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United Kingdom VAT & Duties Tribunals Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> Eaton v Customs and Excise [2004] UKVAT V18791 (08 October 2004)
URL: http://www.bailii.org/uk/cases/UKVAT/2004/V18791.html
Cite as: [2004] UKVAT V18791
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18791
DEFAULT SURCHARGE – Shortage of funds – Office cleaning business – Proprietor cleaning windows – Accident forcing use of sub-contractors – Steptoe [1992] STC 757 applied – Appeal allowed in part
LONDON TRIBUNAL CENTRE
DANE ROBERT EATON Appellant
THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents
Tribunal: THEODORE WALLACE (Chairman)
Sitting in public in London on 11 May 2004
The appellant appeared in person
Alistair Dougall, senior officer advocate, for the Respondents
© CROWN COPYRIGHT 2004
DECISION
This is an appeal against ten default surcharges covering all periods from the period ending 31 January 2001 to 30 April 2003 totalling £2,082.16.
The Appellant's case is that he had reasonable excuses for all the defaults in that he had an accident on 5 November 2000 damaging a ligament in his right knee and the cartilage which prevented him from carrying out the window cleaning for his office cleaning business and obliged him to employ sub-contractors. His contracts were on fixed prices with narrow profit margins.
At the hearing on 11 May the Appellant explained his case but was not cross-examined. After a hearing of an hour and 20 minutes I adjourned the appeal, directing the Appellant to produce to Customs within 28 days his annual accounts from the year ending April 1998 to date, invoices from subcontractors for window cleaning and carpet cleaning, his cash book expenditure records from April 2000 and copies of quotations for work at November 2000.
He did not produce any of the material within the time directed. On 1 July 2004 he faxed Customs asking for a further 28 days due to a family bereavement. Seven weeks later Customs had still not received the material and applied for the Tribunal to decide the appeal on the information and submissions made on 11 May. Customs had not in fact made any submissions and had not cross-examined the Appellant.
The Tribunal directed on 14 September that if the Appellant did not provide the material by 20 September then unless a further application was made the appeal would be considered on the basis that the facts outlined by the Appellant on 11 May 2004 were not challenged.
On 11 May the Appellant told the Tribunal that on 5 November 2000 he had been out celebrating a good new contract when he met flood water at Old Netley, eventually being given a tow by another car. He was pushing the car with his wife driving when he fell down a manhole the cover of which had come off in the flood. He damaged his knee ligament and cartilage. The hospital put plaster on and gave him an appointment to see Mr Barrett. He could hardly walk and was unable to drive.
His business involved regular cleaning of clients' offices out of office hours. In 2000 he had twenty clients. His schedule included a well-known bank. There were written contracts specifying the work with fixed prices agreed in advance for all contracts. Margins were tight.
In November 2000 the Appellant did most of the window cleaning himself both during the week and at week-ends. He also did a couple of the cleaning jobs himself. He had about twelve cleaners working part-time on a weekly or monthly basis. He found cleaners by advertising. The cleaners went to the jobs independently with the Appellant supplying hoovers and cleaning materials.
Following his accident the Appellant had to subcontract all the work which he had been doing previously. He was having difficulty with paying VAT before the accident but he said that with the new contract he would have been earning enough to pay the VAT.
As already pointed out there were no oral submissions by Customs before the adjournment.
The reconsideration letter to his accountant prior to the appeal said that the fact that the Appellant had to employ staff to carry out work on his behalf due to his illness was an occupational business hazard. The writer referred to the fact that VAT was not paid on time before the accident which indicated that VAT returns were not given sufficient priority.
Conclusions
This is a highly unusual case in that there was no cross-examination.
Although the Appellant's compliance record before the accident was not good, payments were up to date at the time of the accident. Having obtained a new contract he stated that he would have been earning enough to pay his VAT. Since this was not challenged and is not inherently improbably I accept it. On the basis of the returns in the bundle business had been steady up to then and a good contract clearly implies good margins. The Appellant had not wholly neglected his responsibilities since he had made partial payments of VAT in the year before the accident.
Window cleaning was an important part of the office cleaning business. Window cleaners invariably cost substantially more than ordinary cleaners involving ladders and insurance as well as health and safety problems.
A letter to the Appellant from Mr David Barrett, consultant orthopaedic surgeon, at Southampton General Hospital confirmed appointments on 19 December 2000, 9 January 2001, 20 March 2001, 10 April 2001 when the Appellant was put on a waiting list for a right knee Arthroscopy which was performed on 2 October 2001, 9 April 2002, 15 March 2003 and 1 July 2003 when a second Arthroscopy was performed.
I readily accept that for a time after the accident the Appellant had difficulty walking and could hardly drive and that thereafter he was unable to do the window cleaning himself at least until the first operation.
His returns show outputs varying between £14,341 and £16,720 excluding VAT before the accident, £13,763 for 01/01 and the highest subsequent figure as £12,578 with some quarters substantially lower.
It is clear that the accident had a serious effect on the Appellant's business. Presumably he renegotiated contracts as far as he could, however there is no reason to assume that customers would readily agree to pay more merely because the Appellant had to sub-contract window cleaning.
I do not accept the view of the reconsideration officer that the need to sub-contract window cleaning in this case was a normal business hazard and I have no hesitation in funding that the Appellant had a reasonable excuse for period 01/01 in which the accident occurred in that he was unavoidably deprived of the ability to pay the tax due, see Customs and Excise Commissioners v Steptoe [1992] STC 757. The problem is how far that excuse extended.
Since the Appellant had to pay his cleaners he was clearly in a very difficult position. Without cleaners he would have had to cease business. Since he was waiting for an operation from April to October 2001, his business was clearly badly affected up to them. In fact he would probably have been entitled to de-register.
I have concluded on the material before me that the Appellant had a reasonable excuse up to 10/01 however on the material before me I am not satisfied that it extended beyond then.
The result is that the surcharge period for the default on period 07/00 expired on 31 October 2001 and the default for 01/02 gave rise to a surcharge liability notice with the following three defaults attracting penalties of 2 per cent, 5 per cent and 10 per cent. The surcharges for the last two periods stand.
The appeals against the surcharges for 01/01 to 10/01 are therefore allowed in full on the ground of reasonable excuse, there is no surcharge for 01/02, the next three surcharges are reduced and the appeals for 01/03 and 04/03 are dismissed.
THEODORE WALLACE
CHAIRMAN
RELEASED: 8 October 2004
LON/2003/868