First-tier Tribunal (Tax)

[2011] UKFTT 420 (TC)

TC01273

Appeal number:  TC/11/01698

Value Added Tax – late payment of tax due (8 days) – default surcharge imposed – whether “reasonable excuse” – Section 71 VATA 1994 – Appeal dismissed.

FIRST-TIER TRIBUNAL

TAX

GRANT VEHICLE REPAIRS LTD Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

TRIBUNAL JUDGE: Mr Kenneth Mure, QC

Sitting in public at Wellington House, 134-136 Wellington Street, Glasgow on 7 June 2011

Mr and Mrs Grant, for the Appellant

Mrs Liz McIntyre, for the Respondents

© CROWN COPYRIGHT 2011

DECISION

1.       In this Appeal, Mrs Elizabeth McIntyre appeared for HMRC.  Mr & Mrs Grant, the director and company secretary of the Appellant, appeared, with Mrs Grant principally presenting submissions.  They led in evidence their bookkeeper, Mrs Isdale, who spoke to the circumstances of the late making of the payment which is the subject of this dispute.  Her evidence was elaborated somewhat by evidence from the Grants themselves.

2.       The Appeal relates to a 5% surcharge in respect of VAT due for the period 08/10, being £1,407.65.  While the Return was submitted on 19 September 2010, well before the due date, the payment was not received until 15 October, some 8 days after the due date for payment.  Mrs Grant on behalf of the company submitted that there was a “reasonable excuse” for the purposes of Section 71 VATA 1994 in as much as Mrs Isdale had gone unexpectedly on a “surprise” holiday, that the date for payment had been confused with that applicable for settling PAYE liabilities, and further that she and her husband had not received notification of earlier defaults.

3.       Mrs Isdale explained in her evidence that she worked for 2 days per week (Wednesday and Thursday) completing the company’s books.  She was an associate of a firm of Chartered Accountants.  She would prepare the books, refer the information to a CA qualified partner in her firm, who would then submit the VAT Return online.  Once the calculations were confirmed by him, she would arrange for the Appellant company to send a cheque in payment.

4.       Mrs Isdale accepted candidly that she had forgotten to send the payment due on 7 October 2010.  Her domestic partner had told her of his arranging a “surprise” holiday to Yorkshire on Wednesday 29 September 2010, leaving on Saturday 2 October for 8 or 9 days.  She had attended at the Appellant company’s office on Thursday 30 September and had been very busy because of her absence on holiday the following week.  She had extra matters to complete.  She did not return to the company until the week commencing 11 October.  The omission was then discovered and the cheque for VAT due was sent at the same time as that for the PAYE liability of the company.

5.       Mrs Grant explained that she was then a full-time bank official but did some part-time work for the company.  Her husband was taking over the duties of the company’s office manager, who had left shortly before, and whom they could not afford to replace.  The company has about 16 employees carrying out repair work.

6.       Mrs McIntyre referred us to two previous failures to make timeous payment in respect of the 11/09 and 02/10 Returns.  The Schedule of Defaults had been amended as an earlier failure (in 08/09) had been withdrawn.  As a result the penalty level for the Return in issue had been reduced to 5%.  A monetary penalty had not been imposed on the two previous occasions, but according to Mrs McIntyre’s records notices warning of default had been served.  Mr and Mrs Grant claimed never to have received these yet, according to Mrs McIntyre, they have not been returned as undelivered to HMRC.

7.       Although I found the Grants genuine and earnest witnesses I had difficulty accepting on the balance of probabilities that they were unaware of the earlier defaults.  There had been special arrangements concluded with HMRC about payment of arrears of tax.  They employ a firm of accountants to assist them.

8.       Although the delay in making payment was short, I do not consider in these circumstances that a “reasonable excuse” for the delay arises.  Mrs Isdale was indeed working at the company’s offices on the date when the cheque should have been sent.  She admitted candidly that she “forgot”.  She was absent on the following week.  On the Wednesday and Thursday of that week it might well have been too late to make payment timeously.  Mr and Mrs Grant, who both had an involvement with the company’s general business administration, were available.

9.       While I have a degree of sympathy for Mr and Mrs Grant, I consider that the Appeal of the company falls to be dismissed for the reasons set out supra.

10.    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.