First-tier Tribunal (Tax)

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URL: http://www.bailii.org/uk/cases/UKFTT/TC/2009/TC00023.html
Cite as: [2009] UKFTT 00023 (TC), [2009] UKFTT 45 (TC)

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Lee Patterson Ltd v Her Majesty's Revenue & Customs [2009] UKFTT 45 (TC) (08 April 2009)
VAT - PENALTIES
Default surcharge

TC00023

VAT – Default surcharge – Reasonable excuse

FIRST-TAX TRIBUNAL

TAX

LEE PATTERSON LTD Appellant

and –

THE COMMISSIONERS FOR HER MAJESTY'S REVENUE & CUSTOMS (VAT) Respondents

Tribunal: CHARLES HELLIER (Chairman)

KEITH DUGDALE FCA

Sitting in public in Norwich on 12 March 2009

Lee Patterson for the Appellant

Pauline Crinnion, instructed by the solicitor to HMRC for the Respondents

© CROWN COPYRIGHT 2009

DECISION

The Appellant appeals against a default surcharge of £504.02 in respect of the 06/08 period (the period ending on 30 June 2008). The surcharge was 5% of the late paid VAT for that period.

We had before us a bundle of copy correspondence and heard the oral evidence of Mr Patterson. Mrs Crinnion provided copies of an exchange of e-mails between one of HMRC's officers and officers of Customs & Excise in the Isle of Man. From that evidence we find the following facts:-

(1) Mr Patterson is a golf professional. He is the principal of the Appellant and through the Appellant provides golf services to the members of the Royal Cromer Golf Club.

(2) Partly as the result of an ill-fated venture with Land of Golf Ltd the Appellant was late in rendering its VAT return and paying the associated VAT for the quarters 06/07 (to 30 June 2007) and 12/07 (to 31 December 2007). A surcharge liability notice was issued in respect of the first period and a surcharge liability extension notice in respect of the second of those periods. No surcharge was levied in respect of the second period.

(3) The surcharge liability notice indicated clearly that the Appellant:

"[might] be liable to a surcharge if you are in default in respect of a [period ending before 30 June 2008]",

the extension notice in respect of the 12/07 default indicated that no surcharge was proposed in respect of that default but that if it defaulted again in respect of any period ending before 31 December 2008

"a surcharge assessment may be made".

(4) The VAT return sent to the appellant for the 06/08 period bore the legend in bold print:-

"if this return and any tax due are not received by the due date you may be liable to a surcharge."

(5) The 06/08 VAT return was due to be submitted by 31 July 2008. The Appellant's bookkeeper prepared the VAT return in good time and gave it to Mr Patterson about a fortnight before that date. All Mr Patterson needed to do was to sign the return and the cheque for the VAT due and send it to HMRC.

(6) At the end of July – on Tuesday 29^th July – Mr Patterson went with his wife to the Glenmore Golf club in Leeds to play at the Glenmore Club Pros Championship. He had intended to send off the VAT return and the cheque before he departed but forgot and left it at home.

(7) The golf tournament lasted from Thursday 31 July to Sunday 3 August with a practice day on Wednesday 30 July. During his practice round Mr Patterson remembered his VAT return. He spoke about it to his wife. His wife suggested he phone HMRC.

(8) He then dialled a directory enquiry service asking for Customs and Excise and was given a number which he phoned. He spoke to a lady who told him not to worry because they could not process all the returns they received at once.

(9) So Mr Patterson took no further action until he got home when on Tuesday 5 August he signed and posted the return and the cheque. They were received by HMRC on 8 August 2008, eight days late.

(10) But, unbeknown to him, the number which Mr Patterson rang was not that of the UK's HMRC enquiry line, but that of Isle of Man Customs & Excise. Thus the advice he received came not from HMRC, but from the service in a different jurisdiction.

