United Kingdom VAT & Duties Tribunals Decisions

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Cite as: [2005] UKVAT V18902

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Stewart Fenn Marketing Ltd v Customs and Excise [2005] UKVAT V18902 (07 January 2005)

18902

DEFAULT SURCHARGE – Reasonable excuse – Illness of director of company with which Appellant was holding merger discussions – Appeal dismissed

LONDON TRIBUNAL CENTRE

STEWART FENN MARKETING LTD Appellant

and –

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: STEPHEN OLIVER QC (Chairman)

MICHAEL SILBERT FRICS

Sitting in public in London on 5 January 2005

No appearance for the Appellant

Pauline Crinnion for the Respondents

© CROWN COPYRIGHT 2005


 


DECISION

1. Stewart Fenn Marketing Ltd ("SFM") appeals against a default surcharge at the 15% rate for the period 5/03. The due date for the payment was 30 June 2003. The tax shown on the return was £17,780. The payment was received on 18 July 2003. The surcharge is £2,667.
2. The appeal was listed for 10.00am on 5 January 2005. SFM's representative, Owadally & King, accountants, were notified by the Tribunal that the hearing would take place by letter dated 3 December 2004. When the case was called on for hearing, there was no representative for SFM. We telephoned Owadally & King but the person spoken to was unable to discover the whereabouts of the person responsible for attending the hearing. We waited until 10.30am. No one from Owadally & King came. We therefore decided to go ahead with the hearing in accordance with rule 26 of the VAT Tribunals Rules 1986.
3. Rule 26(1) enables the Tribunal to go ahead and hear and determine an appeal in the absence of one of the parties. Rule 26(3) provides that the Tribunal may set aside any decision given in the absence of the party "on such terms as it thinks just, on the application of that party … served at the … tribunal centre within 14 days after the date when the decision … of the tribunal was released". Rule 26(4) provides that where an application of that sort has been made, the party seeking the re-hearing must attend the application for the re-hearing in person and if he or she does not do so the application will be dismissed.
4. The grounds of appeal are found in SFM's Notice of Appeal lodged on 14 November 2003. These read as follows:

"Merger talks were being held during the VAT quarter ended 31 May 2003 between SFM and B D Media Ltd to form a new marketing technology organization called Pancentric Ltd. Unfortunately at a very crucial stage of the merger, B D Media's director, Mr Downes, fell seriously ill in May 2003 and was eventually admitted to the intensive care unit at the Princess Royal University Hospital. Mr Downes fell into a coma and took a very long time to fully recover. The stress and trauma of seeing one of their fellow directors being taken suddenly ill and more importantly the burden of ensuring that the merger successfully went ahead, meant that the directors of SFM genuinely forgot to send the company's VAT return for the quarter ended 31 May 2003 by the due date. The merger between the two companies had to be put back and eventually went ahead on 1 August 2003.

As their representative and professional advisers, we can assure Customs and Excise that this action, i.e. the lateness of the VAT return was not deliberate, evidenced by the fact that the company had more than sufficient funds, i.e. £70,749 to meet their VAT liability. We now enclose copies of correspondence and evidence previously sent to Customs and Excise and would urge the Tribunal to reconsider Customs and Excise's decision on this matter."

5. Customs and Excise produced a "Progress Sheet" which sets out the circumstances known to them at and shortly after the default. An entry on 18 August 2003 states that this is the fifth default. It goes on to say that the new accountant "states return and cheque prepared during visit to trader towards end of June, but they were not sent due to the stress caused by an associate director falling seriously ill".
6. The associate director, as we have already noted from the Notice of Appeal, was Mr Downes of B D Media. That is not in dispute. Mr Downes, however, can have had no role to play in the submission of SFM's return for the period 2 May 2003. Moreover that return had, as already noted, already been prepared and SFM's explanation is that it forgot to send the return and cheque in on time.
7. We can see no good reason why the affairs of B D Media and one of their directors should properly have affected SFM's ability to send in their return plus payment on time. Mr Downes was not a director of SFM. We accept, of course, that Mr Downes' illness may have been the cause for the oversight and we take the explanation given in the Notice of Appeal at face value. But we cannot see that this provides SFM with a reasonable excuse for its failure to send in the return, particularly bearing in mind that the return had already been prepared in time. The cheque is dated 30 June. While we have every sympathy with SFM, we cannot accept that they had a reasonable excuse for failing to comply by the due date.
8. For those reasons we dismiss the appeal.

STEPHEN OLIVER QC

CHAIRMAN

RELEASED DATE: 7 January 2005

LON/03/1116