Riaz Datoo and others (The Datoo Partnership) v Revenue & Customs [2011] UKFTT 595 (TC) (12 September 2011)
[2011] UKFTT 595 (TC)
TC01438
Appeal number: TC/2011/4237
VAT –
default surcharge – whether reasonable excuse that HMRC had not sent blank
return forms to Appellants’ new address – no – appeal dismissed
FIRST-TIER TRIBUNAL
TAX
RIAZ
DATOO and others (The Datoo Partnership) Appellants
-
and -
THE
COMMISSIONERS FOR HER MAJESTY’S
REVENUE
AND CUSTOMS Respondents
TRIBUNAL:
JUDGE ROGER BERNER
MR
HARVEY ADAMS FCA (Member)
Sitting in public at Copthall
House, 9 The Pavement, Grove Road, Sutton, Surrey on 23 August 2011
The Appellants appeared in
person through Riaz Datoo
Bruce Robinson, HM Revenue and
Customs, for the Respondents
© CROWN COPYRIGHT
2011
DECISION
1. This
is an appeal by the Datoo Partnership, which comprises Mr Riaz Datoo and
members of his family, against the imposition of default surcharges for the
late payment of VAT in respect of the periods 02/09 and 05/09. The surcharge
amounts are, respectively, £236.25, calculated on the late paid VAT of £2,362.50
at a rate of 10%, and £354.37, calculated on the same amount of late paid tax,
but at the rate of 15%. These rates have been applied because of earlier
defaults for periods 02/08, 08/08 and 11/08.
2. There
is no dispute that the payments were made late. Mr Datoo argued that the
Appellants had a reasonable excuse for the fact that payments were made late
(and the necessary VAT returns were rendered late) in that the Appellants had
not received from HMRC the necessary blank VAT returns for the relevant periods.
3. In
this appeal therefore we are concerned only with whether the Appellants are,
in accordance with s 59(7)(b) of the Value Added Tax Act 1994 (“VATA”), not
liable to the default surcharge and can be treated as not in default in respect
of the relevant accounting periods.
The facts
4. The
Appellants are registered for VAT only in respect of taxable supplies they make
on the letting of commercial property for which an election to waive exemption
(option to tax) has been made.
5. The
Appellants have no business premises of their own, but have used premises which
they own and lease to a company (“the company”) for whom Mr Datoo’s wife works,
as their office address. Staff at that company are used to complete the VAT
returns, from information provided to them by Mr Datoo. We were told by Mr
Datoo that he had attempted to register his home address for the business, but
that this was refused. We saw no evidence of this, and can make no finding;
but in any event we do not consider it material.
6. In
June 2008, the company moved its premises from 288 Lower Addiscombe Road,
Croydon, which at that time was used as the business address of the Appellants
for VAT purposes. The new address was Stoneham House, 17 Scarbrook Road, Croydon CR0 1SQ. However, up to March 2009 there is no evidence of there having been any
notification of a change of address to HMRC. Accordingly, we find that the
change of address was not notified to HMRC in that period.
7. During
that time Mr Datoo explained that mail would periodically be collected from the
address at 288 Addiscombe Road. Mail was not redirected through Royal Mail.
However, no VAT returns were recovered in this way. Mr Datoo said that 288 Addiscombe Road comprised both commercial premises and residential premises and that it
was possible therefore that mail could have been delivered to the residential
part and not recovered. We consider this explanation implausible, but it is
not necessary for us to make any finding in this respect. We accept for
present purposes that the relevant blank returns in that period, which were
made late, were not received.
8. On
16 March 2009 a telephone call was made by a Mr Mohamed Hansraj of Selsdon
Travel Limited to HMRC’s National Advice Centre. Mr Hansraj was the accountant
who looked after the affairs of the Appellants. The call was prompted by the
receipt, at 288 Lower Addiscombe Road, of a notice of assessment issued on 16
January 2009 in respect of the period 11/08. Mr Hansraj was advised that
change of address could be notified by fax to HMRC’s variations department, the
fax number of which was provided, and that a new return would be sent out.
Before that could be done, Mr Datoo (who was with Mr Hansraj) was asked to
confirm some answers to security questions, and he at that time gave the Stoneham
House address.
9. Following
that call, on the same day, Mr Hansraj sent a fax to HMRC with the new
address. However, the fax was unsigned. Mr Datoo explained that this was a
computer generated fax that would be sent electronically, without there being a
paper copy to sign. He expressed incredulity that, as was the case, an
unsigned fax was not accepted by HMRC.
10. That
non-acceptance was confirmed by letter from HMRC to the Appellants dated 25
March 2009. This letter was addressed to 17 Scarbrook Road (omitting Stoneham
House), but Mr Datoo did not argue that it was not received. The letter
enclosed a reply section to be completed and signed, giving the new principal
place of business address.
11. In spite of the
fact that no signed change of address mandate had been supplied by the
Appellants, HMRC did on 16 March 2009 send duplicate returns to the address Mr
Datoo had given in the telephone call. Those returns were for the period 11/08
(the period of the assessment that had given rise to the call) and an earlier
period, 08/08, for which, at that time, no return had been made. No other
returns, including one for 02/09, were at that time sent to the Appellants.
