20053

VAT – PENALTIES  —  default surcharge  —  no appearance for Appellant  —  Appellant requesting payment of VAT by instalments  —  request made on final date for payment of tax  —  payment by instalments agreed but on terms that default surcharge would be payable  —  no reasonable excuse for avoiding surcharge shown —  appeal dismissed  

MANCHESTER TRIBUNAL CENTRE

 
 	
					GOODACRE CARPETS OF KENDAL LTD	Appellant

- and -

THE COMMISSIONERS FOR
				HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

Tribunal: Michael Johnson (Chairman)
  Kathleen Ramm FCA

Sitting in public in North Shields, Tyne and Wear on 23 January 2007

The Appellant did not appear and was not represented
 
Kim Tilling, of the Solicitor’s office of H M Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2007

DECISION

1.	1.	This appeal concerns a default surcharge for £484.91 imposed in respect of the Appellant’s VAT accounting period 06/06.  The Appellant is seeking to have that surcharge set aside pursuant to s 59(7) of the Value Added Tax Act 1994 (“the Act”).

2.	Earlier today (23 January 2007) Sue Little of the Appellant sent a “faxed” letter to the Manchester Tribunal Centre to say that John Beresford, the Finance Director of the Appellant was unable to attend today’s hearing.  That letter did not in terms request a postponement of the hearing, although that may have been what was intended.  However we think that the letter might equally be construed as an invitation to proceed to hear the appeal in Mr Beresford’s absence.  

3.	The letter did not indicate that there would be no attendance at all on behalf of the Appellant.  We note from the bundle of documents handed to us by Kim Tilling, representing the Respondents (“HMRC”), that Peter Brookes, Management Accountant of the Appellant appears to have been principally concerned with progressing this appeal on behalf of the Appellant, although Mr Beresford did write two letters to HMRC relevant to the appeal, respectively dated 7 August and 30 August 2006.  As we see it, whilst we appreciate that the Appellant’s business is located at a distance from the tribunal centre in Kendal, Cumbria, Mr Brookes or someone else could have attended to present the appeal, if not Mr Beresford.

4.	Bearing in mind the appeal’s apparent lack of merits, as perceived by us, we saw no reason to postpone the hearing to another date.  We therefore decided to proceed with the hearing of the appeal pursuant to rule 26(2) of the Value Added Tax Tribunals Rules 1986 (as amended), as we are empowered to do.

5.	It is clear from the documents that the Appellant was in cash-flow difficulties last year.  In respect of its VAT quarter ending 30 June 2006, it found itself able to pay just £12,000 of the £36,245.76 VAT shown as due in its VAT return for that quarter.

6.	The Appellant, in a letter to the Default Surcharge Appeal Team of HMRC dated 17 August 2006 written by Mr Brookes, referred to its application dated 7 August 2006 to pay its VAT liability for that quarter by three instalments.  The letter of 17 August continued as follows:

“We would like to appeal against the default surcharge of £484.91, dated 11 August 2006, on the grounds that we are currently awaiting a decision as to whether our suggested repayment plan is acceptable.”  

7.	Miss Tilling informed us that the application to pay the outstanding tax by instalments was initially declined by HMRC.  Later HMRC relented and agreed to allow payment by instalments.  However we are satisfied that they only did this on terms that a default surcharge would be payable in accordance with s 59 of the Act on the balance of tax remaining due in respect of the 06/06 quarter. 

8.	In calculating the tax outstanding, HMRC treated the £12,000 initially paid towards the Appellant’s tax liability as properly to be disregarded in arriving at the tax due.  The surcharge has therefore been calculated at the rate of 2 per cent on the balance of £24,245.76.

9.	We only have jurisdiction where the circumstances are such as are mentioned in s 59(7)(a) or (b) of the Act.  The fact that the Appellant may have been awaiting a decision as to the acceptability by HMRC of the payment of tax due by instalments, or indeed the fact of HMRC having agreed to such arrangements, are not in our judgment meritorious grounds of appeal. 

10.	There are two reasons for this.

11.	Firstly, the application to pay tax by instalments was only made on 7 August 2006 – the final date for payment of the tax due by electronic means.  It follows that, whichever way the application might be resolved, the application cannot amount to an excuse for not paying the tax by the due date.

12.	Secondly, it was always open to HMRC to agree to the application only on terms that the default surcharge should be payable in respect of so much of the tax as had yet to be paid.   That is what they did, and it was on that basis that the Appellant agreed to fulfil its part of the instalment agreement.  There is nothing irregular about the agreement having been on that basis; indeed it is precisely what one would expect, having regard to the terms of s 59(4) and (6).

13.	We accordingly indicated to Miss Tilling at the conclusion of the hearing that we were not of the view that we could allow the appeal.  This written decision has been prepared subsequently to set out our reasons for dismissing the appeal.  

14.	No application for costs was made and none are awarded.

MICHAEL JOHNSON
CHAIRMAN
Release Date: 20 February 2007
MAN/2006/0664