United Kingdom VAT & Duties Tribunals Decisions

Withers v Customs And Excise [2005] UKVAT V19083 (29 April 2005)

19083

VAT DEFAULT SURCHARGE – Failure to make payment of VAT by due date – Reasonable excuse- the cheque for payment had been stolen- Appellant failed to satisfy the Tribunal on balance of probabilities that the cheque had been stolen – no reasonable excuse found – Appeal dismissed.

LONDON TRIBUNAL CENTRE

YVONNE WITHERS Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: MICHAEL TILDESLEY (Chairman)

MICHAEL SILBERT FRICS

Sitting in public in London on 30 March 2005

The Appellant appeared in person

Pauline Crinnion, Advocate for the Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2005

DECISION

The Appeal

1. The Appellant is appealing against a default surcharge in the sum of £819.62 imposed for her failure to pay the outstanding VAT due of £8196.23 for the period 1 September 2003 to 30 November 2003 by the required date of 31 December 2003.
2. The issue in this Appeal is whether the Appellant had a reasonable excuse for not making the payment on time. The Appellant alleged that she had sent the cheque for payment of the outstanding VAT to the Respondents by the due date but it had been stolen.

The Facts

3. The Appellant is a sole proprietor running a small bed and breakfast establishment in Wimbledon with 14 bedrooms and open all year round. Her accounts were compiled by JF Millar & Co, a firm of accountants based in Ayr Scotland.
4. In Christmas week 2003 she visited JF Millar & Co for the purpose of compiling her VAT return for the period ending 30 November 2003. The Appellant recalled completing the return in her accountant's office and starting to write the cheque. She was unable to complete the cheque because she said her allotted time with the accountants had run out. As far as the Appellant could remember she put the cheque in the envelope with the VAT return and posted it to the Respondents.
5. The Respondents received the VAT return on 5 January 2004 but there was no cheque for the VAT due enclosed.
6. On 16 January 2004 the Respondents issued a Notice of Assessment of Surcharge in the sum of £1229.43 to the Appellant. The Respondents later reduced the amount of surcharge to £819.62.
7. The Appellant contacted the Respondents by phone on 21 January 2004 stating that she had sent the cheque for payment with the return which was cleared by her bank on 5 January 2004. The Respondents were unable to trace the cheque. It transpired later that the cheque in question was a forgery which has been confirmed by the Appellant's bank. It was signed by a David Cole in the sum of £8400 26 dated 29 December 2003 payable to M Robin. The Appellant's bank has since reimbursed the Appellant with the £8400.26.
8. The Appellant suggested in evidence that this forged cheque was the original cheque she had sent to the Respondents with the VAT return. However, her bank manager who had inspected a copy of the cheque could only state that none of the details on the cheque had been altered apart from possibly the payee. The Appellant was unable in her evidence to explain why the forger replaced her signature if this had been the cheque she had signed and sent to the Respondents.
9. The Appellant pointed out that the forged cheque had come from a cheque book which had been stolen. Another forged cheque from the same book had been presented to her bank in September 2004. The Appellant offered an alternative explanation that perhaps the original forged cheque was stolen before she had the chance to sign it.

Our Decision

10. Section 59 of the VAT Act 1994 required the Appellant to furnish the VAT return and pay the outstanding VAT within one month of the relevant accounting period. The Appellant failed to comply with this requirement for the accounting period ending 30 November 2003. The Appellant was subject to a surcharge liability notice making her liable to pay a surcharge of 10% of the outstanding VAT. The Appellant can avoid the default surcharge if she can satisfy the Tribunal on the balance of probabilities that she had a reasonable excuse for not sending the VAT payment on time.
11. We have carefully considered the Appellant's explanations for not making the VAT payment on time. We find her explanation regarding the forged cheque being the original cheque for payment of the VAT as highly improbable. She implied that someone stole the cheque from the envelope with the VAT return and altered the cheque by replacing the names of the payee and the signatory and substituting a different amount from that payable to the Respondents. We are at a loss to understand why the forger would replace her signature with a different signature as the signatory because it would increase considerably the probability that the cheque would be detected as a forgery.
12. We accept that her alternative explanation that the forger stole her cheque book and then forged a cheque partly completed by the Appellant is the more likely account of what happened. However, this explanation is of no assistance to her in mounting the defence of reasonable excuse because it would indicate that the Appellant never put the cheque in the envelope with the VAT return.
13. In our considered opinion the facts support the view that the Appellant was in a hurry from leaving her accountants because her allotted time had expired. She forgot to complete the cheque for the VAT payment and failed to put it in the envelope with her VAT return. Her cheque book with the incomplete cheque was then subsequently stolen from her handbag.
14. The Appellant has, therefore, failed to satisfy us on the balance of probabilities that she had reasonable excuse for not paying the outstanding VAT of £819.62 for the period 1 September 2003 to 30 November 2003 by the required date of 31 December 2003. We dismiss her Appeal and make no order for costs.

MICHAEL TILDESLEY

CHAIRMAN

RELEASE DATE: 29 April 2005

LON/04/1906