United Kingdom VAT & Duties Tribunals Decisions

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Cite as: [2004] UKVAT V18586

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Eight Acres Leisure Ltd v Customs and Excise [2004] UK V18586 (04 May 2004)

DEFAULT SURCHARGE – Reasonable excuse – Cashflow problems – Appeal dismissed

LONDON TRIBUNAL CENTRE

EIGHT ACRES LEISURE LTD Appellant

and –

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: STEPHEN OLIVER QC (Chairman)

SHAHWAR SADEQUE MBCS

Sitting in public in London on 14 April 2004

The Appellant did not appear

Phillip Webb for the Respondents

© CROWN COPYRIGHT 2004

DECISION

Eight Acres Leisure Ltd ("Eight Acres") appeals against a default surcharge of £429.79 raised for the period 04/03. The due date for payment was 30 May 2003. The amount due was £12,297.92. £8,000 was paid on 2 June and the balance was paid later in June.

The representative for Eight Acres, Mr R W Yorke, did not attend. He wrote to the Tribunal on 8 April stating that it was not proposed to have any representation "with a view to keeping administration costs to a minimum". In that letter, signed by Mr Yorke, he referred to his letter of 23 June 2003 as containing the points which he wished to put forward in favour of Eight Acres.

In the light of the letter from Mr Yorke we decided to go ahead and hear the appeal in his absence.

We start by quoting from Mr Yorke's letter of 23 June 2003. This reads as follows:

"I have received a surcharge notice in the sum of £429.79 for the period … to 30 April 2003. I consider this decision to be somewhat harsh, as I have made arrangements to pay the balance due of £4,297.92 by the end of June and are on track to do so. I had been in contact with the Debt Management Unit, well in advance, and had explained our cashflow position and made arrangements to pay as a result of our discussions.

I feel the charge of £429.79 for one month's partial arrears to be excessive and ask that you reconsider your decision."

In the absence of any direct evidence for Eight Acres, we are in difficulties. We know from the Report of the Directors that the principal activity of Eight Acres is the ownership and management of Leeford Place Hotel. We also know from the notice of appeal that Eight Acres was adversely affected by late payments by account customers. We also know that Eight Acres has not been able to gain an overdraft from its existing bank.

The case for the Commissioners is that Eight Acres, through Mr Yorke, was aware that default surcharges might be imposed notwithstanding the fact that he had already entered into a time to pay agreement with the Commissioners. The Commissioners go on to point out that VAT Act 1994 section 59(1) imposes a statutory requirement on registered traders to furnish their returns and make their payments on time, in the absence of which they are liable to default surcharge assessments. Section 71(1)(a) provides that an insufficiency of funds does not provide a taxable person with a reasonable excuse for failing to pay on time. Mr Webb for the Commissioners pointed out that there appeared to be nothing extraordinary about the failure on the part of the account customers to meet their invoices on time. He also pointed out that the cashflow position of Eight Acres did not, on the face of things, appear to be seriously damaging to Eight Acres' capacity to carry on trade. Indeed for the three month period to the end of May 2003, the bank statement showed incoming payments of £114,000.

We have to proceed on the evidence that we have got. We recognize that there is no overdraft available to Eight Acres. But why there is none, has not been explained to us. We recognize also that Eight Acres' customers, most of whom appear to have been large account (commercial) customers, may have been late in meeting their liabilities. Other than that, we have no explanation as to why those customers were late or, indeed, what pressures were put on them to encourage them to pay on time. Nor do we know anything about the more general financial background to Eight Acres' trading undertaking.

We have sympathy for Eight Acres and Mr Yorke. We have, however, looked through the papers provided to us and can find no reasonable excuse for the late payment which has given rise to the default surcharge assessment. The case seems to boil down to one of shortage of funds. And, as pointed out by Mr Webb for the Commissioners, shortage of funds does not provide a reasonable excuse, unless there is some major underlying cause for the shortage of funds that can be described as unforeseen and extraordinary. We are not aware of any such circumstances here.

For those reasons we dismiss the appeal.

Eight Acres are reminded of their rights under rule 26 of the Tribunals Rules. They may, within 14 days, apply to the Tribunal to have the matter reinstated. If such an application is made it may be followed by a hearing and Eight Acres must be represented personally at the hearing or the Tribunal will not be able to carry on with the hearing.

STEPHEN OLIVER QC

CHAIRMAN

RELEASED:

LON/03/1124

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