18919

Adjournment:  Appellant Solicitor:  No reason for delay:  Adjournment Refused.  Default Surcharge:  Late Notice of Appeals:  Appeals admitted:  Reasonable excuse:  Reasons for failure to pay 1999-2004:  Reasonable excuse accepted for part period:  Appeal partly allowed:  No expenses due to or by either party.

EDINBURGH TRIBUNAL CENTRE

	R A LOGAN & CO	Appellants

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	       Respondents

			Tribunal:	 (Chairman):  Mrs G Pritchard, BL., MBA., WS

Sitting in Edinburgh on Wednesday 12 January 2005

for the Appellants		HEARD ON PAPERS ONLY

for the Respondents	Mr A McCue

© CROWN COPYRIGHT 2005.

AMENDED DECISION

This is an appeal by Mr R A Logan, Henry Couchlin and Carolyn Jayne Paton sometime the partners of a firm of Solicitors trading as R A Logan & Co in Ayr, against default surcharges imposed by the Commissioners for failure to make returns and pay VAT timeously.  Only Mr Logan and Mr Couchlin are now partners.

Mr Logan did not attend the hearing.  He had not contacted the Tribunal to say if he would appear.  The Clerk had telephoned on 11/1/05 and been advised Mr Logan would call back on his return from Court.  He did not.  The Clerk telephoned again on 12/1/05 Mr Logan was in Court but was contacted.  The office rang back and asked for this Tribunal to be adjourned to another date and to advise the Tribunal all the returns were now complete.

The Commissioners objected as the Tribunal had been set down for several weeks, the evidence was not disputed, only the decision on it.  No local reconsideration had ever been requested so the decision had only be considered once on evidence not before the Tribunal.  In addition the Commissioners had proceeded civilly against the Appellants who had now made all returns and paid a substantial amount of all sums due.

I took the fact that Mr Logan is a Solicitor into consideration.  He owes a duty to the Tribunal at least to be courteous, and is specially trained to recognise the authority of the Tribunal.  I was not satisfied he had shown good cause for his failure to attend.  

I therefore decided to proceed.  The Appellant appealed 20 default surcharge regime assessments on 28/9/04 relating to periods 31/10/99 (quarter 10/99) to quarter 07/04.  The Commissioners requested dismissal of all appeals up to 07/02 on the grounds of being out of time.  However the Appellants had indicated they made requests for local reconsideration which had gone unheeded and had therefore appealed as a last resort.  They also advised of a traumatic occurrence in their legal practice of a partner stealing firm’s funds to the extent of £150,000 discovered in December 1999 which had led to a wide range of difficulties in the practice.  In all the circumstances I admitted all the appeals to probation.  These are as follows:

Period	Due Date	Return Received	Payment Received	DS	

10/99	
30/11/99	
11/1/00	
11/1/00	
Surcharge Liability Notice (SLN)	
01/00	29/2/00	22/3/00	22/3/00	SLNE+2% = £256.85	
04/00	31/5/00	01/6/00	01/6/01 (part)	SLNE+5% (deminimus)	
07/00	31/8/00	18/9/00	18/9/00 (part)	SLNE+10% = £2,672.79	
10/00	30/11/00	06/12/00	26/7/01	SLNE+15% = £2,871.69	
01/01	28/2/01	22/5/01	26/7/01 (part)	SLNE+15% = £3,137.10	
04/01	31/5/01	19/7/01	20/8/01 (part)	SLNE+15% = £3,059.43	
07/01	31/8/01	15/8/01	11/3/02 (part)	SLNE+15% = £3,024.37	
10/01	30/11/01	28/11/01	None	SLNE+15% = £3,116.91	
01/02	28/2/02	04/3/02	None	SLNE+15% = £1,756.42	
04/02	31/5/02	24/5/02	None	SLNE+15% = £2,801.22	
07/02	31/8/02	09/8/02	None	SLNE+15% = £2,652.02	
10/02	30/11/02	12/11/02	None	SLNE+15% = £2,542.68	
01/03	28/2/03	13/2/03	None	SLNE+15% = £1,972.47	
04/03	31/5/03	15/5/03	None	SLNE+15% = £1,823.68	
07/03	31/8/03	11/8/03	None	SLNE+15% = £1,410.10	
10/03	30/11/03	17/11/03	None	SLNE+15% = £2,154.39	
01/04	29/2/04	None	None	SLNE+15% of assessed amount	
04/04	31/5/04	None	None	SLNE+15% of assessed amount	
07/04	31/8/04	None	None	SLNE+15% of assessed amount	

