20411

VAT DEFAULT SURCHARGE –Appellant’s VAT return and payment dated the same date as the due date – not possible to send the return and payment in time to be received by the Respondents by the due date – no evidence to substantiate a reasonable excuse – Appeal dismissed – application to set aside the decision refused.  

LONDON TRIBUNAL CENTRE

	RANKHOUR LIMITED 	Appellant

	- and -

	HER MAJESTY’S REVENUE and CUSTOMS	Respondents

			Tribunal: MICHAEL TILDESLEY OBE	 (Chairman)
				      SHAHWAR SADEQUE (Member)	  

Sitting in public in London on 29 August 2007

The Appellant did not appear

Pauline Crinnion of the Solicitor’s Office of HM Revenue & Customs for the Respondents

© CROWN COPYRIGHT 2007

DECISION
The Appeal
1.	The Appellant was appealing against a surcharge assessment in the sum of £9,750.85 imposed on 18 January 2007 for the period ending 30 September 2006.
2.	The Appellant did not attend the hearing of the Appeal on 29 August 2007. We decided to proceed in the absence of the Appellant in accordance with rule 26 of the Tribunal Rules 1986. We dismissed the Appellant’s appeal and made no order for costs.
3.	The Tribunal’s decision was set out in accordance with rule 30(8) of the Tribunal Rules 1986, which was released on 4 September 2007.
4.	On 4 September 2007 the Appellant faxed a letter to the Tribunal Office stating that
“We are further surprised to learn that the hearing was commenced in our absence and the Appeal judgment given was “Appeal dismissed”. Accordingly, as there clearly has been a miscarriage of justice under the circumstances, we duly request that the hearing be reinstated and we be duly notified in good time of the date and allowed to attend and defend our position. To do otherwise would be prejudicial against my client”.
5.	On 5 September 2007 the Tribunal Office gave notice in writing that the Appellant’s application to set aside the decision released on 4 September 2007 would be heard on 12 September 2007 not before 10am. The Appellant was advised that if it failed to attend the hearing on 12 September 2007 the Application would be dismissed.
6.	The Appellant failed to attend the hearing on 12 September 2007 with the result that its application to set aside the decision released on 4 September 2007 was dismissed. On 14 September 2007 the Tribunal released its direction dismissing the Appellant’s application.
7.	On 18 September 2007 the Tribunal received a letter from the Appellant dated 10 September 2007 requesting a response to their letter dated 4 September 2007 and written reasons for the decision released 4 September 2007 dismissing the Appeal against the default surcharge.
8.	On 28 September 2007 the Tribunal received a fax dated 26 September 2007 from the Appellant claiming that it had not received notification of the hearing on 12 September 2007. The Appellant also repeated its request for written reasons of the original decision.
9.	On 4 October 2007 the Tribunal responded to the Appellant’s fax received 28 September 2007 enclosing a copy of the fax transmission dated 5 September 2007 informing the Appellant of the hearing on 12 September 2007, and advising that I would be dealing with the written reasons in the week commencing 8 October 2007. The status of the fax transmission was confirmed at 16:19 on 5 September 2007 to 0207 3236476 which was the fax number given by the Appellant on its headed notepaper.
Reasons for Decision dismissing the Appeal against Default Surcharge
Chronology
10.	On 2 February 2007 the Tribunal received the Appellant’s Notice of Appeal dated 1 February 2007.
11.	On 8 February 2007 the Tribunal notified the Appellant at Rankhour Ltd FAO Michelle Rose Walker, 37 Tottenham Court Road, London W1T 1BY, the address given in its Notice of Appeal, of a hearing date of 23 May 2007 at 10.30am .
12.	On 21 May 2007 the Tribunal served the witness statement of Richard John Lang  dated 17 May 2007 upon the Appellant.
13.	On 21 May 2007 the Appellant requested a postponement of the hearing on 23 May 2007 because its in-house solicitor was ill. The Tribunal granted the postponement with the agreement of the Respondents.
14.	On 23 May 2007 the Tribunal notified the Appellant that the hearing had been cancelled and a fresh hearing date would he supplied in due course.
15.	On 30 May 2007 the Appellant’s solicitor enquired of the Tribunal Office about the new hearing date
16.	On 30 May 2007 the Tribunal notified the Appellant in writing that the Appeal would now be heard on 29 August 2007 at 2.00pm at 45 Bedford Square London WC1. The notice was posted to the correct address for the Appellant. 
17.	The Appellant did not attend the hearing on 29 August 2007 at the appointed time. The Tribunal directed the Clerk to contact the Appellant by phone reminding the Appellant of the hearing and giving a new time of 2.30pm. The Appellant’s offices were very close to the Tribunal. The Appellant gave no explanation for not attending  the hearing and did not appear at the new time of 2.30pm. .  
The Decision to Proceed in the Absence of the Appellant
18.	Under rule 26 of the Tribunal Rules 1986 the Tribunal has the discretion to hear the Appeal in the absence of the Appellant. We decided to proceed in the Appellant’s absence because:
(1)	The notice of hearing was sent to the Appellant at its correct address.
