if so, whether
permission should be granted by the Tribunal to hear the substantive appeal
b) whether the Appellant had a reasonable excuse for
failing to make the VAT payment by requisite date and
c) the proportionality of the default surcharge.
The legislation
The Tribunal Procedure (First-tier Tribunal) (Tax
Chamber) Rules 2009
Starting appeal proceedings
Rule 20(4) If the notice of appeal is provided after the
end of any period specified in an enactment referred to in paragraph (1) but
the enactment provides that an appeal may be made or notified after that period
with the permission of the Tribunal—
(a) the notice of appeal must include a request for such
permission and the reason why the notice of appeal was not provided in time;
and
(b) unless the Tribunal gives such permission, the
Tribunal must not admit the appeal.
Section 59A(8) VATA 1994 provides that a taxable
person will not be liable to a surcharge if he satisfies the Tribunal, on
appeal, that he had a reasonable excuse for the default.
Section 71 VATA 1994 states
(1)
For the purpose of any provision of sections 59 to 70 which refer to a
reasonable excuse for the conduct-
(a)
An insufficiency of funds to pay any VAT due is not a reasonable excuse
(b)
Where reliance is placed on any other person to perform a task, neither
the fact of that reliance nor any dilatoriness or inaccuracy on the person
relied upon is a reasonable excuse
Customs and Excise
Commissioners v Steptoe (1992) STC 757
Enersys Holdings UK
Limited v HMRC (2010) UKFTT 20 (TC)
The facts
3. As
a preliminary point, the Tribunal gave permission to hear the appeal out of
time under Rule 20(4) of The Tribunal Procedure (First-tier Tribunal) (Tax
Chamber) Rules 2009 and having had regard to the overriding objective of the
Rules. No objections were raised by the Respondents.
4. This
is an appeal against the default surcharge of £916.35 in relation to the late
payment of VAT for the period date 01/05/10 to 31/07/10. Payment of £8778.97
was due on 31/08/10 and payment was made on 15/09/10. It is not disputed by
the Appellant that the payment was made late.
5. Indeed,
it was conceded by the Appellant that there had been late payments of VAT for
earlier periods.
6. The
first of the five defaults relevant to this appeal occurred for the period date
01/05/09 to 31/07/09, the sum of £4952.61 was due on 31/08/09 but paid on
23/09/09. This led to the issue of a surcharge liability notice; that is a
notice informing the Appellant that it had defaulted and warning them, that a
further default within the next year would lead to the imposition of a monetary
penalty.
7. The
second occurred for the period date 01/08/09 to 31/10/09, the sum of £5554.36
was due on 30/11/09 but paid on 31/12/09. The penalty of 2% of the tax, fell
below £400 and as such, no monetary penalty was imposed.
8. The
third default occurred for the period date of 01/11/09 to 31/01/10, the sum of
£5339.89 was due on 28/02/10 and was paid in two instalments on 06/04/10 and
10/06/10. As the penalty of 5% fell below £400, no monetary penalty was
imposed.
9. The
fourth default occurred for the period of 01/02/10 to 31/04/10, the sum of
£4920.31 was due on 31/05/10 and paid on 15/07/10. The penalty of 10% penalty
was imposed and paid (albeit inadvertently) by the Appellant.
10. The fifth
default, the one against which this appeal has been brought, occurred for the
period of 01/05/10 to 31/07/10 and a 15% penalty was imposed for the
outstanding amount which amounted to £916.35.
11. The Tribunal
heard evidence from the Appellant and took into account, the submissions made
by the Respondent.
12. The Appellant in
giving evidence, advanced a number of grounds, each of which they assert
amounted to a reasonable excuse for the late payment of VAT.
13. For the sake of
clarity, the grounds advanced by the Appellant are that:-
14. i) the Appellant
was unaware of the VAT system of surcharges and HMRC had not assisted them in
their understanding
15. ii) the
Appellant had no real recollections of being in receipt of the Surcharge
Liability Notices or Extensions
16. iii) the
Appellant had cash flow problems.
17. As a separate
point, the Appellant also asserted that the penalty imposed of £916.35 was
disproportionate.
18. The Tribunal
carefully considered the grounds raised by the Appellant and likewise
considered the representations made by HMRC.
19. The Tribunal
concluded as follows:
20. i) In relation to
the first ground asserted by the Appellant, the Tribunal noted that whilst the
Appellant asserted that they were unfamiliar with the VAT surcharge system, the
Tribunal did not find the Appellants lack of knowledge to fall within what
would be deemed to be a reasonable excuse. The Tribunal noted that the onus
fell upon taxpayers to make the necessary enquires to enable them to be
compliant with their tax obligations. Furthermore, the Tribunal noted that
courses were available as was a business helpline to assist taxpayers in this
regard.
21. ii) In relation
to the second ground relied upon by the Appellant, the Tribunal noted that the
Appellant accepted that the Surcharge Liability Notices and Extensions may well
have been received by them but that they could not be certain. The Tribunal
found as a fact that such notices and other letters had been sent by HMRC to
the registered address and on a balance of probabilities received by the
Appellant. In particular, it was noted by the Tribunal that the Appellant had
paid a sum of £5145.33 following a letter sent to him by HMRC specifying this
amount. It was thus clear that the Appellant had received this letter as
otherwise the Appellants understanding would have been that the amount due for
payment was £5145.34.
22. iii)In relation
to the final ground, the Tribunal accepted that the Appellant, like many other
businesses, were holding onto funds as long as possible in the economic climate
and no criticism is made of that. However, the Tribunal reminded itself of the
relevant legislation and case law (as stated above) and went onto consider the
underlying cause of the insufficiency of funds. The Tribunal noted that funds
were available to the Appellant either by moving funds from one source to
another or by resorting to the Appellants private funds. As such, the Tribunal
found that there was no real insufficiency of funds and in considering the
underlying cause of it, found no reasonable excuse.
23. The Tribunal
went onto consider the proportionality of the surcharge and concluded that in
view of the amounts that were due to be payable for VAT as a whole and the
periods of the delay, that the penalty was not so exceptionally harsh, that it
was disproportionate.
24. The Appeal was
dismissed.
25. This document
contains full findings of fact and reasons for the decision. Any party
dissatisfied with this decision has a right to apply for permission to appeal
against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal)
(Tax Chamber) Rules 2009. The application must be received by this Tribunal
not later than 56 days after this decision is sent to that party. The parties
are referred to “Guidance to accompany a Decision from the First-tier Tribunal
(Tax Chamber)” which accompanies and forms part of this decision notice.
TRIBUNAL JUDGE
RELEASE DATE: 24 MARCH 2011
