20406

DEFAULT SURCHARGE –change of accounting period agreed in October 2006 – Appellant did not receive a return form for the accounting period ending on 30 September 2006 but did receive a return form for the one-month period ending on 31 October 2006 – Appellant treated the return form as for an accounting period of four months – whether a reasonable excuse for the delay in sending the return and tax for the accounting period ending on 30 September 2006 – yes – appeal allowed – VATA 1994 Ss59(7)(b) 

LONDON TRIBUNAL CENTRE

RUMLINE LIMITED
Appellant

 - and -   	

THE COMMISSIONERS FOR HER MAJESTY’S 
REVENUE AND CUSTOMS 
Respondents

Tribunal: DR A N BRICE
 MRS C S De ALBUQUERQUE

Sitting in London on 3 October 2007

Mr M P C Simpson, a director of the Appellant, for the Appellant 

Ms G Orimoloye, Advocate in the Office of the Solicitor of HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2007

DECISION

The appeal
1.	Rumline Limited (the Appellant) appeals against a default surcharge penalty of  £628.26. The penalty was imposed by the Commissioners or Her Majesty’s  Revenue and Customs (Customs) because the value added tax return and the tax due for the accounting period ending on 30 September 2006 were not received in time

The legislation
2.	Section 59 of the Value Added Tax Act 1994 provides that where a value added tax return, or the tax due, is not received by Customs in time the taxable person is in default. A surcharge is imposed for the second and subsequent defaults. However, section 59(7)(b) provides that a taxable person is not liable to a surcharge if he satisfies the Tribunal that there is a reasonable excuse for the delay.

The evidence
3.	A bundle of documents was produced by Customs. We heard oral evidence from Mr Michael Peter Coleridge Simpson, a director of the Appellant. We found Mr Simpson to be a reliable witness and we accept his evidence. 

The facts
4.	Before October 2006 the Appellant made returns for the accounting periods ending on 30 September, 31 December, 31 March and 30 June in each year.  On 2 October 2006 the Appellant wrote to Customs asking if it could amend the dates for rendering the returns so as to coincide with its financial year end which was on 31 July in each year. Customs wrote to the Appellant on 11 October 2006 to say that the request had been approved and that the accounting periods would “now end on the last days of April, July, October and January” in each year. The letter went on to say:

“Before this change becomes effective you may receive a return form under the old arrangements. If this happens you must complete the return form and send it to the VAT Central Unit in Southend-on-Sea by the due date specified on the form.”

5.	Under the old arrangements the return form for the accounting period ending on 30 September 2006 should have been received by Customs by 31 October 2006. Mr Simpson said that the Appellant did not receive a return form for the accounting period ending on 30 September 2006. What the Appellant did receive was a return form for an accounting period of one month ending on 31 October 2006. That form had to be returned to Customs so that it was received by 30 November 2006.  Realising that the Appellant had not accounted for the tax which would have been due on 30 September, Mr Simpson amended the return form to show that it was for a four-month period from 1 July 2006 to 31 October 2006. He completed the return form on that basis and sent it with the tax due for those four months. 

The arguments  
6.	For the Appellant Mr Simpson argued that there was a reasonable excuse for the delay because he had not received a return form for the accounting period ending on 30 September 2006. He had assumed that this was because of the agreed change to the accounting periods and so he had treated the return he did receive as for a four month period. For Customs Ms Orimoloye argued that the return form for the accounting period ending on 30 September 2006 was issued to the Appellant on 17 September 2006 before Customs received the letter of 2 October 2006. The return form had not been returned to Customs and she contended that it must have been received by the Appellant.  The return form for the period ending on 31 October 2006 was for one month only. 

Reasons for decision
7.	We accept the evidence of Mr Simpson that the Appellant did not receive the return form for the accounting period ending on 30 September 2006. We also accept that it was issued by Customs on 17 September 2006 but post can get mislaid. We also note that the letter to the Appellant from Customs dated 11 October 2006 stated that the Appellant “may” receive a return form under the old arrangements and “if this happens” it was to be completed and returned to Southend. It is surprising that the letter was not more definite as Customs must have known that they had sent the return to the Appellant on 17 September.

8.	In view of the agreed change to the accounting periods we are of the view that it was reasonable for Mr Simpson to conclude that, as he had not received a return form under the old arrangements, he did not have to send it to Southend. It was also reasonable for Mr Simpson to conclude that he should return the return form he did receive (for the period ending on 31 October 2006) and should use that form to return the tax due for the months of July, August, September and October 2006. 

Decision     
9.	Our decision is that the Appellant did have a reasonable excuse for the delay in sending a return and paying the tax for the accounting period ending on 30 September 2006.

10.	That means that the appeal is allowed. 

DR NUALA BRICE

CHAIRMAN

RELEASE DATE: 24 October 2007

LON/2007/0937
17.10.07