First-tier Tribunal (Tax)

[2014] UKFTT 0768 (TC)

TC03888

Appeal number:  TC/2013/07911

VAT – Late Return and payment – surcharge – whether reasonable excuse – whether amount disproportionate – No – Sections 59 and 71 VATA 1994 – Appeal dismissed

FIRST-TIER TRIBUNAL

TAX CHAMBER

Sitting in public at George House, 126 George Street, Edinburgh on Monday 14 July 2014

Appellant:  not represented

Respondents:  Mrs L Ahammed, Officer of HMRC

© CROWN COPYRIGHT 2014

DECISION

1.             Mr McHardy on behalf of the Appellant company indicated that he did not intend to appear and was content that the Hearing should proceed in his absence.

2.             Mrs Ahammed appeared on behalf of HMRC, the Respondents, and addressed us on the papers and information available.

3.             This appeal is in respect of a 10% surcharge to VAT of £1102.81 for the Period 05/13 for late submission of the company’s Return and payment.  Mrs Ahammed referred us to the Schedule of defaults at p9 of the Bundle.  The Return was not received until 27 July 2013, 20 days late, and payment was not received until 31 July 2013, 24 days late.  This was the fourth default.  No penalty had actually been imposed on the previous occasions:  the amounts fell below £400 and were accordingly waived.  There is no apparent challenge to the timetable set out in the Schedule or the previous defaults.  (However, notwithstanding the absence of any challenge we would suggest that at least some documentary record of the issuing of surcharge liability notices he produced for the Tribunal’s reference.)

4.             Mr McHardy explained in the Grounds for appeal and correspondence that he and his domestic partner had been under severe personal stress.  She had recently had a baby and they had arranged a holiday at short notice in the hope of easing the pressures which they were facing.  The company was a one-man business with Mr McHardy bearing all responsibility for it.  The holiday, he argued, was not foreseeable – it had been arranged at 48 hours notice.  In his letter of 21 August 2013 (p10) Mr McHardy stressed the factors of the holiday, work commitments and family life as contributing to his delay.  Moreover, he considered the penalty excessive and disproportionate.  There had been a genuine oversight on his part, he claimed.  He indicated that there had been a “7 day delay”:  the Schedule indicates a lengthier period.

5.             Mrs Ahammed did not challenge the foregoing narrative and we accepted it as pro veritate.  The issue for the Tribunal was whether the taxpayer had a reasonable excuse.  Mrs Ahammed considered that there was no such excuse.  She referred us to the very limited statutory definition of the term in Section 71 VATA and the decisions in HMRC v Hok Ltd [2012] UKUT 363 (TCC) and HMRC v Total Technology (Engineering) Ltd [2012] UKUT 418 (TCC).  From these decisions it is clear that even a short delay of one day does not necessarily render a penalty disproportionate.  (Accordingly the possible difference of an admitted seven day delay but lengthier delay claimed by HMRC may be immaterial.)  There was no professional evidence setting out any exceptional medical factors.  The taxpayer had not approached HMRC with a view to negotiating a time-to-pay arrangement.  The holiday and the circumstances in which it was arranged did not disclose a reasonable excuse.  Mr McHardy as the Appellant company’s director should have been familiar with the manner of the operation of the default regime.

6.             We considered that the stance adopted by Mrs Ahammed was well-founded.  In our view a reasonable excuse has not been demonstrated.  While we have a degree of sympathy for the taxpayer, the new family and work commitments are not unusual, certainly not exceptional.  We regard the timeous submission of VAT returns and payments to be another routine and important work commitment. The responsibility for ensuring prompt payment rested with Mr McHardy, and given the previous defaults he must be presumed to be familiar with the system of surcharges.

7.             For these reasons we dismiss the Appeal and confirm the surcharge.

8.             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.

KENNETH MURE, QC

TRIBUNAL JUDGE

RELEASE DATE: 6 August 2014