20312

DEFAULT SURCHARGE – Reasonable excuse – Insufficiency of funds not a reasonable excuse – Appeal dismissed

LONDON TRIBUNAL CENTRE

MR & MRS KOSE	           Appellants

-	and –

THE COMMISSIONERS FOR HER MAJESTY’S REVENUE & CUSTOMS 	 Respondents

Tribunal:	THEODORE WALLACE (Chairman)

Sitting in public in London on 15 August 2007

The Appellants did not appear and were not represented

Simon Chambers, advocate, for the Respondent Commissioners

© CROWN COPYRIGHT 2007

DECISION

1.	This was an appeal against a default surcharge of £523.29 for late payment of VAT for the period ending 30 September 2006.

2.	When the Appellants did not appear, the Clerk telephone Mrs Kose who said that she was running the business on her own and asked the Tribunal to consider the appeal in her absence.  This the Tribunal did under Rule 26(2).

3.	The default was the sixth default and attracted a surcharge of 15 per cent.  The VAT for period 03/06 was paid late in three instalments.  The VAT for 06/06 was paid on time.  The return for 09/06 was recorded as received on 10 November 2006, the VAT of £3,488.29 being paid in December.

4.	The notice of appeal stated,

“This penalty is a huge amount for a small business which is still in its third year.  We are still having to put all our money back into the business, which therefore makes this penalty hard.”

5.	From the notepaper it appears that the Appellants are retailers, trading in French and Italian Lingerie at St Neotts, Cambridge.  Earlier returns show quarterly sales fluctuating between £29,086 in 03/06 and £43,138 in 12/05.  There was nothing to indicate bad debts, late receipts or any other unforeseeable problems.

6.	Mr Chambers said that there was nothing to indicate sales on credit; it appears that the Appellant was basically a cash trader.

7.	He cited the decision in Greengate Furniture Ltd v Customs and Excise Commissioners [2003] V&DR where the Tribunal decided that the default surcharge regime was not devoid of reasonable foundation and was therefore not incompatible with EU law.

8.	Apart from referring in the Notice of Appeal to the need for cash in its early years, the Appellant did not advance any reason for the default.  It would appear that the business is under-capitalised.

9.	Mere insufficiency of funds is excluded from being a reasonable excuse by section 71(1)(a) of the VAT Act 1994.  The Appellant has not established any underlying cause for the insufficiency which might constitute an excuse, see Customs and Excise Commissioners v Steptoe [1992] STC 757.

10.	The Tribunal has no power to mitigate the surcharge which is at a rate set by Parliament.

11.	The appeal is dismissed.

THEODORE WALLACE
CHAIRMAN

RELEASED: 22 August 2007

LON/2007/757