20534

VAT – Default surcharge – Taxpayer apparently alleging that no surcharge liability notice received – Appeal dismissed – Discussion of time for submission of return when payment made electronically: Regulation 25(4L) VAT Regulations 1994

LONDON TRIBUNAL CENTRE

	IBBD LTD	           Appellant

-	and –

	THE COMMISSIONERS FOR HER MAJESTY’S REVENUE & CUSTOMS 	 Respondents

				Tribunal:	CHARLES HELLIER (Chairman)

Sitting in public in Cardiff on 14 December 2007

The Appellant did not appear and was not represented

Gloria Orimoloye, solicitor, instructed by the Solicitor to HMRC, for the Respondents

© CROWN COPYRIGHT 2007

DECISION

1.	The Appellant had been notified by the Tribunal of the place and time for the hearing of the appeal.  The Tribunal’s clerk attempted to telephone the Appellant at the number given on the Appellant’s notepaper and on its appeal form.  The number was unobtainable.  The Tribunal decided to proceed in the absence of the Appellant.

2.	The Appellant appealed against a default surcharge of 5% of £8,896.46 i.e. £444.82 in respect of the period to 31 March 2007 (the 03/07 period).

3.	There were before the Tribunal two letters from the Appellant to HMRC dated 13 June and 11 July 2007.  These letters were appended to the Appellant’s Notice of Appeal.  In that notice the Grounds of Appeal were `Please see copy letter to HMRC dated 13/06/-7 (attached)”.

4.	These letters in my view disclosed only two possible grounds of appeal:-

(i)	that there had been a postal delay in the delivery of the Appellant’s VAT return; and
(ii) 	that the Appellant had not received the Surcharge Liability Notice which was a prerequisite for the imposition of a surcharge under section 59 VATA.

Other complaints were made in those letters but none of them were relevant to the operation of section 59 VATA 1994 – the section which creates the default surcharge liability.

5.	The Respondents assert that:-

(i)	for the period ended 31 March 2006 (the 03/06 period) the Appellant paid its VAT late; 

(ii)	for the period ended 30 September 2006 (the 09/06 period), the Appellant paid its VAT late; and

(iii)	for the 03/07 period, the Appellant paid its VAT late.

In each case there was no assertion by the Appellant or evidence to the contrary.  I find as fact that for each of those periods the VAT was paid late (i.e. it was received by the Commissioners after the date set for the relevant period by the VAT Regulations 1995 SI 1995/2518).

6.	The Respondents also assert that the Appellant’s return for 09/06 was received by them on 4 May 2007.  The Appellant’s correspondence discloses no assertion or evidence to the contrary,  I find as fact that it was received on that date.

7.	Section 59 VAT Act 1994 provides that a person is in default in respect of a period if either:

(i)	his return is not received by the Commissioners in time; or
(ii)	the VAT payable on that return is not received by the Commissioners in time.

But, broadly, section 59(7) provides that a default giving rise to a surcharge may be ignored if the return or the VAT was dispatched so that it was reasonable to receive it on time or if he has a reasonable excuse for the delay.  The Appellant’s correspondence proffers no such excuse in relation to the late payment of the VAT: payment was made electronically and no claim of excuse for late payment or reasonable expectation of timely receipt is made.

8.	The Appellant’s letters do disclose a potential claim to an excuse in respect of a VAT return.  However there is only a need to consider such an excuse if the return was submitted late.  For the reasons in paragraphs 15ff below I conclude that it was not submitted late.  At this stage therefore I conclude that the Appellant was in default, by reason of late VAT payment only in respect of 03/06, 09/06 and 03/07.

9.	If a person is in default in respect of a period the Commissioners may serve a Surcharge Notice specifying a period (a `surcharge period’) beginning with the date of that notice and ending 12 months after the end of the period of default.  If, after the service of that notice, the taxpayer is in default again in respect of a period ending within that default period then these consequences follow:-

(i)	the Commissioners may serve a notice extending the surcharge period so that it ends 12 month after the end of the period of that subsequent default; and
(ii)	the taxpayer becomes liable to a default surcharge broadly being 2%, 5%, 10% or 15% of the unpaid tax for the period of the subsequent default: the percentage being determined respectively by reference to whether the default is the first, second, third, or fourth or later default in the surcharge period.

