20571

Default Surcharge – reasonable excuse – customer providing substantial cash-flow liquidated – three defaults – the liquidation principally affecting the first.  Held reasonable excuse for that one accounting period.

EDINBURGH TRIBUNAL CENTRE

	F W R COATINGS LTD	Appellant(s)

	- and -

	THE COMMISSIONERS FOR 
	HER MAJESTY’S REVENUE & CUSTOMS	       Respondents

			Tribunal:	 (Chairman):  T Gordon Coutts, QC

Sitting in Aberdeen Sheriff Court on Tuesday 12 February 2008

for the Appellant(s)	Mr Jim Rodda

for the Respondents	Mr Russell Harrison

© CROWN COPYRIGHT 2008.

DECISION

The Appellant appealed against a default surcharge levied in the period ending 02/07 of 15% on his VAT.  

The Managing Director of the Appellant gave evidence to the effect that when Swallow Hotels Ltd, a substantial regular customer, went into liquidation owing the Appellant £70,000 that meant an immediate loss of 75% of his cash flow.  Swallow Hotels was his main customer.  Support for that can be found from the amounts which were due by way of VAT from the Appellant, as shown on a schedule of activities provided by the Respondent.

The critical event leading to continuing surcharge occurred in relation to the period 08/06.  That elevated the amount by way of surcharge to 5%.  It so happened that nothing was payable because of the small amount involved but it did mean that further defaults were liable to surcharge of 10% and subsequently 15%.

The Appellant’s Mr Rodda did not get his tax situation properly organised.  He changed his place of business from Tyne & Wear to Kincardineshire and despite being asked for details in relation to his claim for a review asserting that he should not be surcharged he did not provide at the time the necessary detail explaining how his cash flow had been affected.  That only fully emerged at the Hearing.

Mr Harrison for the Respondent, with his customary fairness, indicated that had the figure of loss of 75% of turnover been put to the Respondents at the proper time they might well have adopted a different attitude.

The Tribunal took the view that at least the surcharge for the period ending 08/06 would have been remitted and it might have been that subsequent periods also would have been excused.

However, on the evidence before the Tribunal and exercising a measure of leniency in the event, and having made allowance for the fact that the Appellant had not done all that it should have done to draw the matter to the Respondent’s attention decided that in the interests of justice and fairness the surcharge for the period 08/06 should be discharged.  The Tribunal was unable however to stretch that compassion for later periods which should have been properly attended to.

The effect of the Tribunals decision is that for the period ending 11/06 the proper surcharge would have been 5% and there would have been no sum exacted by the Respondents because of low value.  However for the period ending 02/07 a surcharge of 10% was correct.  The effect is that the Appellant is due £707.99 which sum he will require to pay.

T GORDON COUTTS, QC

CHAIRMAN

RELEASE:  22 FEBRUARY 2008

EDN/07/109