First-tier Tribunal (Tax)

[2010] UKFTT 154 (TC)

TC00460                    

  Appeal number TC/2009/13770

VAT DEFAULT SURCHARGE – appellant sought to introduce defaults not contained in notice of appeal – objection by respondents – objection upheld - case dismissed.

FIRST-TIER TRIBUNAL

TAX

                            PIC BUILD CONSTRUCTION LIMITED           Appellant

                                                                      - and -

                                 THE COMMISSIONERS FOR HER MAJESTY’S

                                              REVENUE AND CUSTOMS VAT           Respondents

TRIBUNAL:              David S Porter (Judge)

                                    Carole Roberts (Member)

Sitting in public in Liverpool on 19 March 2010

Christopher Owen for the Appellant

Mrs Kim Tilling instructed by the General Counsel and Solicitor to HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.     By a notice dated 3 September 2009 Bernard Davis, a director of the Appellant (PIC Build Construction Limited hereinafter referred to as ‘the company’) appealed against the imposition of 6 default surcharges for the periods 02/08; 05/08; 08/08; 12/08; 12/08 and 04/09 amounting to £18,403.27 on the basis that PIC Build had received incompetent advice with regard to its VAT returns over that period and earlier. The Respondents (HMRC) stated that the company did not have a reasonable excuse

2.     Christopher Owen, a Senior Appeals Consultant of Northgate Company Services Limited, appeared for the company and called Bernard Davis and Robert Burke as witnesses. He also supplied the tribunal with a bundle of documents. Mrs Kim Tilling appeared for HMRC and also produced a bundle of documents for the tribunal.

Preliminary issue

3.     Mr Owen opened the case for company and explained the background to the company’s appeal. At the end of his presentation, Mrs Tilling objected to the matters that he had risen. She said that they bore no relationship to the details contained in the notice of appeal and HMRC had not been advised that the appeal would be on a different basis to the matters set out in the notice. She asked the tribunal to disallow the introduction of such grounds at this late stage. The tribunal refused to allow Mr Owen to argue the appeal on the basis of his submission and, as the company confirmed through Mr Davis that it had no reasonable excuse for the defaults listed in its appeal notice, we dismissed the appeal. It is necessary, however, to set out the grounds on which Mr Owen sought to have the appeal heard, and to explain why we could not agree to his request.

4.     Mr Owen told us that Andrew Norton, a solicitor, had been retained by the company in July 2002 to look after the day to day administration of the company and to complete its VAT returns. It transpired that over the period from August 2002 to his dismissal in July 2005 he had failed to fulfil the administrative role. It was alleged that he had stolen money from the company and that he had also become an alcoholic. As a result, the company wished to argue that it had a reasonable excuse for its failure to pay its VAT giving rise to the two defaults in 08/04 and 05/05. The Judge pointed out that there appeared to have been no defaults for 11/04 and 02/05. As a result, the company must therefore have been able to meet its VAT liabilities for those periods. On that basis, it was difficult to see how the activities of Mr Norton in earlier periods could have affected the payments due in 08/04 and 02/05. Mr Owen also wanted to appeal the surcharge for the period 11/06 on the basis that the portacabins, from which the company operated, had been broken into and the computers containing the appropriate VAT details had been stolen. He produced to the tribunal an unsigned statement by Mr Davis, the original statement he alleged had been signed on or about 25 January 2007. The statement had been provided by the company’s solicitors on one of the occasion when HMRC were seeking to liquidate the company for its failure to pay its VAT on time or at all. It appears that there had been similar applications made earlier by HMRC. At paragraph 16 he stated that the matter had been reported to the police, but that he did not have the crime number. He said he would supply the same to the court as soon as he obtained the copy. That hearing took place in January 2007, by the time of this appeal he was still unable to produce the crime report. We do not know whether a burglary took place, but without the date of the burglary, which Mr Davis could not recall at the tribunal, it is impossible to know which default surcharge period might have been effected. Either way it could not have been the default for 11/06 as this would appear to have been before the burglary. Mrs Maureen Kileen, a freelance bookkeeper, had been instructed on 18 December 2006 to write up the books. She had been on holiday and did not start work until 7 January 2007. In her letter the company’s solicitors dated 29 January 2007, she stated that when she attended at the company’s premises, presumably on or sometime after 7 January 2007, the premises had been vandalised.  The next default by the company after 11/06 was 05/07. Again there appears to be a gap in the defaults and payment appears to have been made for 02/07 so that period could not have been involved with the burglary, or alternatively the burglary had not affected the ability to pay VAT on time. Mr Owen also sought to challenge the default surcharge for 08/07. Mr Davis indicated that payment from Enterprise–Liverpool was usually every two weeks. On some occasions the payments had been delayed and for this period the payments had been delayed for 8 weeks. He had confirmed to us that the company’s turnover was approximately £1,000,000. On that basis two months would represent approximately £166,000. It appeared that the company did not have an overdraft facility and without knowing what amounts the company had at the Bank and its facility, we cannot say whether the lack of those funds, allegedly through no fault on the company’s behalf, would be sufficient to give rise to a reasonable excuse. It seems to us that £166,000 on £1,000,000 turnover ought not to have presented an insuperable problem.

5.     Mrs Tilling submitted that all the matters raised by Mr Owen had not been disclosed to HMRC before the hearing. She had attended the tribunal today instructed to object to the appeals for the surcharges mentioned in the notice of Appeal, none of which were going to be referred to today. The Notice of Appeal was dated 3 September 2009 and the company had had plenty of time to notify HMRC of the proposed changes and had failed to do so. It was not reasonable to allow the grounds of the appeal to include the new surcharges as she was unable to take instructions in regard thereto

The decision

6.     We have decided that the company may not raise the new default surcharges as proposed by Mr Owen. It appears to us that none of the applications have any merit and do not appear to be sufficiently well identified to give grounds for a reasonable excuse. We therefore refuse the application. Mr Owen confirmed that the company did not wish to dispute the default surcharges referred to in the Notice of Appeal and accepted that the company did not have a reasonable excuse with regard to those matters. We therefore dismiss the appeal. We award not costs as none were requested by HMRC

7.     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: 9 April 2010