(11) Apparently when a person phones a directory enquiry service and asks for Customs and Excise, the Isle of Man number (which is not an "00" prefixed number) tends to be given out. The Isle of Man Customs and Excise receive a number of enquiries in this way from UK traders who we suspect have asked for Customs and Excise rather than HMRC.

(12) The e-mail correspondence kindly produced by Mrs Crinnion between a UK HMRC officer and an officer of the Isle of Man Customs and Excise indicated that if a call is received from a caller they suspect to be a UK trader they give the trader the UK VAT National Advice Number, and that if the caller said that his return was going to be late he would be put in contact with their Debt Management Unit which would ask for the relevant VAT number first. Whilst we accept that this may be the recommended procedure generally in the Isle of Man, we accept Mr Patterson's evidence that he was told not to worry by the person to whom he spoke on this occasion.

(13) The evidence from the Appellant's bank statements indicated that had the VAT been paid on time, there were sufficient funds available (taking into account the available overdraft facility) to meet the payment.

(14) Had Mr Patterson been told in his phonecall that a surcharge would have been levied, he would have made arrangements to ensure that the return and payment would have been received in time. Mrs Crinnion submitted that even if Mr Patterson had made arrangements for the return and VAT cheque to have been posted on 30 July, there would be no guarantee that they would have arrived on 31 July (the due date). But both those days were weekdays and it seems to us reasonable to expect that a letter despatched first class on 30 July would arrive the following day. Mr Patterson made his call to 'Customs and Excise' at 12.11; had he received a different answer we believe he would have arranged despatch in time for the letter to arrive the next day.

The Law

Section 59(7) VATA provides that a person shall not be liable to a surcharge if he satisfies the tribunal that there is a reasonable excuse for the return or the VAT not having been despatched on time.

The Parties' Contentions

Mr Patterson submits that as the result of the advice he received on his telephone call there is a reasonable excuse for the Appellant's default. Had the advice been different he would have made arrangements for the return and the VAT to be sent in on time.

Mrs Crinnion says that the Appellant was aware of the default surcharge regime : the surcharge liability warning notices and the warning on the VAT return made it clear that default could lead to a surcharge. She says that even if the cheque and return had been posted on 30 August that would not have guaranteed timely receipt. Lastly she notes that, had Mr Patterson rung HMRC's advice line on 5 August he would have been advised to pay immediately by CHAPs which would have secured same day receipt of funds by HMRC, and, because of the seven day extension of time limits for electronic payment, would also have secured timeous receipt.

Conclusion

We have found that if Mr Patterson had not received the advice on the phone from Isle of Man customs and Excise the payment and return would have been received on time. The reason or excuse for the late receipt is therefore the fact that Mr Patterson acted upon that advice.

Was it reasonable for Mr Patterson to act on that advice? If it was then the Appellant has a reasonable excuse for its delay.

We concluded – on balance – that it was reasonable to act on that advice. First we note that HMRC's written material and prior actions indicate that a measure of discretion may be exercised in relation to the making of a surcharge : the surcharge liability notices and the overprinting of the returns both indicate that a surcharge "may" be levied; and in relation to the 12/07 default the Commissioners did not propose a surcharge on that occasion. From that we conclude that those documents do not suggest that it would be unreasonable to rely on a discretion being examined in appropriate circumstances. Second we believe that it can be reasonable to rely upon an appropriate assurance given by a person reasonably believed to represent the Commissioners. In this case Mr Patterson sought the number for 'Customs and Excise' rather than 'HMRC' but given the then fairly recent change in name we concluded he acted reasonably in believing he was speaking to someone representing the Commissioners. Third the advice which we found was given to Mr Patterson was sufficiently clear and unequivocal to found a reasonable belief that it would be acceptable for him to send the return and VAT off on his return and for him to act on that advice.

We therefore allow the appeal. Our decision was unanimous. We did not think it appropriate to award costs.

CHARLES HELLIER

TRIBUNAL JUDGE

RELEASED:8 April 2009

LON 2008/2155