From the evidence I find as follows:
1.	The Appellants were late with a VAT return and payment for the quarter 10/99 due 11/99 which was not received until 11/1/00.  This was due to a partner resigning on 8/12/99 commented on further below.  The Appellants entered a default surcharge regime, with the issue of a Surcharge Liability Notice on 11/1/00.  No penalty is due when the notice is issued.
2.	The Appellants were late with the VAT Return for the quarter 01/00 resulting in the surcharge for such first occasion amounting to 2% of sums due and amounting to £256.85.  In December 1999 a then partner of the firm Mr Maxwell was found to have dishonestly appropriated firm’s funds.  This is very difficult for a legal practice involving as it does, possible investigation by Police, Law Society and Insurers as well as concern amongst staff and clients whose business must be dealt with even if a partner is gone from the business peremptorily.  As well as that there is a shortage of cash.
3.	The difficulties with the business were compounded by failure by the Scottish Legal Aid Board to make payment on tax invoices issued, within their own guideline period.  It appears that fee notes by the practice are issued as tax invoices to the Scottish Legal Aid Board.  Failure in payment means a cash flow crisis of serious proportion to the firm.
4.	One problem Mr Logan encountered was a blacklisting for credit by his Bank, issued by his bank in error but preventing him borrowing from any source.  Since he was unaware of the erroneous blacklisting he was unable to raise funds until this error was discovered and corrected.  Although Mr Logan contacted the Commissioners, S Cleary the officer who determined these matters decided the partners of R A Logan & Co did not have a reasonable excuse for failure to pay for the quarters “10/99 and 01/00” 
5.	Although Mr Logan persisted locally with protests it is perhaps unfortunate that the officer S Cleary used the word “appeal” in dealing with correspondence as if he was the person responsible for dealing with an appeal mechanism.  Although in production 30 he refers to Tribunal decisions he does not provide (as is usual in such cases) the Trib 1 form usually supplied at that point, but suggests further information be provided for reconsideration.
6.	The Appellants made strenuous efforts over 2 years to keep the business going and raise funds from private sources but mainly from personal borrowing to meet liabilities but did not make VAT payments from quarter 01/02 – 10/03, though making returns.  From 01/04 – 07/04 no returns or payment were made.
7.	The Commissioners officer Ms Cook’s letter at Production 24 is not wholly accurate, suggesting as it does there was no contact with the Commissioners after March 2000.  The Appellants did correspond with the debt management unit.  Even for a Solicitor it is hard to understand different branches of the Commissioners do not communicate.
8.	It is certain that once Mr Logan was in funds, albeit borrowed, he gave time and attention to this longstanding problem, avoiding bankruptcy which would have occurred if he had been rigorously pursued for this debt.

Decision
I am satisfied from the evidence that the trauma of the theft by the partner Mr Maxwell, as well as the failure of the Scottish Legal Aid Board is a reasonable excuse for failure to make returns or full payment for a period of two and a half years the quarter 10/99 due 30/11/99 to quarter 04/02.

Reasons for the Decision
The representation by Mr Logan of the effort he has made to stay in practice and keep his staff and clients, whilst attempting to deal with great hardship and anxiety, and also requiring to borrow funds from his wife and family and commercial sources to ensure all his debts are paid because of the defalcation by his partner is impressive.  He has now made all the necessary returns and paid most of the VAT liabilities.  The Appellants have found it necessary to raise an action against their partner for recovery of funds as well as try to deal with the slow paying of a government agency.  It is hard for taxpayers even those who are Solicitors to understand why they must be timeous to the day for the government or suffer serious penalty whilst a government funded body is not.  The combination has had serious consequences for the Appellants.

I cannot comprehend the persistent failure of the Appellants to actually complete returns by April 2002 as that is simply administrative.  Nor is there justification for not even making a part payment in respect of money actually received as VAT of which there was some throughout the periods.

I am therefore satisfied that it is reasonable to accept the excuses until April 2002 but not thereafter.

No expenses found due to or by either party.

MRS G PRITCHARD, BL., MBA., WS

CHAIRMAN

RELEASE:  9 FEBRUARY 2005

EDN/04/123