20165

DEFAULT SURCHARGE – Late payment – Insufficient funds – Appeal dismissed

LONDON TRIBUNAL CENTRE

	ABSOLUTE RESTAURANTS LTD	           Appellant

-	and –

	THE COMMISSIONERS FOR HER MAJESTY’S REVENUE & CUSTOMS 	 Respondents

				Tribunal:	SIR STEPHEN OLIVER QC (Chairman)

Sitting in public in London on 23 May 2007

Mr Sarabjit Singh Ghosal, director, for the Appellant 

Mrs Pauline Crinnion for the Respondents

© CROWN COPYRIGHT 2007

DECISION

1.	Absolute Restaurants appeals against a default surcharge for the period 03/06 at 15% in the amount of £454.  

2.	Mr Sarabjit Singh Ghosal presented the case for Absolute Restaurants and gave evidence.  

3.	The records of the Customs show that the payment and the return were received on 9 May 2006.  Mr Ghosal says that the payment and the return were posted in the middle of the week before 30 April 2006 (a Sunday). 

4.	Absolute Restaurants had been in the default surcharge regime for over a year prior to the default. During the course of 2006 they had been experiencing cash shortages and had been in contact with Debt Management Unit of the Customs.  The Customs records, presented by Mrs Crinnion, show that on 7 April 2006, Customs had not yet received the 12/05 return. They had, according to the records, been told that business had been very slow and that Absolute Restaurants had had cashflow problems. The record goes on to state that Mr Ghosal informed Debt Management Unit that he had used the VAT money received from customers to keep his business going. In the course of the communication between Mr Ghosal and Debt Management Unit of 7 April 2006, Mr Ghosal was advised that the Customs would not allow time to pay in these circumstances. The next entry in the Customs’ records relates to an exchange of calls on Tuesday 25 April. Apparently Mr Ghosal had asked for more time to clear the debt in full, explaining as the reason that he was in the process of selling the business and reducing the staff level. Moreover, Mr Ghosal had explained, the bank was not in the position to help. That was the occasion when Customs told him that his only chance to keep the bailiffs out was to pay £3,000 now and the 03/06 return in full.

5.	It is also relevant to mention that Absolute Restaurants had made electronic payments of VAT in the past.  Bearing in mind that 30 April was a Sunday, why did they not activate an electronic payment at the start of May?  The answer, I think, must be that Absolute Restaurants had no funds and no facilities available to them to enable them to pay the tax shown due on the 03/06 return.

6.	I cannot accept that the return and the cheque were posted by Absolute Restaurants in time to reach the Customs by the end of April.

7.	The only conclusion that I can reach is that Absolute Restaurants had insufficient funds to pay the tax for the 03/06 period by the due date.  I fully recognise that Mr Ghosal was not receiving the help and cooperation that he deserved from his co-director. I also accept that the insufficiency of funds was itself causing pressure on Mr Ghosal. Nonetheless, insufficiency of funds is excluded as a reasonable excuse by the VAT Act.  I am bound, therefore, to dismiss the appeal.

8.	Appeal dismissed.

SIR STEPHEN OLIVER QC
CHAIRMAN

RELEASED: 24 May 2007

LON/2007/81