First-tier Tribunal (Tax)

[2010] UKFTT 52 (TC)

TC00365

Appeal number TC/2009/14750

 EC SALES LIST – Appellant started new business- failure to complete appropriate returns – received ‘help letter’ – “penalty warning letter” – penalty notice in sum of £500 - no reasonable excuse – appeal dismissed

FIRST-TIER TRIBUNAL

TAX

                                          CORRIFORM LIMITED                         Appellant

                                                                      - and -

THE COMMISSIONERS FOR HER MAJESTY’S

                                  REVENUE AND CUSTOMS (income tax)                                                                                      Respondents

                                                TRIBUNAL: David S Porter         (Judge)

                                                                        Derek Robertson     (Member)                                                                    

Sitting in public in Manchester on 12 January 2010

Bernard Jones, Managing Director, for the Appellant

Mrs KimTilling, a solicitor instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.     Bernard Jones, on behalf of Corriform Limited (the Appellant), appeals against a civil penalty of £500 contained in a notice dated 28 April 2009 arising from the Appellant’s failure to return an EC Sales List for the periods03/08, 06/08 and09/08. Mr Jones explains that the company’s cashier left the company in April 2008 and did not complete the return that had been alerted by a ‘help letter’. The Appellant had subsequently employed an accountant. The Appellant operates in the construction industry and has struggled to maintain and grow its business.  The Respondents say that the Appellant had had more than adequate time, and warnings, to complete its returns timorously and it did not have a reasonable excuse for its failure.

2.     Mrs Kim Tilling appeared for the Respondents and produced a bundle for the tribunal. Mr Bernard Jones, Managing Director, and Mr Peter Donald appeared for the Appellant.

3.     We were referred to the following case:

·       John Proops T/A J P Antiques London Tribunal Centre: Decision number 16409.

The Facts.

4.     The Appellant constructs beams and ground beams for the construction industry. It had patented the construction of the beams in polypropylene and started trading in 2001. It had moved into exporting in 2005 and had approximately 15 to 20 customers in Holland and Belgium. Mr Jones accepted that the quarterly returns had not been returned on time. He alleged that the form for the period 09/08 had not been received and he had requested a duplicate. Mrs Tilling said that all the returns were duplicates. The Appellant had employed a book-keeper, who had been completing the forms, but she gave a months notice and left in April 2008. She had not completed the return for the period ending 03/08, which was due to be returned by 12/5/08. The Appellant decided to instruct a firm of accountants to act on its behalf to complete both the VAT and E C Sales lists. Mr Jones accepted that the defaults were as under:

Ref              Period          Due date      Date          Default         Notice       Penalty  

                                                             received      Days

Mr Jones said that although the business was growing, there were only a few employees and he had not had time to complete the returns. He confirmed that the Appellant was now up to date with its returns.

The Law.

5.     Section 66 of the Value Added Tax Act 1994 requires a person to submit an EC statement within the prescribed period and if it is not received then that person is in default. The Respondents are required to serve a notice of default, but usually serve a help notice to give the trader an opportunity to file his returns before the penalty notice is served. The Respondents then serve the default notice, which puts the traders on notice that if he fails to file the EC sales list within the following period he will receive a penalty of the greater of £50 or £5 per day for every day he is late up to a maximum of 100 days. If the trader remedies the position within 14 days of receiving the notice, then no action will be taken against him. Once the trader has received a penalty notice he will remain in the penalty regime for a further 12 months. The 12 months will be ongoing from any default he makes in that period of 12 months until he has not had any defaults for a continuous 12 month period.

Subsection 7 (b) a trader will not be in default if he had a reasonable excuse.

In John Proops T/A J P Antiques London Tribunal Centre: Decision number 16409

The Appellant had not received a return and had failed to ask for a duplicate return. The Tribunal Chairman decided that it was for the trader “.. to obtain the form when it was easily within his power to do .” and the trade’s failure to do so does not provide the Appellant with a reasonable excuse. It is the taxpayer’s responsibility to complete and submit the EC Sales list by the due date …..”

Submissions

6.     Mrs Tilling submitted that the E C Sales list was required so that all European transactions are recorded and available to the various countries to verify the movement of goods and the business involved. Mr Jones had accepted ,on behalf of the Appellant, that it was in default. She submitted that even if the Tribunal found that the Appellant had a reasonable excuse for the first default, which gave rise to the ‘help letter’, this would not assist the Appellant. Unlike the provisions in the VAT ‘default surcharge’ regime, the allowance of a reasonable excuse in relation to the first default would not have the effect of reversing the sequence, so that the penalty notice became the ‘help letter’ and the penalty became the penalty notice and the penalty of £500 would fall. The Appellant appears to have had the assistance of an accountant prior to receiving the ‘help letter’ in 17 July 2008 and does not therefore have a reasonable excuse and the penalty should stand.

7.     Mr Jones submitted that the Appellant had established the business in Europe in 2005 encountering all the problems inherent in setting up a business enterprise. The loss of the cashier in April 2008 meant that the first of the returns had not been completed. He accepted that the Appellant was aware of the defaults and that it had received the default correspondence. He considered a penalty of £500 was unwarranted given the difficulty the Appellant was experiencing during the “credit crunch”, when it needed all the assistance it could get. He had now instructed a firm of accountants and the Appellant was compliant. In the circumstances the penalty should be withdrawn.

Decision

We have considered the facts and the law and we dismiss the appeal. The Appellant has confirmed that the defaults are correct and conceded that it was late with all the returns. We are satisfied that duplicate returns had been supplied and we are surprised that having involved an accountant there were continuing delays. We do accept that the departure of the cashier in April 2008 would have led to a delay in providing the first return due by 12 May 2008. It might have amounted to a reasonable excuse if the return had been submitted by June or July at the latest. It was not, in fact, submitted until 4 August 2008 and then only after the ‘help letter’ of 17 July 2008. For a reasonable excuse to be effective, action must be taken as soon as reasonably possible within the allocated time span. There is, however, no reasonable excuse for the other two defaults incurred by the Appellant and the penalty of £500 must stand. As the Respondents have made no request for costs none are awarded.

8.     The Appellant has a right to apply for permission to appeal against this decision pursuant to Rule 39 of the Rules.   The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

                                           TRIBUNAL JUDGE

RELEASE DATE: 29 January 2010