BELATED NOTIFICATION  PENALITY — reasonable excuse — mitigation — Value Added Tax Act 1994 sections 67, 70 and 71 — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

 
 	
	MICHAEL ANTHONY JACKSON	Appellants

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	Miss J Warburton (Chairman)

Sitting in public in Manchester on 17 July 2003

The Appellant in person

Mr C Owen of the Solicitor’s office of HM Customs and Excise for the Respondents

	© CROWN COPYRIGHT 2003

DECISION

1.	This is an appeal by Michael Anthony Jackson against the imposition of a penalty for belated notification of liability to registration on the 28 October 2002 in the sum of £681.00

2.	The Appellant appeared in person and the Commissioners were represented by Mr C Owen of the Solicitor’s office of HM Customs and Excise.  Both parties put into the Tribunal a bundle of copy documents.

3.	The Appellant addressed the Tribunal.  The main facts are not seriously in dispute and I find them to be as follows.

4.	The Appellant’s business is that of electrical and security alarm systems and commenced in September 1994.  From the beginning the Appellant retained the services of an accountant Mr Bill O’Neil.  The Appellant kept his own records and then passed them to the accountant after his financial year end which is 31 August.  There was sometimes a delay of a year in passing his records to his accountant for the finalised accounts to be prepared.

5.	The Appellant’s business gradually increased so that by 1996 he had to take on one or two employees.  He has both commercial and domestic work.  His turnover to August 1999 was below £51,000.  In the last quarter of 1999 the Appellant had 3 large contracts for Corporate Developments although the level of work did not persist in 2002.  The Appellant was not requested by his accountant to hand over his records for the year to 31 August 2000 until 2001.

6.	In November 2001 the Appellant was notified by his accountant that he had exceeded the limit for registration in November 1999.  His accountant provided him with the written financial statement of accounts on 29 November 2001 and the Appellant applied for registration on the same day.  The Appellant added VAT to his invoices thereafter.

7.	The Appellant was registered for VAT from 1 January 2000.  There was some delay before a VAT registration number was issued.  The Appellant has tried with some difficulty to collect VAT on invoices issued between November 1999 and November 2001.

8.	The Appellant submitted to Customs and Excise his figures for sales and expenses between 1 January 2000 and 29 November 2001 thus allowing the Commissioners to calculate the penalty for belated notification of liability to register.  The Commissioners mitigated the penalty as to 25% for notification of liability by the Appellant and as to 25% for submission of accounts.

9.	The Appellant submitted that he was not aware he was liable to be registered until November 2001.  Much more information should be given to small traders about liability to register.  He considered he had suffered sufficient penalty by the imposition of VAT for the period between 1 January 2000 and 29 November 2001 and the difficulties of trying to recover that VAT from his customers.  The imposition of the penalty and the arrears of VAT were causing financial difficulties.

10.	Mr Owen for the Commissioners submitted that the penalty was imposed correctly.  The Appellant was 23 months late in notifying his liability to register and over that period had had an unfair advantage over the traders.  The Appellant had had professional advice throughout his business.  The Commissioners had recognised the Appellant’s cooperation by mitigating the penalty by 50%.

11.	Section 67 of the Value Added Tax Act 1994 imposes a civil penalty where a person fails to notify the Commissioners that he is liable to be registered for value added tax.  The penalty was imposed correctly in this case and calculated correctly on the figures supplied by the Appellant.

12.	The question is whether the Appellant had a reasonable excuse for the delay in notification such that the penalty should not apply.  It is well settled that knowledge of liability to register for value added tax is a basic matter of value added tax law such that a person’s ignorance of the law cannot provide a reasonable excuse – see Neal v Customs and Excise Commissioners [1988] STC 131. Section 71 of the Value Added Tax Act 1994 specifically provides that neither an insufficiency of finds or the reliance on another person, such as an accountant, to perform any task cannot be a reasonable excuse for his failure to notify the Commissioners of his liability to register until November 2001.

13.	It is clear that the Appellant sent in his Application for Registration form as soon as he was advised to do so by his accountant and submitted accounts to enable the outstanding VAT and penalty to be calculated.  The Commissioners have, quite rightly, mitigated the penalty by 50% to reflect this cooperation.  Section 70 of the 1994 provides that insufficiency of funds or the fact that a person has acted in good faith are not matters which can be taken into account when considering mitigation of the penalty.  I am of the view that 50% mitigation is the correct level of mitigation.

14.	The appeal is thus dismissed but there is no direction as to costs.

MISS J WARBURTON
CHAIRMAN
Release Date:

MAN/03/244