The legislation makes clear, however, that without the service of a surcharge liability notice which creates or extends the surcharge period such that it coves the period of default, no liability to a surcharge in respect of that period can arise.

10.	The Commissioners assert that:

(i)	on 12 May 2006 they issued and posted a notice in respect of the 03/01 default specifying a surcharge period beginning on 12 May 2006 and ending on 31 March 2007; and
(ii)	that notice was received by the Appellant.

11.	If the Commissioners are correct then the Appellant is liable to the surcharge assessed.  That is because:

(i)	the 12 May notice embraces the period 12 May 2006 to 31 March 2007;
(ii)	I have found that the Appellant was in default in respect of 09/06 which fell within this period: that would have been the first default in the surcharge period;
(iii)	I have found the Appellant was in default (in relation to its late payment) in respect of 03/07 which also falls within the surcharge period created by the notice, and would have been the second default period in that surcharge period.

Accordingly the issue for me is whether or not a surcharge liability notice was served upon the Appellant in respect of 03/06.

12.	The Appellant’s letter of 13 June 2007 asserts that Mr Brooks, the managing director of the Appellant, has “confirmed that I know of no such issue/notice”.  I took this as an assertion that the notice dated 12 May 2006 was not served on the Appellant.

13.	Since the Appellant did not appear at the hearing there was no way for the Tribunal to test Mr Brooks’ statement: what enquiries or searches had he made?  What controls were there over the post?  Could it have got lost or overlooked?  Was he referring to the 12 May 2006 letter? Mrs Orimoloye told us that the Commissioners’ system indicated that the letter had been sent and that it was rare for letters which the systems indicated had been sent to go astray.  I remind myself that the onus is on the Appellant to provide evidence to prove any point he relies upon (at least to the extent of making a credible case whereafter the burden may shift to the Respondents).  I am not convinced by the Appellant’s assertions.  I find that the notice was served.

14.	On this basis I dismiss the appeal.

15.	I indicated at paragraph 8 above and at the hearing that I did not consider that the Appellant’s VAT return for 03/07 was received late.  Mrs Orimoloye asked me to set out my reasons for that.  I do so in the following paragraphs.

16.	A person is in default for the purposes of section 59(1) if “by the last day on which [he] is required in accordance with regulations under this Act to furnish a return … the Commissioners have not received that return.”

17.	Regulation 25(1) of SI 1995/2518 requires that a registered person “shall in respect of [any VAT period] not later than the last day of the month next following the [period] to which it relates make to the controller a return …”  Thus Regulation 25(1) required the return for 03/07 to be received by 30 April 2007.  It was received on 4 May 2007.

18.	But Regulation 25(4L) provides that “Additional time is allowed to make a return for which any related payment is made solely by means of electronic communications.” The Appellant’s payment for 03/07 was made wholly electronically.

19.	Regulation 25(4L) continues: “The additional time is only as the Commissioners may allow in a specific or general direction …  The Commissioners need not give a direction pursuant to this paragraph.”

20.	On the back of the VAT return appears the following:

“you may receive [up to] 7 days extra time if you make electronic payment.”;

and at paragraph 21.3.1 of the April 2002 VAT Guide (Notice 700) published by the Commissioners it is said that if a taxpayer pays by electronic means:

“you may receive up to 7 extra calendar days for the return … to reach us.”

21.	As the Tribunal said in R H C Lifting Limited 2006 (VATD 19433) and Hans Christian Beir 2006 (VATD 19441) these statements appear to be a general direction by the Commissioners authorised by Regulation 25(4L).  Accordingly where payment is made electronically (whether or not received on time) the date for the receipt of the return is extended by 7 calendar days.

22.	Thus it seems to me that the date by which the regulation required the Appellant to ensure that the Commissioners received the 03/07 return was 7 May 2007.  It was received on 4 May 2007.  The Appellant was therefore not in default in respect of the delivery of the return.

23.	But as I have said for other reasons this appeal is dismissed.  I make no award of costs.

CHARLES HELLIER
CHAIRMAN

RELEASED: 16 January 2008

LON 2007/1251