First-tier Tribunal (Tax)

[2011] UKFTT 74 (TC)

TC00952

Appeal reference: TC/2010/05446

EXCISE DUTY – gas for use as road fuel – return not submitted by due date – duty not paid by due date – penalty imposed – reasonable excuse – no – appeal dismissed

FIRST- TIER TRIBUNAL

TAX

PRESSURETECH TRANSPORT SERVICES LTD Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOM Respondents

Tribunal: Jennifer Trigger (Judge)

Ms. Carol Roberts (Member)

Sitting in public in Manchester on 23 September 2010

Mr. Michael Hyde Smith, managing director of the Appellant, for the Appellant

Mr. Bernard Haley, Higher Officer, Her Majesty’s Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.     Pressuretech Transport Services Ltd (“the Appellant”) trading as BDS Fuels and Lubricants supplied gas for use as road fuel and is required to pay excise duty on the fuel to the Commissioners for Her Majesty’s Revenue and Custom (“the Commissioners”).  On 30 April 2010 the Commissioners issued to the Appellant a Civil Penalty Notice showing an assessment to a penalty in the sum of £717.35.  The penalty was issued to the Appellant because it had failed to pay duty due on gas for use as road fuel for the period 1 January 2010 to 31 March 2010 by the due date of 14 April 2010.

2.     The excise duty on gas for use as road fuel return (“the Return”) completed by the Appellant, recorded 51,850.50 kg of gas had been sent out, set aside or used as road fuel.  The excise duty payable by the Appellant was £14,347.03 on which the Commissioners had levied a 5% penalty £717.35.  The Return was unsigned and dated 26 April 2010 which was eleven days late of the submission date of 14 April 2010.  Although the document was unsigned it was accepted by both the Appellant and the Commissioners that it was the Return and we accepted documents 332 and 33 as the Return.

3.     The Appellant, in common with all suppliers of gas for use as road fuel, is required to pay excise duty on the fuel to the Commissioners.  The Appellant is required to submit a return of duty due by sending it to the Commissioners on a quarterly basis.  The Appellant had been trading for a number of years supplying gas for use as road fuel and is aware of its responsibility to submit a return and pay the excise duty due on the fuel to the Commissioners.

4.     The background to this appeal was that on 24 July 2009 Ms. Shanks, on behalf of the Commissioners, wrote to the Appellant.  She advised the Appellant that the records held by the Cumbernauld Accounting Centre (“CAT”) showed that a return and duty payment for the accounting period 1 April 2009 to 30 June 2009 had not been received by the due date which was 15 July 2009.  Ms. Shanks asked the Appellant for this return and the payment to be submitted by 7 August 2009.  The Appellant was advised by Ms. Shanks of the consequences of failure to comply with its legal obligations.

5.     On 26 January 2010 the Appellant wrote to CAT and asked for time to pay its return for the period ending 31 December 2009.

6.     On 8 April 2010 Ms. Shanks notified the Appellant that as its return and payment for the period ending 31 December 2009 had not been received on time she was issuing a penalty.  A penalty was issued in the sum of £499.79 for the period 1 October 2009 to 31 December 2009.  On 14 April 2010 the Appellant wrote to CAT and asked for the penalty to be withdrawn.  The Appellant pointed out that it had complied with the terms of an agreement reached with the Commissioners that it could make payments of the excise duty due by instalments and that it had not been informed that it would incur a penalty.

7.     On 26 April 2010 the Appellant advised CAT that it was still experiencing cashflow problems and requested time to pay the outstanding excise duty for the period 1 January 2010 to 31 March 2010.

8.     On 28 April on behalf of the Commissioners, Ms. V Anderson wrote to the Appellant to advise it that the penalty of £499.79 had been withdrawn.

9.     On 30 April 2010 Ms. Shanks, on behalf of the Commissioners, wrote to the Appellant to advise it that a penalty was to be issued as the Return and payment specified in the Return had not been received and paid by 15 April 2010.

10.  The Appellant disputes the imposition of the penalty for the late submission of the Return and the payment of the duty due.

