First-tier Tribunal (Tax)

[2010] UKFTT 198

TC00500                   

  Appeal number TC/2009/15500

Valued Added Tax – Default surcharge – Return and payment sent ten days late – Director and her husband went on holiday and did not submit Return and payment until after holiday until they checked on sufficient funds – whether reasonable excuse – answer no – Appeal dismissed – s.50 and s.71 VATA 1994

FIRST-TIER TRIBUNAL

TAX

                              SHAUN BATCHELOR ELECTRICAL

                                           CONTRACTORS LTD                          Appellant

                                                                      - and -

                                 THE COMMISSIONERS FOR HER MAJESTY’S

                                                   REVENUE AND CUSTOMS               Respondents

TRIBUNAL:              Ian Vellins (Judge)

                                    Roland Presho (Member)

Sitting in public in Leeds on 11^th February 2010

No attendance by the Appellant

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

CROWN COPYRIGHT 2010

DECISION

1. In this Appeal the Appellant appealed against a decision of HMRC dated 14^th August 2009 assessing it for a default surcharge at the rate of 5% in the sum of £428. 95 in respect of Value Added Tax for the period 06/09, where the due date for the return and payment being received by HMRC was 31^st July 2009.  The Appellant’s VAT return and payment was 10 days late, and was not received until 10^th August 2009. The Appellant had previously defaulted in respect of periods 12/08 and 03/09, submitting returns and payments 6 and 8 days late respectively, resulting in default surcharge notices being issued.

2. The Appellant’s director Joanne Batchelor wrote to HMRC on 3^rd September 2009 stating that the payment and return for the period 06/09 was late because she and her husband went on holiday over the return period and could not issue payment until their return from holiday to ensure that sufficient funds had been received from customers during their absence.  She stated that the business of the Appellant was a small business, and that she and her husband were the only people who have access to and are able to make payments on behalf of the Appellant.  In correspondence on 9^th December 2009 she informed HMRC that she had had a customer who went into liquidation earlier in 2009 owing invoices dated January, February and March 2009 totalling £4,242 and that the Appellant had an overdraft limit at its bank of £35,000, with the Appellant having been overdrawn as at 31^st July 2009 in the sum of £34,995. The Appellant’s sales shown on the return indicated sales in the quarter of £103,817,

3. The Appellant’s Grounds for Appeal stated:  “We do not believe the Commissioners took full consideration of the factors and purely focused on the fact that we were away.  Cash flow is critical to small business and when customers and contractors discover you are away and unable to chase them, more often than not promised payments fail to arrive or are delayed.  We simply could not release funds until we had confirmed we had been paid”.

4. The Appellant’s director did not attend at the Hearing although Notice of the Hearing had been sent.

5. We find that the Appellant did not have a reasonable excuse for the default under appeal.  We find that the Appellant did not give sufficient priority and attention to its obligation to submit and pay VAT returns on time.  The appellant had received warnings in the previous default notices as to the consequences by way of surcharges following further defaults. The Appellant ignored the warnings.  Mrs. Batchelor and her husband went on holiday without making arrangements for the prompt submission and payment of the return due while they were on holiday.  We find that the circumstances were not unforeseeable and we are of the view that a prudent taxpayer ought reasonably to have arranged its affairs to ensure that the holiday planned did not interfere with its tax obligations.  We find that the holiday excuse is not a reasonable excuse for the default.  We further find that the financial problem raised by the Appellant does not amount to a reasonable excuse.  We have taken into account the Appellant’s explanation that it was close to its overdraft limit, and that a customer had gone into liquidation earlier that year owing £4,242, although that customer only represented a small percentage of the Appellant’s turnover.  We find that the director’s delays in submitting the return and payment until she returned from holiday and checked the sufficiency of funds do not amount in law to a reasonable excuse.  Section 71(1)(a) of the Value Added Tax Act 1994 specifically states: “an insufficiency of funds to pay any VAT due is not a reasonable excuse”.  In reaching our decision we have taken into account the totality of the evidence before us.

6. Accordingly we have decided that the Appellant has not satisfied us that it has a reasonable excuse for the default, and we dismiss the appeal.

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: 05 May 2010