[2011] UKFTT 249 (TC)

TC01113

Appeal number TC/2010/02049

VAT – late payment – default surcharge – no reasonable excuse – proportionality – appeal dismissed

FIRST-TIER TRIBUNAL

TAX 

	DIGITOP LIMITED	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

				TRIBUNAL: TRIBUNAL JUDGE MANUELL
				Mr DAVID E WILLIAMS CTA

						
Sitting in public at Reading County Court, 160-163 Friar Street, Reading, Berkshire RG1 1HE on 23 March 2011

Mr Sam Merchant FCA for the Appellant

Mr R Lewis, HMRC Presenting Officer, for the Respondents

© CROWN COPYRIGHT 2011

DECISION

1.	The Appellant company appealed against the default surcharge notice in the sum of £1,364.70 dated 15 January 2010 and supplementary surcharge notice in the sum of £1.21 dated 20 January 2010 totalling £1,365.91 imposed for the late payment of VAT due for the quarter ended November 2009.  The applicable rate of surcharge was 15%. The Appellant had been in the surcharge regime since November 2007.  Four previous surcharge liability notices had been received.  No appeal had been lodged against any earlier surcharge notice.  The facts were not in dispute, as Mr Merchant for the Appellant confirmed.  The issue was the proportionality of the fifth surcharge of £1,365.91.
2.	Mr Merchant for the Appellant submitted that the facts were identical to those in Enersys Holdings UK Ltd [2010] UKFTT 20 (TC).  The VAT due from the Appellant of £9,106.07 had been received one day late, by transfer on 8 January 2010 not 7 January 2010.  There had been no attempted evasion.  HMRC had changed its bank from Lloyds TSB Bank plc to Santander, which meant that the transfer of funds was slower.   The “Faster Payment Service” was not available. HMRC profited at the tax payer’s expense.
3.	Mr Lewis for the Respondent submitted that Enersys (above) should be confined to its own facts, which were different from the present appeal.  In the first place the rate of surcharge was 5% and the amount of surcharge was £131,881.  There were numerous other appeals where the First-tier Tribunal (Tax Chamber) had held that a default surcharge was not disproportionate.  There was no reasonable excuse shown.   It was stated on HMRC’s website that the “Faster Payment Service” was not currently available, which alerted tax payers to the need to pay timeously.  The Appellant had also been given that information in a previous telephone conversation with an officer of HMRC.  The Appellant was a persistent defaulter and was well aware of the consequences of default.
4.	Mr Merchant in reply reiterated his earlier submissions.
5.	The Tribunal reserved its determination, which follows.  The Tribunal agrees with the submissions made by Mr Lewis and adopts them.  Enersys (above) shows that proportionality needs to be considered by the Tribunal when considering reasonable excuse appeals, but no First-tier Tribunal determination can be considered as more than illustrative.  Enersys (above), powerfully reasoned in relation to its own facts, cannot bind the First-tier Tribunal generally.  In any event, the facts of Enersys (above) were materially different from those in the present appeal, both as to the stage of the surcharge process and as to the sums involved.  In the present appeal, no reasonable excuse for the late payment was asserted, and the facts were that Appellant had regrettably mismanaged its accounting responsibilities so as to have entered the 15% regime.  
6.	It must be recalled that VAT as collected is the property of the state and thus it is in the interests of all citizens, above all tax paying citizens, that VAT collection obligations are rigorously enforced by means of the statutory scale fixed by Parliament.  While there may be rare circumstances where the application of that statutory scale will produce a disproportionate outcome, the Tribunal finds that the surcharge penalty in the present appeal falls far short of disproportionality.  Earlier warnings and a previous penalty of £641.50 had gone unheeded.  The appeal is dismissed. 
7.	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 (as amended).   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 MANUELL
RELEASE DATE: 14 April 2011