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United Kingdom VAT & Duties Tribunals Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> Steptoe v Revenue & Customs [1989] UKVAT V4283 (09 November 1989)
URL: http://www.bailii.org/uk/cases/UKVAT/1989/V4283.html
Cite as: [1989] UKVAT V4283
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4283
LONDON TRIBUNAL CENTRE
J. B. STEPTOE Appellant
(LON/89/745Z)
- and -
THE COMMISSIONERS OF H.M. CUSTOMS & EXCISE Respondents
Tribunal Chairman:
HIS HONOUR JUDGE MEDD, O.B.E., Q.C.
Sitting in public at 15-17 Great Marlborough Street, London W1V 2AP on the 30 October, 1989
Mr J. B. Steptoe represented himself
Mr P. J. Walsh, a senior officer of H.M. Customs & Excise, appeared for the Respondents
[CROWN COPYRIGHT 1989]
DECISION
Mr Steptoe, the Appellant in this appeal, appeals against four assessments to surcharges made upon him by the Commissioners of Customs & Excise in the total sum of £1,142.69. The amount of each assessment is shewn in the Schedule of Defaults at page 1 of the Bundle of Documents put in by the Respondents, with the details of which Mr Steptoe agrees. Each of the assessments was made under the provisions of Section 19(4) Finance Act, 1985, because Mr Steptoe was late in sending to the Respondents the return and the tax due for the period to which it related. The returns were overdue by lengths of time which varied from just over 3 weeks to just under 5 weeks.
Mr Steptoe gave evidence on his own behalf and presented his case with clarity and courtesy. Mr Walsh, a senior officer of H.M. Customs & Excise, appeared on behalf of the Respondents.
Mr Steptoe, whose evidence I accept, told me that he was an electrical contractor and he employs two men to assist him. 95% of all the work that he does is done for the London Borough of Redbridge. During the time before the end of 1988 he found, as to his knowledge did other tradesmen working for the Borough, that the Redbridge Council was an extremely slow payer. They never paid the amount owing on an invoice less than six weeks after it was delivered and usually it was paid upwards of two months late. So bad was the situation that all the tradesmen contractors who, like him, found themselves in difficulties as a result of the Council's behaviour protested, with the result that eventually the position improved and the Council has since the end of 1988 paid its debts with reasonable promptness.
As a result of this conduct by the Redbridge Council Mr Steptoe found himself in the situation that at the due date for the three prescribed accounting periods which gave rise to the first three surcharges to which I have referred he was without sufficient funds to pay the tax due. So far as the fourth surcharge was concerned the position was different. By the time that the return for that period was due the Council had, as I have said, mended its ways and he had the money available to pay. The reason why the return was late on that occasion was explained by his accountants, Paul Conway & Co., who wrote to the Commissioners on 19 January, 1989, the letter at page 17 of the bundle. In that letter they said:
"Unfortunately the gentleman that deals with our V.A.T. has been out of the office, due to a death in the family, (his father's) and therefore will not be returning to work until the middle of next week. Consequently, although the return has already been submitted to you, the delay in sending this to you, is in no way the fault of our client …"
Mr Walsh, on behalf of the Commissioners, indicated that the local V.A.T. Office was aware that other small contractors in the area had been placed in the difficult situation described by Mr Steptoe which arose from the delay by the Redbridge Council in paying its bills.
Such being the facts which gave rise to the imposition of the surcharge assessments on Mr Steptoe it was Mr Steptoe's contention that he had a reasonable excuse for the four defaults. Mr Walsh argued that none of the reasons put forward by Mr Steptoe for why he should be excused amounted to reasonable excuses because they all fell within one or other of the provisions of Section 33(2) Finance Act, 1985, which lays down that:
"33. (2) For the purposes of any provision of this chapter which refers
to a reasonable excuse for any conduct –
(a) an insufficiency of funds to pay any tax due is not a reasonable excuse; and
(b) where reliance is placed on any other person to perform
any task, neither the fact of that reliance nor any dilatoriness or inaccuracy on the part of the person relied upon is a reasonable excuse."
If it were not for those provisions I would have no hesitation in saying that Mr Steptoe had a reasonable excuse for not having despatched the returns and the amount of tax shewn on them to be due by the due dates. I must, therefore, consider whether Mr Walsh's submission that I am precluded from holding that Mr Steptoe had a reasonable excuse because of the provisions of Section 33(2) Finance Act, 1985, is right in the circumstances of this case.
It was said by Nolan J. in the case of Commissioners of Customs & Excise v Salevon Ltd (unreported) that though Section 33(2)(a) makes it plain that insufficiency of funds cannot be regarded as a reasonable excuse, nevertheless it does not necessarily follow that a trader whose explanation of non-payment or late payment was not simply a temporary cash shortage but the fact that the wrongful act of another had deprived him of the means to pay is precluded from pleading that he had a reasonable excuse. In Salevon the trader's shortage of cash had been caused by the dishonest acts of a secretary to the Company. In the present case the shortage of cash which resulted in Mr Steptoe being unable to pay his tax on time in the first three periods with which we are concerned was the persistent delay in paying of the Redbridge Council which was virtually his only client.
The Council's conduct was not wrongful in the same way that the conduct of the secretary in Salevon was, but it seems to me that it was conduct of a sort that a small trader was entitled to expect would not happen. It is not something that can be regarded as a normal hazard of trade such as the failure of one customer amongst several to pay a debt, which would produce a temporary shortage of funds and would not amount to a reasonable excuse. If he had brought pressure to bear on the Council he would probably have received no further orders and the bulk of his livelihood would have disappeared. It seems to me, therefore, that this is one of those rare cases where the taxpayer may legitimately put forward as the reason why he should be excused the unexpected and continuing conduct of the person which gave rise to the prolonged shortage of funds.
For these reasons I have come to the conclusion that Mr Steptoe had a reasonable excuse for his failure to render on time the three returns which gave rise to the first three surcharges. The surcharge for the final period to 30 November, 1988, is, as I have already said, different. In that case Mr Steptoe had the funds available but his accountants failed to render the return in time. Mr Steptoe relied on the accountants and they were dilatory, albeit because of the absence of one of their staff due to his father's death. It seems to me that Section 33(2)(b) covers that situation and, because of the express provisions of that part of the subsection he is unable to assert that he had a reasonable excuse for that default.
In the result, therefore, the appeal will be allowed to the extent that the three surcharges for the periods to 30 November, 1987, 29 February, 1988, and 31 May, 1988, must be discharged. The surcharge for the period to 30 November, 1988, must stand, though at the reduced rate of 5 per cent. The surcharge in respect of that period will, therefore, be reduced to £122.89.
There will be no order as to costs.
HIS HONOUR JUDGE MEDD, O.B.E., Q.C.
CHAIRMAN
[Release date: 9.11.89]