18753

REASONABLE EXCUSE – application under Rule 26(2) to hear appeal in the absence of  appellant accepted – absence abroad – whether trader has reasonable excuse for failure to file return and pay tax due on return – no – appeal dismissed

LONDON TRIBUNAL CENTRE

	TERENCE W FRASER	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

			Tribunal:	 MALCOLM J F PALMER  (Chairman)

Sitting in public in London on 18 August 2004

The Appellant did not appear and was not represented

Mrs P Crinnion,  Advocate, of the Office of the Solicitor for the Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2004

DECISION

1.	This is an appeal by Mr Fraser against a default surcharge £424.09 in respect of the quarter ended 28 February 2003.

2.	When Mr Fraser failed to appear at the hearing, Mrs Crinnion applied under Rule 26(2) of the Value Added Tax Tribunals Rules 1986 for the appeal to be heard in his absence.

3.	Taking into account (a) that I had in evidence Mr Fraser’s notice of appeal,  letters or notes from him or his wife to Customs and Excise dated 23 April, 22 May, 18 June and 29 July 2003 and 31 May 2004 giving me grounds on which Mr Fraser had sought to claim a reasonable excuse; (b) that following a direction by this tribunal to postpone the hearing of Mr Fraser’s appeal, Mrs Wood of Customs and Excise had written on 14 June 2004 to Mr Fraser requesting details of the dates when Mr Fraser was absent from the United Kingdom and for other information for the purposes of a further consideration of his appeal, but that by the time of this hearing Customs and Excise had not received any information in reply to that request; and (c) the interest in bringing this appeal to a conclusion, I agreed for the appeal to be heard in the absence of Mr Fraser. 

4.	Mr Fraser is a sole proprietor carrying on a taxable business of management consultancy.  He prepares his VAT returns.  On 18 January 2002 he got a Surcharge  Extension Notice for failure to file or pay VAT for the three month period ended 30 November 2001.  He was, therefore, in the default surcharge regime since before November 2001.  A default surcharge of £351.25 had been imposed on him for the period ended 30 November 2002.  He had had, therefore, before this default surcharge which he is now appealing against at least one earlier surcharge which had not been withdrawn.
 
5.	Mr Fraser’s VAT liability was being dealt with in early 2003 by the Debt Management Unit at Southampton. 

6.	The principal reason for the appeal given in the notice of appeal and the other correspondence I have listed in paragraph 3 is that Mr Fraser was abroad when the return for the period ended 28 February 2003 should have been prepared and sent to Customs and Excise.  Mr Fraser writes that due to “an unplanned and unexpected absence” he was unable to return to this country to take these steps.  

7.	Under the terms of section 59(7)(b) of the Value Added Tax Act 1994, if a trader who is liable to a default surcharge for a late payment or return can satisfy Customs and Excise or, on an appeal such as this, a VAT tribunal that there is a reasonable excuse for the late payment or return, then he will not be liable to the default surcharge. 
8.	Does his “unexpected” absence abroad give Mr Fraser a reasonable excuse?  Mr Fraser must be expected to give appropriate priority to the filing of his returns and the payment of his VAT liability. In my view the test is whether a reasonable businessman carrying on Mr Fraser’s business and conscientious in meeting his VAT liabilities, would be reasonably expected to fail to meet those liabilities due to the particular circumstances experienced by Mr Fraser.  If the answer is yes, and such a reasonable businessman could be expected to have been prevented from paying and making his returns in time, then Mr Fraser may have a reasonable excuse.  

9.	Neither Mr Fraser nor his wife has explained what the circumstances were that kept Mr Fraser abroad.  I am not satisfied, therefore, that, whatever those circumstances were, they meet the test I have given.  There could be many reasons that were unplanned and unexpected but were either foreseeable or avoidable so that the reasonable conscientious trader would have been able to take steps to make sure that the relevant tax was paid in time.  I refer particularly to the failure to pay the tax due.  The mere failure to file a return is a default, but the amount of the penalty is dependent on the amount of tax that is not paid by the due date.
	
10.	Mr Fraser and his wife make another point.  When it was clear that Mr Fraser would not be returning to this country, Mrs Fraser, who was also abroad, called Customs and Excise to warn that payment would be delayed.  She was asked, or at any rate advised, to call the Debt Management Unit.  She did so and said that there would be a short delay.  There is some conflict in the evidence I have seen as to whether this happened on the 30th March, as Mrs Fraser claims, or on the 31st March, as the Unit’s log records.  It makes no difference to my view.  I am prepared to accept that Mrs Fraser may have thought that, because she had done as asked and telephoned the Debt Management Unit, no further action would be taken if the tax was paid shortly.  

11.	But I cannot accept that these telephone calls give any reasonable excuse.  Whatever Mrs Fraser may have optimistically thought, I see nothing in the record she has given or in the Unit’s progress log which shows any agreement or indication on behalf of Customs and Excise to waive the default surcharge.  The Debt Management Unit were already involved.  It was, therefore, very reasonable for the first officer to whom she spoke to recommend that she call that Unit to avoid any more unwelcome steps by it to enforce payment of any tax that might already be due.  It would be reasonable to think that a delay in making payment of the next amount to become due might prompt such steps.

12.	The Debt Management Unit are not involved in any decision to waive any default surcharge or to accept that any circumstances give a reasonable excuse.  That was a matter for the Poole office.  However, as I told Mrs Crinnion at the hearing, I do have one criticism of the Poole office.  It seems to me that it would have been much more constructive if the officer who spoke to Mrs Fraser had been more frank and made it clear to her that the request for a call to the Debt Management Unit would not in any way affect the obligation to pay any default surcharge that might become due if there was a delay in payment.  She might have got a blunt response, but that information frankly given might have helped to avoid this appeal.

13.	One further point I should make is that in coming to my decision not accept that there was any reasonable excuse I have taken into account (although it is certainly not determinative) that Mr Fraser should have been aware for several periods that any delay in payment might lead to a default surcharge.  In those circumstances a reasonable businessman conscientious to pay his tax might well, therefore, have concluded that, if he was going to be abroad for much of the time, he should take advantage of such helpful mechanisms open to him as a small trader as the filing of annual returns rather that quarterly returns.

14.	For these reasons I dismiss Mr Fraser’s appeal.

CHAIRMAN

MALCOLM J F PALMER

Release Date: 3 September 2004
LON/2004/21