19017
	DEFAULT SURCHARGE — postal delays due to arson attack — no cogent evidence produced — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

 
 	
	BLUEBERRY CREATIVE LTD	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	Colin Bishopp (Chairman)
						Marjorie Kostick BA FCA CTA	

Sitting in public in Birmingham on 6 April 2005

The Appellant was not represented

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

	© CROWN COPYRIGHT 2005

DECISION

1.	This is an appeal by Blueberry Creative Ltd against a default surcharge imposed on it for the late rendering of its 02/04 return.  The due date for the return was 31 March 2004 but the Respondents’ records show that they received it, with full payment, on 13 April 2004.  This was the Appellant’s third successive default and a penalty (£539.55) assessed at five per cent of the tax due was imposed.
2.	Blueberry was not represented at the hearing and we agreed to the request of Richard Mansell, who appeared for the Respondents, that we should proceed to hear the appeal in Blueberry’s absence, in accordance with rule 26(2) of the Value Added Tax Tribunals Rules 1986 (SI 1986/590), as amended.  If, having read this decision, Blueberry’s directors feel they have something to put forward which the tribunal should consider, they may apply for the decision to set aside.  We have adopted a course now unusual in cases of this kind – of setting out a full decision - as it seems to us that Blueberry may indeed have a point to make which has not been put forward.
3.	The factor which Blueberry apparently blames for the default is an arson attack on its local postal sorting office.  The Respondents accept that there was such an attack and have, we were told, agreed that traders affected by it, in that their VAT returns were delayed, may have a reasonable excuse.  However, the attack was in September 2003 and, so the Post Office have advised the Respondents, alternative means of handling post had been put in place by December 2003 and no unusual delays were thereafter experienced.
4.	The first of Blueberry’s late returns was that for 08/03, which should have been rendered by 30 September 2003.  In fact, it was received, according to the Respondents, on 9 February 2004.  It seems unlikely that it was held up for postal reasons since the return is dated 5 February 2004.  The second return rendered late is that for 11/03, for which the due date was 31 December 2003.  This return is dated 20 December 2003, which suggests it was prepared, if not posted, in good time.  It was not received, however, until 13 January 2004.  A two per cent penalty was due but as it amounted to less than the minimum which is imposed in practice, no monetary penalty was exacted.  However, the rate of any subsequent penalty increased to five per cent: see section 59(5) of the Value Added Tax Act 1994.
5.	Blueberry’s third late return – the one which led to the imposition of the penalty now under appeal – is dated 5 April 2004 which, again, suggests that it cannot have been rendered in time.  Blueberry seems, from its letters, to be blaming further postal delays occasioned by a second arson attack on the local sorting office, though Mr Mansell told us that the Respondents were not aware of any second attack.  If the return was not posted before 5 April 2004, it obviously cannot have arrived by 31 March, and there seems, regardless of any postal delays, to be no reasonable excuse for the failure to render it on time.
6.	What is not clear to us, and has prompted this decision, is whether Blueberry is blaming postal delays for the lateness of its 11/03 return.  Although that lateness did not of itself result in a penalty, it did increase the penalty imposed for the late rendering of the 02/04 return from two per cent to five per cent.  If, therefore, Blueberry is in reality blaming postal delays for the lateness of its 11/03 return, it may (provided cogent evidence can be produced) have a worthwhile argument that it has a reasonable excuse for that default with the consequence that the penalty imposed for the lateness of its 02/04 return should be reduced.
7.	As matters stand, however, there is no such evidence before us and the appeal must be dismissed.

COLIN BISHOPP
CHAIRMAN
Release Date: 12 April 2005

MAN/05/0005