United Kingdom VAT & Duties Tribunals Decisions

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Cite as: [2004] UKVAT V18658

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Hazelton v Customs and Excise [2004] UKVAT V18658 (17 June 2004)

18658

Default Surcharge: Late payment; overdraft exceeded; uncleared cheques in excess of balance due; bank un-co-operative; VAT already collected, unpaid. No reasonable excuse. Appeal refused.

EDINBURGH TRIBUNAL CENTRE

GORDON HAZELTON Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: (Chairman): Mrs G Pritchard, BL., MBA., WS

Sitting in Edinburgh on Friday 4 June 2004

for the Appellant Mr Gordon Hazelton

for the Respondents Mr A McCue

© CROWN COPYRIGHT 2004.


 
DECISION

This is an appeal against the imposition of default surcharges for the periods 06/01, 09/01, 12/01 and 12/02.

A reasonable excuse was accepted for a different period 03/02, by the Commissioners.

Mr Gordon Hazelton appeared on his own behalf. Mr McCue appeared for the Commissioners. The written evidence consisted of two bundles. The Commissioners' bundle is numbered 1-105. The Appellant's bundle is numbered A1-A23. Where reference is made to any page in either bundle it will be treated as repeated here.

From the evidence I find:

1. Mr Hazelton has great difficulty running his business, selling wheels and tyres. He has been in business for some years and owns his own premises. A member of his staff stole two lorries full of tyres. He was prosecuted. No financial recovery was made and no insurance claim available. The Appellant is given only very limited financial provision of overdraft by his bank and effectively runs on a cash basis. He pays his VAT by bank transfer. As 7 days grace is given for such transactions and as he pays extra for same day transfers his due date for payment is effectively extended.
2. In respect of the periods 06/01, 09/01 and 12/01 the Appellant ran into great difficulties with supplies. He therefore imported tyres from the EC. He was in arrears with his VAT and entered two time to pay agreements. He had not understood that default surcharges would apply. Paying VAT on entry of the tyres to the UK meant cash flow problems. He had VAT recovery in the following quarter but had to fund the payments himself, in the first instance.
3. His trading difficulties were assisted by the time to pay agreements but this never does affect the default surcharge. There is therefore no foundation in law for his appeal for the periods 06/01, 09/01 and 12/01. He knows the payments were late. Lack of funds does not constitute a reasonable excuse. This is set out in S71 of the Value Added Tax Act 1994 (VATA 1994).

I find in respect of the 12/02 quarter:

4. The due date of payment would have been 07/02/03. Looking at Mr Hazelton's Bank Statement at P75 his overdraft at 06/02/03 was £3793.56. He had an overdraft facility for £4,000 agreed so that any payment instructed to the Commissioners would not be paid by the bank.
5. On 07/02/03 however various credits occurred which would have allowed payment to be made, though a small overdraft would have occurred. These credits were not of cleared funds.
6. He faxed the bank asking for these credits to be taken into account and explaining that their failure to pay would cause him to have a default surcharge applied. They would not concede. The VAT instruction was not carried out by the bank until 11/02/03.
7. On 12/02/03 the bank's Glasgow office wrote indicating the Appellant's overdraft was to be treated as unauthorised and requiring him to keep his account in credit. They have never given a reason for this. They told him he is a credit risk without further explanation. He has tried to make different banking arrangements to no avail as other banks are suspicious and unwilling to lend. His current overdraft facility is £4,000.
8. However as with all VAT, it is accounted for when billed over a quarter. There was no suggestion here of bad debts, simply bad timing of credits. However, the VAT must have been in the Appellant's hands albeit he used the funds for some other purpose.

Therefore although sympathetic to his business difficulties I see no foundation for a reasonable excuse for the late payment for the quarter 12/02.

The appeal is therefore refused.

No expenses are found due to or by either party.

MRS G PRITCHARD, BL., MBA., WS CHAIRMAN
RELEASE: 17 JUNE 2004

EDN/003/51