18860
	
	DEFAULT SURCHARGE — tribunal barred in law from treating insufficiency of funds as reasonable excuse — non attendance of appellant — no reasonable excuse suggested for non-payment of tax by due date — appeal dismissed 

MANCHESTER TRIBUNAL CENTRE

 
 	THE ORIGINAL PRODUCE COMPANY
	 (MIDDLESBROUGH) LTD	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	 Michael Johnson (Chairman)

Sitting in public in North Shields, Tyne and Wear on 16 November 2004

The Appellant was not represented

Mr J Holmes, counsel, instructed by the Solicitor’s office of HM Customs and Excise for the Respondents 

	© CROWN COPYRIGHT 2004

DECISION

1.	This is an appeal under section 59(7) of the Value Added Tax Act 1994 (“the Act”) contesting a default surcharge for £750.00 imposed in respect of the appellant’s VAT accounting period 1 December 2003 to 29 February 2004 (“the period”).  The appellant alleges that it has a reasonable excuse within the meaning of that sub-section for a default in paying tax due.

2.	When the appeal was called on for hearing, it was apparent that no-one had attended to represent the appellant.  I nevertheless decided to proceed with the appeal, as I am empowered to do pursuant to rule 26(2) of the Value Added Tax Tribunals Rules 1986 (as amended).  I did this because no excuse had been advanced to the tribunal for the non-attendance, and because, on considering the circumstances of the appeal, the position appeared to me to be clear.

3.	Mr Holmes, representing the Commissioners of Customs and Excise (“Customs”), put before the tribunal a folder of copies of documents relevant to the appeal (“the folder”).  

4.	I note from the folder that Jill Scott, writing on behalf of the appellant, sent a letter to Customs dated 28 March 2004, with which she said that she was enclosing the appellant’s VAT return for the period, together with a cheque for £6,253.66, being part of the VAT of £11,253.66 declared in the return to be owing.  That left tax amounting to £5,000 unpaid.

5.	The folder shows that the VAT return itself was dated 24 March 2004, and that it reached Customs on 30 March 2004.  Customs therefore accept that the return and the cheque had arrived with them by 31 March 2004, being the due date in respect of the period.

6.	£5,000 of the tax due was not however paid by the due date, as the letter of 28 March 2004 accepts.  In her letter, Jill Scott wrote:

	“I appreciate that this may result in my incurring penalties, but could I please pay the balance within the next 2 weeks, as this will greatly help my cash flow at the present time”.

7.	The surcharge under appeal was imposed on 16 April 2004.  On 22 April 2004, Jill Scott wrote again to Customs, stating that she had sent a cheque for £5,000 as promised, i.e. within the 2 weeks mentioned, but complaining that she had been charged £750 for the £5,000, being only 2 weeks late.  She said that she had expected to incur a penalty, but had not expected the amount to be so large.
8.	The £750 was not, however, the first default surcharge imposed upon the appellant.  As appears from the schedule of defaults included in the folder, the appellant had suffered surcharges on a number of previous occasions in 2003, totalling several thousand pounds.  The folder shows that the appellant’s VAT compliance record had been consistently poor for well over a year.

9.	The appellant had accordingly reached a default surcharge rate of 15%, something of which it must have been aware, because that was the rate applied in respect of the surcharge imposed on the most recent previous occasion on which the appellant had been in default, namely in relation to its VAT accounting period ending 30 November 2003.

10.	I note that the only reason put forward for the non-payment of the £5,000 in time was a difficulty with the appellant’s cash flow.  This tribunal is precluded from treating as a reasonable excuse for conduct “an insufficiency of funds to pay any VAT due” – see section 71(1)(a) of the Act.

11.	For Customs, Mr Holmes submitted that I should dismiss the appeal because no reasonable excuse for allowing it had been demonstrated.  I accept his submissions.  

12.	It seems to me not only that the appellant expected to have to pay the surcharge imposed, but must have appreciated the rate of the surcharge, being the rate provided by law for the latest in a series of defaults.  An excuse for the latest default has not been put forward of a kind that the tribunal can accept.  

13.	Accordingly I have no alternative but to dismiss this appeal.  I announced the dismissal at the conclusion of the hearing.  This is the record of that decision, with reasons.

14.	I record that Mr Holmes applied for costs, but I exercised my discretion not to award costs.  This is because I do not believe that Customs would have applied for costs had a representative of the appellant attended, although the outcome of the appeal would have been no different.  That being so, it would be unfair to penalize the appellant for not having attended.

MICHAEL JOHNSON

MAN/2004/0433

CHAIRMAN
Release Date: 9 December 2004