(2)	The Appellant gave no explanation to the Clerk when contacted by telephone as to why it had not attended the Tribunal on the date and time set out in the hearing notice.
(3)	The Appellant chose not to attend the hearing at the later time of 2.30pm. The Appellant’s offices were very close to the Tribunal centre.
(4)	Over six months had elapsed since service of the Notice of Appeal.
(5)	The Appeal had already been adjourned once at the request of the Appellant. On that occasion the Tribunal did not insist upon the Appellant’s solicitor producing a doctor’s certificate to substantiate her illness.
(6)	The Appellant made no enquiries of the Tribunal Office of the new hearing date after its telephone call on 30 May 2007. 
(7)	The Tribunal was in the possession of Appeal bundle which set out the Appellant’s case for not imposing the surcharge assessment dated 18 January 2007. 
(8)	The Tribunal inferred from points 1, 2, 3 and 6 above that the Appellant had in fact received the Notice of Hearing dated 30 May 2007.
The Facts regarding the Surcharge Assessment
19.	The Appellant was registered for VAT on 10 April 1990. Its business activity was the retail of electrical and electronic goods.
20.	The Appellant was required to submit its VAT return and payment for the period ending 31 August 2006 by 30 September 2006. The Appellant’s VAT return for this period was dated 30 September 2006 and received by the Respondents on 18 October 2006. The VAT payable under the return was £650,000.68p. A cheque dated 30 September 2006 for the amount of £65,005.68 was enclosed with the return. The return was found to contain an error and was replaced with another return dated 19 October 2006 and received 12 January 2007 correctly stating that the amount of VAT due was £65,005.68.
21.	On 18 January 2007 the Respondents issued a surcharge assessment in the sum of £9,750.85 which represented 15 per cent of £65,005.68. This assessment replaced a previous centrally raised estimated assessment dated 13 October 2006 in the sum of £7,560.96. The assessment was issued because the Appellant was late with its return and VAT payment and already in the default surcharge regime having three previous defaults in the surcharge period.
The Appellant’s Case
22.	 On 18 October 2006 the Appellant wrote to the Respondents requesting withdrawal of the surcharge assessment dated 13 October 2006 on the ground that the return and payment had been sent by the due date. The Appellant attached copies of the cheque and return both dated 30 September 2006 to support its assertion.
23.	In its Notice of Appeal dated 1 February 2007 the Appellant stated that it had a reasonable excuse for the default surcharge which included:
(1)	Possible postal error by Post Office Service.
(2)	Possible misplacement of cheque by the Respondents.
(3)	Illness due to extremely impaired health.
(4)	Date and figure errors by the Respondents.
The Respondents’ Case
24.	Richard John Lang in his witness statement dated 17 May 2007 explained the Respondents’ procedures for receipt of VAT returns. Essentially the majority of the post is processed in a secure area on the same day it is received. The post that is held over is received in plastic stacking boxes in the post processing section with the date of receipt noted on each box. The boxes are then stored in a secure location until the mail is processed. On the opening of the mail the Officers date stamp the VAT return and tick a box on the form if a cheque is enclosed with the correct amount. The empty envelopes are then opened so that the inside of the envelope is fully exposed to ensure that nothing remains inside.
25.	The Respondents pointed out that the Appellant’s VAT return and cheque were dated 30 September 2006 which was the due date for receipt of the return and payment. In those circumstances it would not have been possible for the Appellant to have sent the return and cheque in time for the Respondents to receive them by the due date.
Reasons for the Decision
26.	Section 59 of the VAT Act 1994 requires the Appellant to furnish VAT returns and pay the outstanding VAT within one month of the relevant accounting period.  The Appellant failed to pay the VAT owing by the due date for the accounting period ending 31 August 2006. As the Appellant was subject to a surcharge liability notice throughout the relevant accounting period it was liable to pay a surcharge at the rate of 15 per cent of the VAT due, namely £9,750.85. 
27.	 The Appellant can avoid the default surcharge if it can satisfy the Tribunal on a balance of probabilities that it had a reasonable excuse for not furnishing the VAT return and payment on time or that it dispatched the payment at such time and in such a manner that it was reasonable to expect that it would have been received by the Respondents by the due date.
28.	The Appellant supplied a copy of its VAT return and cheque in support of its original contention that it had sent them in time to be received by the Respondents by the due date of 30 September 2006. However, the copies produced were both dated 30 September 2006 which undermined its assertion that the return and cheque were sent in time to be received by the Respondents on the 30 September 2006. We find that the Appellant’s VAT return and payment for the period ending 31 August 2006 was received by the Respondents on 18 October 2006 which was the date of receipt stamped on the return by the Respondents. 