12. On 22 April 2009
HMRC sent to the Scarbrook Road address what was described as a final reminder in
respect of the need for written confirmation of the requested change of
address. A further copy of the reply section was enclosed. This was completed
by Mr Datoo and signed by him on 29 April 2009. Unfortunately, due to a slip,
Mr Datoo included the wrong postcode (using his own personal address postcode).
13. This error was
reflected in the new certificate of registration for VAT which HMRC issued on
14 May 2009. But it was not the only error in that certificate: instead of
Stoneham House, the certificate referred to Toneham House.
14. These errors
were brought to HMRC’s attention in a call on 21 May 2009. Advice was again
given that the correct details should be notified to the variations unit by
fax. At the same time HMRC were informed that the 02/09 return had not been
received. HMRC agreed to issue a duplicate return.
15. The change of
address (giving the correct details) was notified to HMRC by fax, signed by
“the Datoo Partnership” sent on 22 May 2009.
16. However, no
duplicate return was sent for 02/09, and no return was sent in respect of
period 05/09 until a further call was made, this time by a Mr Moyez, also
describing himself as Mr Datoo’s accountant, to HMRC on 23 July 2009. This was
prompted by receipt of a letter (which we infer were the assessment and
surcharge notices for 02/09 and 05/09 which were issued on 17 July 2009)
referred to by Mr Moyez as concerning the non-filing of the return 05/09. This
resulted in the duplicate returns for 02/09 and 05/09 being sent to the
Appellants on 23 July 2009.
17. The Tribunal has
considered the transcript of that call on 23 July 2009. In it Mr Moyez refers
to the fact that the last return that had been received was that for 11/08, and
recites the change of address position. The reply given to him by the HMRC officer
is:
“... Right in which case I’ll get copies of the
missing returns to the new address. If those are completed and sent in the
assessments that have been sent out will be removed from the record.”
The officer repeats this and confirms it later on in the
conversation. Nothing, however, is said about the fact that late filing of the
return and actual payment of the tax will generate a default.
18. The returns for
02/09 and 05/09 were made, together with payment of the relevant amounts, on 28
July 2009 and were received by HMRC on 30 July 2009. This gave rise to the
revised surcharge notices issued on 31 July 2009 that are the subject of this
appeal.
Discussion
19. The sole
question for us on this appeal is whether, in the circumstances that have
arisen, there was a reasonable excuse for the Appellants to have filed to make
their VAT returns and pay the VAT due on the due dates in respect of the
periods 02/09 and 05/09.
20. The Appellants
were not new in business and they had been making timely VAT returns in respect
of their taxable supplies over a period. They were fully aware of the
requirement to make returns and to pay the VAT by the due date.
21. A series of
errors occurred after the Appellants changed their business address from 288 Lower Addiscombe Road to Stoneham House. However, we have found that they did not
notify that change of address to HMRC until 16 March 2009, and they did not
take steps to have mail redirected, in spite of the fact that they say that
there was a possibility that mail could be wrongly delivered to the residential
part of the premises at Addiscombe Road.
22. In our judgment,
the mere non-receipt of blank VAT returns is not a reasonable excuse for
failure to pay the tax. The reasonable course of action would have been for
the Appellants to have contacted HMRC and to have made payment of the VAT in
order to avoid the imposition of the surcharge. It was not reasonable in our
view for the Appellants simply not to pay over to HMRC the tax that they had
collected as part of the rents they had received, and to wait until HMRC had
sent the returns for completion.
23. The Appellants
did not take these reasonable steps. It was unreasonable for them not to have
paid the VAT for the periods 02/09 and 05/09 by the respective due dates and
accordingly we find that the Appellants do not have a reasonable excuse for the
defaults.
24. The failure by
HMRC to send the returns to the Appellants, although in part due to some
inefficiency on the part of HMRC, cannot affect the position. The reason why
the forms were not received is not material. The non-receipt of the returns
cannot reasonably justify the failure of the Appellants to pay the tax due, and
thus avoid the imposition of the surcharges.
25. Nor can the
comments made to Mr Moyez by the HMRC officer in the telephone call on 23 July
2009 affect our determination. They were made at a time after the defaults had
taken place, and cannot therefore impact on the question whether there was a
reasonable excuse for the defaults themselves. The officer correctly stated the
position in that the original assessments, based on estimated turnover, would
be removed on payment of the tax according to the actual returns. However, as
no reference was made to the position regarding default, and the possibility of
surcharge, the Appellants might have assumed from this that on filing the
returns the matter would be at an end. This has no doubt contributed to the
Appellants’ sense of grievance, but that is not a matter within the scope of
our own jurisdiction.
26. This appeal is
accordingly dismissed.
27. When we
announced this decision orally at the hearing, Mr Datoo enquired what could be
done to redress his grievances as to the faults that he claimed lay on the HMRC
side in respect of the failures to send the returns to the correct address in a
timely fashion. We acknowledge that HMRC were not as efficient in dealing with
the change of address issue as they might have been, but as we have found that
this did not affect our determination on the issue of reasonable excuse, that
is a matter for complaint to HMRC. In this connection we referred Mr Datoo to
the possibility of an approach to the Adjudicator’s Office ( http://www.adjudicatorsoffice.gov.uk/
) in this respect.
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.
ROGER BERNER
TRIBUNAL JUDGE
RELEASE DATE: 12 SEPTEMBER 2011