VAT DEFAULT SURCHARGE – section 59 VATA 1994 – whether the Appellant satisfies the tribunal that there is a reasonable excuse for the defaults – section 71(1) VATA considered – held on the evidence that he had not so satisfied the Tribunal – dictum in C&E Commissioners v Steptoe [1992] STC 757 adapted and applied – Appeal dismissed

LONDON TRIBUNAL CENTRE

	RUSSELL McCREIGHT T/A 2-WAY TRAVEL	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	MR JOHN WALTERS QC  (Chairman)

Sitting in public in Birmingham on 9 April 2003

The Appellant did not appear and was not represented

Sarabjit Singh, of Counsel, instructed by the Solicitor for the Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2003

DECISION

1.	The Tribunal heard this appeal in the absence of the Appellant pursuant to rule 26(2) of the VAT Tribunals Rules 1986.
2.	The appeal is against the imposition of default surcharges of £464.47 (charged at a rate of 10%) in respect of the period 06/02, and £495.83 (charged at a rate of 15%) in respect of the period 07/02.  The Appellant was, at the relevant time, subject to a direction to submit monthly returns.
3.	The default surcharges are imposed pursuant to section 59 Value Added Tax Act 1994 (“VATA”), which provides, relevantly to this appeal, at section 59(7)(b) that a person shall be treated as not having been in default if he satisfies the Commissioners or, on appeal, a tribunal that, in relation to a relevant default, there is a reasonable excuse for the return or the related VAT not having been despatched on time.  In this connection section 71(1) VATA provides that (a) an insufficiency of funds to pay any VAT due is not a reasonable excuse, and (b) where reliance is placed on any other person to perform any task, neither the fact of that reliance nor any dilatoriness or inaccuracy on the part of the person relied upon is a reasonable excuse.
4.	It is relevant to note that prima facie liability to default charges at 2% and 5% arose in respect of the periods 04/02 and 05/02 respectively, but they were not imposed by reason of the Commissioners’ policy not to collect such surcharges where they are less than £400 in amount.
5.	It appears that funds to pay the relevant VAT liabilities on time were available, but the fact that they were not paid on time was due to a number of other factors.
6.	One was the sudden departure to Portugal (albeit on six weeks’ notice) of the Appellant’s “sleeping partner”, Mr. P. Jelf.  There was some indication that this happened in or about January 2002.
7.	Another factor was the unexpected death of one of the Appellant’s employee drivers, Mr. J. Bevan.  He died on 23rd December 2001. In consequence of losing Mr. Bevan, the Appellant had to take a PSV driving course himself.  This was in June 2002.
8.	There was a move of offices in July 2002.  
9.	The telephones to the business were (apparently wrongfully) cut off by BT in July 2002.
10.	A new office manager, Mr. England, was appointed with effect from August 2002.
11.	Mr. Singh submitted on these facts that it appeared that the real reason for the returns and VAT being delivered late was the fact that Mr. Jelf left and the Appellant did not replace him until August 2002 (when Mr. England was appointed).
12.	I take as guidance as to what can be regarded as a reasonable excuse in this context, the words of Lord Donaldson of Lymington MR in Customs and Excise Commissioners v Steptoe [1992] STC 757 at page 770d, adapting them to deal with a case which does not involve insufficiency of funds, as follows:

“[I]f the exercise of reasonable foresight and of due diligence and a proper regard for the fact that the tax would become due on a particular date would not have avoided … the default, then the taxpayer may well have a reasonable excuse for non-payment, but that excuse will be exhausted by the date on which such foresight, diligence and regard would have overcome the [immediate cause of the default].”

13.	The dates when the 06/02 return and associated tax, and the 07/02 return and associated tax were due were 31st July 2002 and 31st August 2002 respectively.  I cannot interpret the circumstances which I have outlined above as giving rise to a situation where the respective defaults would not have been avoided by the exercise of reasonable foresight, due diligence and a proper regard for the fact that the tax would become due on the relevant particular dates.  Putting the matter positively, it seems to me that, on the evidence, the exercise by the Appellant of reasonable foresight, due diligence and a proper regard for the fact that the tax would become due on 31st July and 31st August respectively would indeed have avoided the defaults, and so I dismiss the appeal.
14.	Mr. Singh asked for an order that the Appellant make a contribution to the Commissioners’ costs in the amount of £150.  I direct the Appellant, pursuant to rule 29(1)(a) of the VAT Tribunals Rules 1986, to pay that amount to the Commissioners within 56 days of the release of this Decision.

JOHN WALTERS QC
CHAIRMAN

RELEASED:

LON/02/1034