29.	The defence of reasonable excuse is strictly construed. The legislation takes no account of the difference between the trader who has made a genuine effort to comply albeit without success and the trader who has made very little effort and it takes no account whatever of the extent of lateness. Either the trader is on time or he is not; either he exercises due diligence or he does not. No account is taken of the degree of culpability.
30.	The Appellant’s sole explanation to the Respondents for the late delivery of its return and payment for the period ending 30 August 2006 was that they were sent in time to be received by the due date of 30 September 2006. This explanation had no foundation as it was contradicted by the dates on the return and cheque relied upon by the Appellant. It was only after the Respondents rejected this explanation that the Appellant put forward alternative explanations for the late delivery of the said return and payment. 
31.	The alternative explanations were set out in a list of possible excuses in its Notice of Appeal dated 1 February 2007. The list of excuses was not accompanied by an explanation or supporting documentation.  Two of the potential excuses regarding misplacement of the post and date stamping errors by the Respondents were not supported by the evidence of Mr Lang and the documents themselves. The excuse that there was a potential postal error by the Postal Service was not relevant because it was not possible for the Appellant to send the documents in time as they were dated 30 September 2006.  Throughout the proceedings the Appellant has only mentioned the ill-health of its solicitor which was not the person who signed the VAT returns. We are satisfied that the list of possible reasonable excuses lacked conviction and was not supported by the evidence before the Tribunal. We hold that the Appellant has no reasonable excuse for not sending the VAT return and payment for the period ending 31 August 2006 on time.      
Decision
32.	 We are satisfied from our findings in paragraphs 28, 30 and 31 that the Appellant did not send its VAT return and payment in time for the Respondents to receive them by the due date and that it had no reasonable excuse for the late delivery of the return and payment. We, therefore, dismiss the Appeal and make no order for costs.
The Application for Rehearing on 12 September 2007
33.	On receipt of the Appellant’s fax dated 4 September 2007 complaining about its Appeal being heard in its absence and requesting re-instatement of the hearing, I instructed the Clerk to list the matter before me on 12 September 2007 under rule 26(3) of the Tribunal Rules 1986. I exercised my discretion under rule 19(3) of 1986 Rules 1986 to dispense with the requirement of 14 days notice under rule 23 Rules 1986. The Respondents initially objected to the listing of the application on 12 September 2007 but later withdrew their objection. I formed the view that it was necessary and expedient to ensure a speedy and just determination of the Application to hold it on 12 September 2007 because 
(1)	The nature of the complaint by the Appellant.
(2)	 The hearing would be restricted to the issue about whether the Appeal should re-instated which  involved consideration of the Appellant’s reasons for not attending the hearing on 29 August 2007.  The hearing of the actual Appeal would be heard at some future date if the Application was successful.
(3)	Seven days notice of the hearing was sufficient in the circumstances of the application.
(4)	The interests of justice would be served if I dealt with the application as I was seized of the Appeal and familiar with the details of it. I was due to go on holiday on 14 September 2007 which would mean further delay of at least three weeks in resolving the application.
34.	The notice of the hearing on 12 September 2007 was faxed to the Appellant on 5 September to the fax number on its headed notepaper. The status of the fax was confirmed as at 1619, 5 September 2007. The notice of hearing stated that
“Application to set aside the decision released on 4 September 2007. If the Chairman decides to set aside the decision, the Appeal will be heard on a future date. If the Appellant fails to attend the hearing on 12 September 2007 the application will be dismissed.
35.	The Appellant failed to attend the hearing on 12 September 2007. The Respondents again raised the issue of 14 days notice under rule 23 of Tribunal Rules 1986. I was satisfied that the Appellant had received adequate notice of the hearing and that I could dispense with the 14 days notice under rule 19(3) of Tribunal Rules 1986.
36.	Under rule 26(4) of Tribunal Rules 1986 the Appellant is not entitled to apply to  set aside decision if fails to attend the hearing.  I dismissed the application after taking into account the following factors:
(1)	The Appellant provided no explanation for not attending the hearing despite receiving seven days notice of the hearing which was sent to the Appellant’s fax address.
(2)	The chronology demonstrated that the Appellant was avoiding its responsibilities to prosecute its Appeal.
(3)	The evidence indicated that the Appeal had no reasonable prospects of  success.    

                                 MICHAEL TILDESLEY OBE
CHAIRMAN
RELEASE DATE: 24 October 2007

LON 2007/287