19405
	VALUE ADDED TAX — misdeclaration penalty — VATA 1994 s63 — Appellant apparently treating supplies as non-taxable while turnover below registration threshold even though Appellant registered for VAT — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

 
 	
	D D GROUP LIMITED	Appellant

	- and -

THE COMMISSIONERS FOR
	HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

				Tribunal:	Colin Bishopp  (Chairman)

Sitting in public in Birmingham on 7 December 2005

The Appellant was not represented 

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

	© CROWN COPYRIGHT 2005

DECISION

1.	This appeal by D D Group Limited is against the imposition on it by the Commissioners of a misdeclaration penalty amounting to £616.  It is said by the Commissioners that the Appellant’s VAT return for the period 11/03 understated its true net tax liability by £4,109.  The penalty represents the standard 15 per cent of that amount, prescribed by section 63(1) of the Value Added Tax Act 1994.  No mitigation has been allowed because, the Commissioners say, the error was made despite the Appellant’s having received appropriate advice from an officer, and because no grounds for mitigation have been put forward.  
2.	When the appeal was called on for hearing, the Commissioners were represented by Richard Mansell of their Solicitor’s office, but there was no-one present to represent the Appellant.  It appeared to me that notice of the hearing had been properly given and, in the absence of any explanation of the Appellant’s failure to procure representation, I decided to hear the appeal in the Appellant’s absence, in accordance with rule 26(2) of the Value Added Tax Tribunals Rules 1986 (SI 1986/590) as amended.  I later learnt, after I had announced my decision and had left the hearing centre, that the Appellant’s director had arrived late, having lost his way.  If the Appellant is aggrieved by this decision, and wishes to do so, it may apply to have this decision set aside and to have the appeal heard again; any such application must be made within 14 days of the release of this decision.
3.	It was apparent from the information provided to me by Mr Mansell that the Appellant had applied to become registered for VAT with effect from 16 September 2003.  The application was not accepted at face value, and an officer, Barry Bartley, undertook a visit at which he discussed the Appellant’s business with its director, Navin Dhir.  I was provided with a statement made by Mr Bartley in which he states that Mr Dhir told him that, although the Appellant’s turnover had not reached the registration threshold, and its supplies (he thought) would be mainly zero-rated, its customers, large building contractors, insisted that their suppliers should be registered for VAT purposes and it was for that reason that registration was required.  Mr Bartley accepted that explanation and the Appellant was duly registered.
4.	However, Mr Dhir seems to have formed the view that, even though the Appellant was registered, it did not need to charge VAT on any of its supplies until its turnover had reached the threshold.  Its return for period 11/03 – apparently the first it had rendered – shows that supplies had been made in the period, but no output tax liability is disclosed (although a modest input tax credit is claimed).  Unfortunately for the Appellant, once it became registered, it was required to charge VAT on all of its positive-rated supplies, whether or not its turnover exceeded the threshold.  Mr Dhir appears to be complaining that Mr Bartley offered misleading advice.  While I can accept that Mr Dhir might have misunderstood what he was told, I cannot accept that an officer of HM Revenue & Customs would not be aware of the rule, which is elementary, nor that the advice actually given on the point would be ambiguous.
5.	The Appellant’s mistake triggered the imposition of a penalty because the value of the tax under-declared exceeded 30 per cent of the correct amount.  The Commissioners and, on appeal, the tribunal can reduce the penalty from the standard 15 per cent if mitigating factors are shown but I must agree with the Commissioners that, at least so far, no such factors have been shown and there is no ground on which I could properly reduce the penalty.  There was an error in the calculation of the penalty as it was originally imposed, but that error has been corrected and I am not aware of any challenge to the arithmetic of the revised penalty.
6.	In those circumstances I must dismiss the appeal.

COLIN BISHOPP
CHAIRMAN
Release Date: 22 December 2005
MAN/05/0612
££D D Group Ltd v Revenue and Customs [2005] UKVAT V19405 (22 December 2005)