JJ Sprinkler Services Ltd v Customs & Excise [2003] UKVAT V18347 (10 October 2003)

Default Surcharges – no reasonable excuse - dismissed under Rule 19(4)

EDINBURGH TRIBUNAL CENTRE

                                     J J SPRINKLER SERVICES LTD	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	       Respondents

			Tribunal:  GRETTA PRITCHARD, BL., MBA., WS(Chairman)

Sitting in Edinburgh on Tuesday 1 OCTOBER 2003.

for the Appellants		Heard on papers only

for the Respondents	Mr A McCue

© CROWN COPYRIGHT 2003.

DECISION

This was an adjourned hearing.  The Appellant did not appear and although previously represented, no representative appeared.   The written evidence consisted of 2 bundles of documents one produced by each of the Appellant and the Commissioners.  Where reference is made to a document in the Appellants’ bundle it will be prefixed by the letter A and the Commissioners’ bundle by the letter R. A request for postponement had been refused as the Appellant’s representative gave no good reason for further delay. There was a written submission from the Appellant.  We waited until 10.15 a.m. and proceeded on papers only for the Appellants.  Mr McCue represented the Commissioners of Customs and Excise.

	The Direction adjourning the previous Tribunal and dated 7 July 2003 is attached to this Decision and referred to for its terms.

	I find as facts as follows:-
	This appeal is against default surcharges imposed for non-payment of Value Added Tax by the due date in respect of quarters 09.02 and 12.02.   The Trib 1 referred to amounts of default surcharges which were attributable to 06.02 and 09.02 quarters only. but in discussion with the Commissioners prior to the first hearing the default surcharge appeal for the quarter 06.02 had been withdrawn by the Appellant and the appeal extended to both the 09.02 and 12.02 periods.   The Appellants claimed that cash flow difficulties relating to three specific customers had caused great difficulty but had failed to supply sufficient information to the Commissioners for any determination to be made in his favour.

	The Tribunal was therefore adjourned as above.   Following that direction:
	the Appellant had not obtempered the Direction as it 	had not sent any further documentation to the Tribunal 	as directed.   The Commissioners had received 	documents which showed that the non payment of 	invoices affecting the Appellant’s ability to pay had not 	exceeded a sufficient percentage of its gross sales as 	shown on its VAT 	returns for the relevant quarters 	09/02 and 12/02, to affect their decision.

REASONS FOR DECISION

	It had been explained to the Appellant prior to and at the first hearing that non payment of very large accounts could be given some consideration.   The Appellant gave details of non payment of amounts due by one of his customers Grinnell consisting of retentions by them during the 09/02 quarter.   The Appellant only produced statements for income for August and September and not for July the first month of that quarter.  However August/September credits were £140,000.  The amount withheld by Grinnell and later refunded to the Appellants was £14,803.28 approximately 10% of two months credits as shown at Page R40.   It is 7.5% of the sales declared on the Appellant’s VAT return for the quarter 09/02.

	With regard to the 12/02 quarter there were retentions by Grinnell of £5632.50 as shown in document Page R45 of the bundle of documents and referred to for its terms.  This was 2.5% of the total sales figures in the VAT return for the quarter 12.02

	Actspeed was another customer who did not pay the Appellant.  No information on the date of invoice or any due date of payment has been given.  It is accepted it may be in the period 09.02.   The Appellant advised in November 2002 that the total debt was £20,409.75 but again has given no details of its outstanding amount. He did give information that £5,000 had been irrecoverable.   Even allowing for £20,409 being unpaid during the quarter 09.02 that is 8.35% of total credits for the quarter and taken along with the previous calculation of 7.5% still gives an overall percentage of 16%, for the 09.02 quarter.   This is still well outside the percentage of indebtness of creditors which would found a reasonable excuse for non payment of VAT.  No further information was supplied about the third contractor Vipond, the details of which were insufficient beyond the amount of £7,000 which again taken with the income figure for the 12.02 quarter of £189.291, is not a significant proportion.    In the case of Steptoe v Customs and Excise Commissioners (LON/89/745) the amount of indebtedness to the taxpayer was 83% of invoices.

THE LAW

	Lack of funds is not a reasonable excuse for non payment of VAT in terms of S71 Value Added Tax Act 1994.  The sums involved here are insufficiently large to affect the application of the default surcharges for the quarter 09.02 and 12.02. and do not found a reasonable excuse for non payment.
THE DECISION
	I therefore dismiss the appeal
1.	Under Rule 19(4) for failure to obtemper a direction of 	the Tribunal, and
2.	on the ground that no reasonable excuse had been 	proved for non payment of VAT for the quarters 09/02 	and 12/02.

	No expenses are awarded to or by either party.

MRS GRETTA PRITCHARD, BL., MBA., WS
CHAIRMAN

RELEASE DATE:
EDN/03/12

T GORDON COUTTS, QC

CHAIRMAN

RELEASE 

EDN/