19018

Poor compliance record:  Request for reconsideration of rate of surcharge:  Commissioners lack discretion.  Appeal dismissed.

EDINBURGH TRIBUNAL CENTRE

	TIRAVIE ENTERTAINMENTS LLP	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	       Respondents

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

Sitting in Edinburgh on Wednesday 13 April 2005

for the Appellant		HEARD ON PAPERS ONLY

for the Respondents	Mr Russell A Harrison 

© CROWN COPYRIGHT 2005.

DECISION

This is an appeal against a Default Surcharge applied in respect of the quarter 06/04 amounting to £994.25.

The Appellants are Tiravie Entertainments LLP previously know as James Stirling and Tom Stirling trading as Chapel Taverns.  The name change occurred in 2003.  The Appellant requested that the Appellant’s case be heard on the papers already submitted.  The Commissioners were represented by Mr Russell Harrison.  The evidence was contained in a bundle of documents consisting of the Value Added Tax returns in respect of the quarters from 06/02 to 06/04, a schedule of defaults showing the Default Surcharge history, copies of the surcharge liability notice extensions along with correspondence on behalf of the Appellant all signed by Mike Preston who is an employee of one of the partners of Tiravie Entertainments in another business altogether.  

From the evidence I find as follows:
1.	The Appellants run 2 Community Public Houses and trade on a cash counting basis.
2.	In respect of the quarter 06/04 the amount of Value Added Tax due was £6628.27 and the return and payment were due on 31/07/04.  The return and payment were received by the Commissioners on 12/08/04.
3.	The business has a history of poor compliance with regard to submission of returns and payment commencing in the quarters 06/02, 09/02 and 12/02 in respect of which the returns were received on 11/03/03.  The rate of penalty surcharge was nil in respect of the first, 2% on the second and 5% on the third. 
4.	For the following 2 quarters 03/03 and 06/03 having due dates of payment of 30/04/03 and 31/07/03 the returns and payment were not received until 15/09/03 and the default surcharge rate of 10% on the first and 15% on the second was applied.
5.	For the quarter 12/03 having a due date of payment of 31/01/04 the return and payment were received on 24/02/04 again with a default surcharge rate of 15%.
6.	For the quarter 06/04 having a due date of payment of 31/07/04 as narrated above the 15% surcharge amounted to £994.25.
7.	The Appellants were aware of the difficulties which they were encountering and have simply paid the default surcharges until that time.  However on this particular occasion they believed that the amount of the surcharge being imposed was excessive and they had had difficulty transferring from a manual to a computerised system, some discretion should be applied by Customs as the amount of surcharge appeared an unaffordable cost to the business.  
8.	As well as that Mr Preston advised that the company for which he worked which is owned by one of partners of the Appellant closed for the holidays on 15/07/04 and he did not have all of the information to complete the return timeously some consideration should be given to this.  

Reasons for Decision
This Appellant has not provided a reasonable excuse for failure to submit and pay the Value Added Tax return and payment for the quarter 06/04.  A reasonable excuse has to show unusual grounds for failure to account for Value Added Tax.  The only ground offered was the transfer from a manual to a computerised system of accounting but this appears to have been achieved over a period of time and there was no suggestion that the standard practice of keeping parallel systems of the manual and accounting records had not occurred.  The business is run on a cash counting basis and therefore Value Added Tax is collected at the point of sale.  In these circumstances these funds cannot be used for any other purpose than to pay the Value Added Tax due to the Commissioners.  In respect of the claim about the holiday period, it is inappropriate to use this as an excuse as the circumstances are not unforeseen.  Appropriate planning measures are expected to be taken by the Appellant to overcome the difficulty.  We can understand Mr Preston’s own personal circumstances in that regard but he is not the person liable for the duty.  It is the Appellant who is liable.  No reliance on a third party is taken as a reasonable excuse.  The Appellant’s reliance on Mr Preston cannot be founded on in respect that he was on holiday.  The history indicates very poor compliance with the legislation.  The Commissioners have no discretion with regard to the level of the penalty as that is provided for by statute.  Once the surcharge liability notice extension is in place and the level of penalty is running at 15%, the only way to stop that running is to have timeous returns and payments.  These have to continue for a full year before the surcharge liability notice extension runs out.  In all the circumstances therefore the appeal is refused.

No expenses are found due to or by either party.

MRS G PRITCHARD, BL., MBA., WS

CHAIRMAN

RELEASE:  20 April 2005
EDN/04/159