MAN/03/0749     

VAT – default surcharge appeal — travel agents — management fee included in earlier return than necessary — Commissioners claimed the tribunal had no jurisdiction to hear under s.59 VATA — held — jurisdiction under s.82(q) VATA — assessment reduced — appeal allowed
MANCHESTER TRIBUNAL CENTRE

	UNBEATABLE DEAL LIMITED	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	Mrs E Gilliland  (Chairman)

Sitting in public in York on 26 February 2004

Mr J Macdonald, manager of the Appellant, for the Appellant

Mr Richard Shaw of the Solicitor’s office of HM Customs and Excise for the Respondents

© CROWN COPYRIGHT 2004

DECISION

1.	This is an appeal by Unbeatable Deal Limited (the Appellant) against a default surcharge issued on 26 September 2003 by the Commissioners in respect of the period 1 May 2003 to 31 July 2003 in the sum of £1,102.85.  Mr. J. Macdonald, the manager of the Appellant has attended the hearing on behalf of the Appellant travel agents.  The Commissioners have been represented by Mr. Richard Shaw.
 
2.	It is not in dispute that the return was submitted late.  The issue before the Tribunal, however, relates to VAT on a management fee.  The Tribunal has been told by Mr. Macdonald that this was included in the return in error.  Mr. Macdonald accepts that he was at fault on this and that the fee was included in an earlier return than was necessary and that accordingly that VAT should not have been paid on this fee until the end of the year.  The default surcharge was assessed on the figure of £7,352 which was the figure returned and not on the correct figure which he said should have been in the region of £300 to £400.  It was he submitted unfair that the Appellant should be obliged to pay the full amount of the assessment calculated on the basis of a figure which was not due for the period in question.

3.	The Commissioners have submitted that the Tribunal has no jurisdiction to hear the appeal on the grounds set out by the Appellant.  Whilst the Commissioners might have some sympathy with the position of the Appellant and be prepared to discuss their position with the Appellant, this was nevertheless on the basis that the matter was outside the power of the Tribunal to deal with, and that it was for the Commissioners to take any stance that they might wish.    

4.	The Tribunal has been referred to Section 59 of the Value Added Tax Act 1994 (the Act) which provides for the imposition of a default surcharge if the required return has not been received by the due date or payment has not been made. On 31 August 2003 the Commissioners had not received a return for the prescribed accounting period nor any payment and accordingly liability to the surcharge was triggered.

5.	Under s.59(4) of the Act the amount of the surcharge is the greater of £30 and the specified percentage of the taxpayer’s outstanding VAT for the prescribed accounting period. There is no dispute that the specified percentage in the case of the Appellant for the period is 15%.  By s.59(6) of the Act, the amount of a person’s outstanding VAT is “so much of the VAT for which he is so liable as has not been paid by that day”.

6.	By s.59(7) of the Act an appeal lies to the Tribunal against liability to a default surcharge if the Tribunal is satisfied either that the return or the VAT was despatched at such time and in such a manner that it was reasonable to expect it would be received by the due date or if there  was a reasonable excuse for the return or the VAT not having been so despatched. Where the ground of appeal is established, then the person who would otherwise have been liable to a default surcharge is not liable to the surcharge.  It is clear that the present appeal does not fall within s.59(7) of the Act since there is no dispute that the return was late  and the VAT was not paid. It has not been suggested by the Appellant that there was a reasonable excuse for the delay or that the return and the VAT had been despatched at a time and in a manner whereby it was reasonable to expect it to have been received by the due date.  The issue in this appeal is not whether the Appellant is liable to a default surcharge but as to the amount of the surcharge.

7.	I do not accept the submission of the Commissioners that the Tribunal has no jurisdiction to deal with this appeal. It is correct that s.59(7) of the Act is not applicable, but there is jurisdiction under s.83(q) of the Act to hear an appeal in respect of the amount of any surcharge specified in an assessment  under s. 76 of the Act. Under s.76 (1) the Commissioners have power, where a person is liable to a surcharge under s. 59, to assess the amount of the surcharge and to notify it to the person liable to the surcharge. That is what has happened in the present case and the appeal is an appeal, not under s.59, but against the amount of an assessment made pursuant to s.76 of the Act.

8.	The Commissioners have not challenged the evidence of Mr. Macdonald that the management fee was included in the return by mistake and that VAT on it of £7000 need not have been paid until the end of the year.  In the circumstances the Tribunal is satisfied that the amount of the Appellant’s outstanding VAT as at the due date was not £7,352 but that figure less the VAT on the management fee of £7,000, namely £352. That was the true extent of the Appellant’s liability.  The Tribunal holds that the correct amount of the default surcharge is 15% of £352, namely £52.  Accordingly the appeal is allowed and the default surcharge is reduced to £52.     

9.	No direction as to costs is made.

Mrs E GILLILAND  
CHAIRMAN
Released:
MAN/03/55