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	United Kingdom VAT & Duties Tribunals Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> Words Worldwide Ltd v Revenue & Customs [2008] UKVAT V20721 (27 June 2008) URL: http://www.bailii.org/uk/cases/UKVAT/2008/V20721.html Cite as: [2008] UKVAT V20721

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20721

VAT – default surcharge – non service of notice – appeal allowed in part

MANCHESTER TRIBUNAL CENTRE

WORDS WORLDWIDE LIMITED Appellant

and –

HER MAJESTY'S COMMISSIONERS OF

REVENUE AND CUSTOMS Respondents

Tribunal: Richard Barlow (Chairman)

John Lapthorne FCMA (Member)

Sitting in public in North Shields on 12 May 2008.

Mr. Peter Kelway (director) for the Appellant

David Mohyuddin, counsel, instructed by the Solicitor for HMRC Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2008


 


DECISION
1. This appeal is against default surcharges imposed on the Appellant in the following amounts: £152.04 for the prescribed accounting period ending June 2006, £98.73 for the period ending September 2006 and £213.77 for the period ending September 2007.
2. Originally the Appellant had only appealed against the surcharge of £213.77 but, with the agreement of the respondents, the appeal was extended to cover the three defaults referred to above.
3. The default for period ending June 2006 was not the first default. The Appellant had also defaulted in respect of periods ending December 2004, March 2005 and March 2006 so that the company was, in principle, in the default regime from December 2004 and remained so throughout the period in question in this appeal. However, the surcharge of £152.04, which was at the 10% rate because of the earlier defaults, was the first occasion on which a surcharge had been imposed because the earlier periods that gave rise to liabilities for surcharges fell within the Commissioners' "de minimis" limits and so no actual surcharges were issued and those periods gave rise to surcharge liability extension notices only.
4. Mr. Kelway did not put forward any reason that could be described as a reasonable excuse for the late payment of the sums due. The only reason given was that the company had cash flow difficulties and he thought it had a few days' leeway to make the payments. The returns were late because he thought that he could not make a return if he was not making the payment.
5. Those reasons would not amount to a reasonable excuse for late payment in any event and they are precluded from even being considered as reasonable excuses by section 71(1)(a) of the VAT Act 1994 which precludes an insufficiency of funds from being relied upon as a reasonable excuse. Nothing was put forward as a reasonable excuse arising from an unexpected and insurmountable lack of funds in the sense that sometimes gives rise to a reasonable excuse despite section 71(1)(a) where the unexpected nature of the insufficiency rather than the insufficiency itself can be considered an excuse.
6. Mr. Kelway said that none of the surcharge or extension notices had come to his attention until a distraint notice was issued after the last surcharge which claimed payment of all three surcharges.
7. He asserted that the staff employed by the company who dealt with the post had not received the notices either but that was on the basis only that they would have brought them to his attention if they had arrived.
8. I find it most unlikely that none of these notices would have come to the Appellant's attention and that on the balance of probabilities the notices did come to the Appellant's attention.
9. There is however one very significant exception to that finding.
10. Documents produced at the hearing show that the surcharge liability notice extension for the period ending March 2006 was sent to the Appellant on 12 May 2006 addressed to Ash House, Belle Villas, Ponteland. Service of such notices is good service, by reason of section 98 of the VAT Act 1994, if it is sent by post to the "last or usual residence or place of business" of the person to be notified.
11. On 3 May 2006 the Grimsby office of the Respondents had received a notice from the Appellant informing them that its address had changed to 9 Military Road, Heddon on the Wall.
12. It follows that the Commissioners cannot rely on posting to Ponteland on 12 May as due service under section 98. They might be considered a little unfortunate in that respect because the notice to the Grimsby Office had probably not filtered through to all the necessary places by 12 May but that is the legal position.
13. Actual notice would, of course, suffice in stead of the deemed notice under section 98 but the evidence of Mr. Kelway was that notice was not received. Whilst I find that it rather unlikely that all the notices failed to arrive there is no evidence that this particular notice would have been or was forwarded from the incorrect address. Again, it might have been prudent for the Appellant to have had post forwarded but it was not put to Mr. Kelway that that had occurred and I am not prepared to assume that it did. It would have been open to the Respondents to have a system in place for checking that post like the notices in question )which are undoubtedly recorded on the Respondents' computer) are re-sent to the correct address where they have been posted to the old address between the date of notification and the date the new address is entered into the computer system.
14. The consequence of those findings is that the surcharge liability notice extension in respect of period ending March 2006 ceases to have effect and, as the previous notice was in respect of a period that was more than twelve months before the default in respect of the period ending June 2006, the surcharge in respect of the period ending June 2006 is discharged and the notice in respect of that period becomes a liability notice. The subsequent defaults then become applicable at 2% in stead of 15% for period ending September 2006 and 5% in stead of 15% for period ending September 2007.
15. The surcharges for those periods are then reduced from £98.73 to £13.64 and from £213.77 to £71.26 respectively. I understand that those amounts fall within the de minimis limits usually applied by the Respondents but the tribunal has no power to direct the Respondents to apply those limits, which are applied in exercise of their discretion under their care and management powers not by any statutory provision binding them to that action.
16. The appeal is allowed to the following extent. The surcharge of £152.04 is discharged and the other two are reduced as in the previous paragraph.
Richard Barlow CHAIRMAN Release date: 27 June 2008

MAN/08/0118