11.  The relevant legislation is to be found in the following provisions:

·       Gas (Road Fuel) Regulations 1972, which provides so far as it is relevant:

“(5) Every person required by Regulation 4 to give a notification shall, unless the Commissioners otherwise require, furnish, not later than the fifteenth day of each month, to the Collector of Customs and Excise in whose Collection that person’s premises are situated, on forms provided by the Commissioners, a return of the quantities of the gas upon which excise duty has not been paid, which has been sent out, set aside or used as fuel in a road vehicle during the preceding months and at the same time pay to that Collector the excise duty chargeable on the said gas.”

·       Section 21(3) of the Hydrocarbon Oil Duties Act provides in the following terms:

“21(3) [Where any person] contravenes or fails to comply with any regulation made under this section [his contravention or failure to comply shall attract a penalty under section 9 of the Finance Act 1994 (Civil Penalties), and any goods in respect of which any person contravenes or fails to comply with any such regulation shall be liable to forfeiture].”

·       The Finance Act 1994 section 9, Penalties for contravention of statutory requirements, provides in the following terms:

“(1) This section applies, subject to section 10 below, to any conduct in relation to which any enactment (including an enactment contained in this Act or in any Act passed after this Ac t) provides for the conduct to attract a penalty under this section.

(2) Any person to whose conduct this section applies shall be liable to –

(a) in the case of conduct in relation to which provision is made by subsection (4) below, [or by or under any other enactment], for the penalty attracted to be calculated by reference to an amount of, or an amount payable on account of, any duty of excise, to a penalty of whichever is the greater of 5% of that amount and £250; and

(b) in any other case, to a penalty of £250.

(5) Where –

(a) a contravention of any provision made by or under any enactment consists in or involves a failure, before such time as may be specified in or determined in accordance with that provision, to send a return to the Commissioners showing the amount which any person is or may become required to pay by way of, or account of, any duty of excise, and

(b) that contravention attracts a penalty under this section

Section 10 Exceptions to liability under section 9 –

(1) Subject to subsection (2) below and to any express provision to the contrary made in relation to any conduct to which section 9 above applies, such conduct shall not give rise to any liability to a penalty under that section if the person whose conduct it is satisfies the Commissioners or, on appeal, an appeal tribunal that there is a reasonable excuse for the conduct

(2) Where it appears to the Commissioners or, on appeal, an appeal tribunal that there is no reasonable excuse for a continuation of conduct for which there was at first a reasonable excuse, liability for a penalty under section 9 above shall be determined as if the conduct began at the time at which there ceased to be a reasonable excuse for its continuation.

(3) For the purposes of this section –

(a) an insufficiency of funds available for paying any duty or penalty due shall not be a reasonable excuse; and

Section 13 Assessments to penalties –

Where any person is liable to a penalty under this Chapter, the Commissioners may assess the amount due by way of a penalty and notify that person, or his representative accordingly.”

12.  In its notice of appeal dated 25 June 2010 the Appellant claimed:

“Our Autogas return was extended from monthly to quarterly despite several requests to avoid this charge.  The extra stresses imposed on the cashflow due to quarterly payments have become increasingly difficult.  We have been in close contact with HMRC regarding staged payments and were able to maintain a manageable level of payment, mostly within agreed timescales.

At the same time as changes to Autogas returns, the banks reduced our overdraft facility from £170,000 to £30,000 which put further strains on week-to-week cashflow.

We never had any intention of declining to pay the duty, however, it would have been fruitless to send cheques not honoured at the bank.

We believe we have worked hard to maintain a reasonable degree of repayments under extremely difficult circumstances and there the penalty imposed by HMRC is considered unfair.”

13.  Before us Mr. Smith, on behalf of the Appellant advised that in November 2009 the Allied Irish Bank had without notice reduced the Appellant’s overdraft from £170,000 to £30,000.  In addition Mr. Smith told us that the Appellant had an account with the HSBC bank.  An overdraft facility of £30,000 was provided by the HSBC bank.  This was used by the Appellant to pay for all weekly transactions.  Towards the end of 2009 the HSBC bank had altered the trading arrangement enjoyed by the Appellant.  The Appellant was no longer able to draw against an uncleared cheque but was from that time required to wait three days following the end of which the Appellant could draw against cheques presented.  This change in the banking arrangements placed a further burden on the Appellant.  The Appellant had had an account with the HSBC bank for approximately seven years and had previously had an overdraft facility of £100,000.

