Kelly v Customs and Excise [2003] UKVAT V18220 (07 July 2003)

Default Surcharge – One year’s accounts behind schedule – no reasonable excuse -  appeal dismissed.

EDINBURGH TRIBUNAL CENTRE

	JERRY KELLY	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	       Respondents

			Tribunal:  Mrs Gretta Pritchard, BL., MBA., WS(Chairman)

Sitting in Edinburgh on 2 July 2003.

for the Appellants		The Appellant appeared on his own behalf

for the Respondents	Mr A McCue

© CROWN COPYRIGHT 2003.

DECISION

This appeal is against the imposition of default surcharges for the quarters 02/01, 08/01 11/01 and 12/02.

Mr Kelly represented himself and gave evidence.   He was credible.  Mr McCue appeared for the Commissioners.   The written evidence is contained in the Commissioners file of evidence.   Where any page is referred to it shall be treated as repeated here.

Default Surcharges are imposed by S59(1) of the Value Added Tax Act.   The legislation is clear and states
“If, by the last day on which a taxable person is required in accordance with regulations under this Act to furnish a return for a prescribed accounting period –
(a) the Commissioners have not received that return, or
(b) the Commissioners have received that return but have not received the amount of VAT shown on the return as payable by him in respect of that period.
then that person shall be regarded for the purposes of this section as being in default in respect of that period.”

	After this the law goes on to provide in that Section the procedure which is to be followed by the Commissioners for the rate of imposition of the penalties, the method of intimating this and collecting the funds.

	The right of appeal against the imposition is contained in S59(7) which states
“If a person who, apart from this subsection, would be liable to a surcharge under subsection (4) above satisfies the Commissioners or, on appeal, a tribunal that, in the case of a default which is material to the surcharge –
(a) the return or, as the case may be, the VAT shown on the return was despatched at such a time and in such a manner that it was reasonable to expect that it would be received by the Commissioners within the appropriate time limit, or
(b) there is a reasonable excuse for the return or VAT not having been so despatched.
he shall not be liable to the surcharge and for the purposes of the preceding provisions of this section he shall be treated as not having been in default in respect of the prescribed accounting period in question (and, accordingly, any surcharge liability notice the service of which depended upon the default shall be deemed not to have been served.)”

	Mr Kelly’s grounds of appeal were
	(1) That in respect of the quarter 02/01 his accountant had had a conversation with Mr Kerr in the VAT Office stating they could have a few days grace and the cheque in favour of the Commissioners for the amount due for the whole period of the Appeal was delayed a few more days.
(2) That the nature of his occupation as a cameraman leads to an erratic lifestyle and does not allow for due care and attention to tax collecting.

	From the evidence I found as follows:-
	In the course of his business as a cameraman the Appellant lived an irregular and erratic lifestyle, sometimes having long periods away from home.   He had previously had an accountant attending to his business then he moved to Ayrshire in 2000 after which he had not appointed a new accountant.   

	He knew he was in a default regime from 02/00.  He had paid the defaults at 2, 5 and 10% but baulked at 15% which was first imposed in the quarter 02/01 which co-incided with the birth of his second son.   His wife suffered post natal depression subsequent to the birth of their second child in February 2001, and she could not manage any of his business correspondence at that time.    The Appellant made no arrangements  for his accounts to be done until March/April 2002 more than one year later.   He offered no specific reason in respect of any specific quarter.   His longest period away from home was almost 7 weeks so there was nothing specific offered to cover specific periods relating to payment.

	Since S71(1) VATA 1994 precludes shortage of funds as an excuse that was not open to the Appellant although his claims related more to the random nature of his work.

	With regard to the telephone call between his accountant and the Commissioners, his accountant did not give evidence.   The Commissioners record showed the conversation had taken place on a general enquiry without mentioning a particular VAT trader.  Had this been a first late payment there would have been no penalty.  However had the full circumstances of delay been disclosed then no such response and reassurance would have been possible.  It was accepted by the Appellant in any event that his accountant may have misunderstood the default surcharge regime.

	I therefore refuse the appeal in respect of this ground, as lacking substance.

	The second ground was his lifestyle.  I find the random nature of his work is not limited to cameramen or even members of the artistic community.  Nor is working away from home unusual enough to found a reasonable excuse for his failure to make and pay returns.  The obligation to pay Value Added Tax which is a turnover tax, is statutory.   There is no difference in law drawn between types or nature of businesses.  It is the taxpayer’s duty to complete and make returns and pay the sums due.

	The disruption of the accounting routine might have had some substance if the Appellant had reappointed a local accountant more quickly.  Lack of adequate assistance would have been acceptable possibly in respect of a critical period when the return was due.  Here however the delay was unreasonable, even allowing for his wife’s illness after the birth of her baby.  Pressure of work has been looked at in a number of cases but again one quarter might be acceptable but not a year to sort things out.  I therefore do not find the Appellant had a reasonable excuse in terms of S59 VATA 1994.

	I find no expenses due to or by either party.

MRS GRETTA PRITCHARD, BL., MBA., WS

CHAIRMAN

RELEASE:   7 JULY 2003

EDN/02/165