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Cite as: [2012] UKFTT 286 (TC)

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The Copperfields Restaurant v Revenue & Customs [2012] UKFTT 286 (20 April 2012)
VAT - REPAYMENTS
Vat - repayments

[2012] UKFTT 286

TC01974

Appeal number: TC/2011/09683

VAT – late payment – surcharge – time to pay arrangement with HMRC – Appellant believed that the time to pay arrangement lasted throughout the four VAT periods during which late payments were made – HMRC accepted that arrangement was in place but that it only related to an earlier period – appeal allowed

FIRST-TIER TRIBUNAL

TAX CHAMBER

	THE COPPERFIELDS RESTAURANT	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S	Respondents
	REVENUE & CUSTOMS

TRIBUNAL:	JUDGE J. BLEWITT

Sitting in public at Manchester on 11 April 2012

Mr Howard for the Appellant

Mr O’Grady, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents

DECISION

1. This is an appeal by the Appellant Company, no longer trading, through Mr Howard, a former partner in the Company.

2. By Notice of Appeal dated 7 November 2011 the Appellant appealed against surcharges totalling £4,539.84, comprised as follows:

VAT PERIOD	SURCHARGE %	AMOUNT (£)
02/09	10	1,086.74
05/09	15	1,238.77
08/09	15	1,009.04
11/09	15	1,205.29

Undisputed background facts

3. The Appellant first defaulted in VAT period 05/07; no surcharge was imposed as this was the first default. A further default occurred in VAT period 02/08 for which a surcharge liability notice was issued however no charge incurred by the Appellant as, at 2%, the surcharge fell below the de minimus limit of £250. A surcharge at 5% was imposed in respect of a default for the VAT period 05/08.

4. HMRC initially, and incorrectly, imposed a surcharge at 10% for the VAT period 11/08. However it was accepted by HMRC that prior to the payment date for that VAT period, the Appellant had made a time to pay arrangement with HMRC and consequently the surcharge was subsequently withdrawn.

5. As a result, the surcharge imposed for the default in VAT period 02/09 was reduced from the initially imposed 15% to 10%, and the surcharges imposed thereafter for the defaults in VAT period 05/09, 08/09 and 11/09 at 15%.

6. Mr Howard accepted that the defaults occurred as set out in HMRC’s schedule contained within the bundle presented at the hearing and did not dispute that the surcharges were imposed in accordance with legislation.

Legislation

7. As there was no dispute between the parties as to the legislation applicable in this case, it is unnecessary to set it out in any detail. The VAT default surcharge is provided for by Section 59 of the Value Added Tax Act 1994.

8. Relevant to this appeal are the provisions found in Section 108 of the Finance Act 2009 which relate to time to pay agreements:

(1) This section applies if—

(a) a person (“P”) fails to pay an amount of tax falling within the Table in subsection (5) when it becomes due and payable,

(b) P makes a request to an officer of Revenue and Customs that payment of the amount of tax be deferred, and

(c) an officer of Revenue and Customs agrees that payment of that amount may be deferred for a period (“the deferral period”).

(2) P is not liable to a penalty for failing to pay the amount mentioned in subsection (1) if—

(a) the penalty falls within the Table, and

(b) P would (apart from this subsection) become liable to it between the date on which P makes the request and the end of the deferral period.

(3) But if—

(a) P breaks the agreement (see subsection (4)), and

(b) an officer of Revenue and Customs serves on P a notice specifying any penalty to which P would become liable apart from subsection (2),

P becomes liable, at the date of the notice, to that penalty.

(4) P breaks an agreement if—

(a) P fails to pay the amount of tax in question when the deferral period ends, or

(b) the deferral is subject to P complying with a condition (including a condition that part of the amount be paid during the deferral period) and P fails to comply with it.

9. It was accepted by HMRC that a time to pay agreement, which satisfied the conditions of S 108 of the 2009 Act, existed prior to the default in the VAT period 11/08.

Appeal

10. The grounds of appeal relied upon by the Appellant as set out in the Notice of Appeal dated 7 November 2011 and can be summarised as follows: HMRC’s decision is wrong as the Appellant was never made aware when the Time To Pay arrangement was made that it was only applicable to the first VAT period and that new agreements were required for subsequent periods. The Appellant contacted HMRC on a number of separate occasions as cash flow problems continued, ultimately resulting in the closure of the business and the redundancies of 17 employees.

11. A letter from the Appellant to HMRC dated 17 June 2011 reiterated the grounds of appeal set out in the Notice of Appeal and added that, on each occasion subsequent to the Time To Pay arrangement being agreed, when the Appellant had telephoned HMRC they had been informed that surcharges would not be incurred under the arrangement. The Appellant acted on the advice given by HMRC representatives and feel misled that surcharges were subsequently imposed in the sum of £4,539.84.

Evidence and Submissions

12. Mr Howard confirmed in evidence to the Tribunal that he had kept in regular touch with HMRC over the default periods and that once the Time To Pay arrangement had been agreed with HMRC, the Appellant had adhered to it. Mr Howard stated that he had always spoken to the same department at HMRC (albeit different representatives) and had never been referred to the local debt management unit, consequently when he had called on 5 or 6 occasions, HMRC were aware of the agreement in place and had never advised him that the arrangement had expired.

13. HMRC submitted that the partners/directors of the Appellant Company had the ultimate responsibility for the timely submission of VAT returns and payments, which was not disputed by Mr Howard.

14. HMRC accepted that a Time To Pay agreement was put in place for the period 11/08, however for the four subsequent periods under appeal, namely 02/09, 05/09, 08/09 and 11/09, no Time To Pay agreements were executed prior to the due date for each respective period.

15. HMRC included within its bundle logs of telephone calls between HMRC and the Appellant. It was submitted that there is a reference to the arrangement relating to the period 11/08 but nothing else within the logs to suggest that further agreements were executed. It was also submitted that an HMRC VAT Officer in Belfast, Mr John McCabe, had confirmed that the only arrangement in place was that relating to the period 11/08. As the arrangements are a concession relevant to specific periods and are not “rolling agreements”, the Appellant should have made new agreements with HMRC for each default period. Furthermore surcharge liability notices were issued for the default periods and the Appellant should have questioned why this was the case if the Time To Pay arrangement was in place.

Discussion

16. It is helpful at this point to refer to some of the telephone logs produced by HMRC which assisted me in reaching a decision in this case.

17. On 8 January 2009 reference is made to “TTP AGREED” which, it was agreed by all parties, referred to the arrangement made prior to the 11/08 period.