14.  Mr. Smith advised us that the Appellant had a large debtor base which was significantly higher than the number of its creditors.  Furthermore the Appellant had few bad debts.  Mr. Smith explained that the Commissioners had withdrawn the penalty in the sum of £499.79 for the period 1 October 2009 to 31 December 2009 and by doing so had recognised that the Appellant was unable to pay the full amount of the excise duty due.  Furthermore the Appellant had shown a commitment to make payment for that period by entering into an agreement with the Commissioners to make payment by instalments.  In respect of the return and the outstanding duty for the period 1 January 2010 to 31 March 2010, Mr. Smith pointed out that the Appellant had again made payment by instalments and that all the duty due had been paid to the Commissioners.  The Appellant’s customers for the gas for use as road fuel were garages.  Some of these customers were substantial clients.  Nevertheless Mr. Smith contended on behalf of the Appellant that its cashflow problems were as a result of the reduction in its overdraft facility and the inability to draw on uncleared cheques.

15.  We now turn to deal with the evidence and to make findings of fact thereon.

16.  The Return for the period 1 April 2009 to 30 June 2009 had not been received by the Commissioners by the due date.  The Appellant was given time to submit a return and make payment of the duty due by 7 August 2009.

17.  For the period 1 October 2009 to 31 December 2009 the Appellant had requested time in which to submit the Return and pay the duty due.  The Commissioners issued a penalty notice in the sum of £499.79.

18.  On 28 April 2010 the Commissioners withdrew the penalty.

19.  On 24 April 2010 the Appellant again requested time to submit the Return and pay the duty due for the period 1 January 2010 to 31 March 2010. The due date for the submission of the Return and the payment of the duty for that period was 14 April 2010.  The outstanding duty due as at 14 April 2010 was £14,347.03.  The Commissioners imposed a penalty of £717.35, being 5% of the outstanding duty.

20.  The Appellant’s failure to pay the duty was as a result of insufficiency of funds.

21.  The Appellant has shown a consistent failure to submit returns and to pay the duty due from the period 1 April 2009 to 30 June 2009.

22.  That the Appellant had an overdraft facility with the HSBC bank in the sum of £30,000 and an overdraft facility with the Allied Irish Bank in the sum of £30,000.

23.  That the Appellant had not drawn on the facility with the HSBC bank or the Allied Irish Bank to pay the outstanding duty in the sum of £14,347.03 by the due date.  It was our view that the Appellant had at its disposal adequate funds in the overdraft facilities provided by both the HSBC bank and the Allied Irish Bank to make payment of the outstanding duty in the sum of £14,347.03 by the due date.  The Appellant maintains that it has a reasonable excuse for failure to pay the duty due as itemised in the Return by the due date.  It was our view that the Appellant has shown a consistent failure to submit returns and pay the duty due from the period 1 April 2009 to 30 June 2009, that the outstanding duty for the period 1 January 2010 to 31 March 2010 could have been paid through either of the overdraft facilities at the named banks.  The Appellant had chosen not to do that and has instead used the duty payable to the Commissioners to finance its business.  There was no evidence before us that the Appellant had taken any steps to rectify the cashflow problems claimed.  Furthermore the gas for use as road fuel was sold by the Appellant to other garages.  Many of these garages were substantial trading enterprises.  The Appellant had few bad debts.  It was our view that the Appellant had used the monies paid by these garages for the purposes of his business rather than to pay the duty due to the Commissioners.  We were aware that section 10 of the Finance Act 1994 excluded insufficiency of funds available for paying any duty or penalty due as constituting a reasonable excuse.  We were also aware that the tribunal could look at the root cause of the insufficiency.  We decided that the root cause of the insufficiency of funds in the Appellant’s case was a deliberate decision to use monies which should have been paid to the Commissioners for the purposes of the Appellant’s business, and a further deliberate decision not to draw on the overdraft facilities at either the HSBC bank or the Allied Irish Bank which would have been sufficient to extinguish the Appellant’s liability to the Commissioners.  In all the circumstances we dismiss the appeal

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  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.

JENNIFER TRIGGER

TRIBUNAL JUDGE

Release Date: 20 JANUARY 2011