United Kingdom VAT & Duties Tribunals Decisions

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Cite as: [2005] UKVAT V19273

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Fizique Health & Leisure v Her Majesty's Revenue and Customs [2005] UKVAT V19273 (04 October 2005)

19273

Default Surcharge: Reasonable excuse; illness of one partner; drug addiction of second; whether reasonable excuse; appeal allowed in part.

EDINBURGH TRIBUNAL CENTRE

FIZIQUE HEALTH & LEISURE Appellants

- and -

HM REVENUE & CUSTOMS Respondents

Tribunal: (Chairman): T Gordon Coutts, QC

Sitting in Aberdeen Sheriff Court on Thursday 29 September 2005

for the Appellants Mr Alistair J Ewen

for the Respondents Mr Russell Harrison

© CROWN COPYRIGHT 2005.


 


DECISION

The Appellant taxpayer which was described to the Tribunal as a partnership, albeit Mr Ewen appeared to be the person acting as though he was the owner, initially had a good compliance record but fell into the default surcharge regime in the period 03/01 and continued until the period 12/03. He claimed to have a reasonable excuse at the beginning in respect of a fire at his premises which excuse was ultimately accepted and the surcharges applied during 2001 were withdrawn. However that still meant that the taxpayer was subject to a surcharge liability notice. The returns and payments for periods from 03/02 and 12/03 were late to a varying extent.

In terms of section 59 of the Value Added Tax Act 1994 if a taxable person is in default in a prescribed accounting period he is liable to a surcharge. That surcharge is of a specified and prescribed amount rising from 2% to 15% after the third default.

Mr Ewen, in common with many taxpayers so caught protested against the "grossly unfair application of surcharges" and presented a calculation showing by how much the surcharge exceeded what would be a normal interest rate for overdue money. That is not in terms of the statute a relevant consideration, and neither Commissioners nor the Tribunal has any power to mitigate these surcharge percentages.

The only way to avoid the payment of a surcharge in respect of late payment is to establish under the statute that there was a reasonable excuse for the default. By Section 71 reliance on any person to perform any task does not provide a reasonable excuse. There did not appear to be any question of insufficiency of funds in the present case.

By the time the matter came before the Tribunal the issue was whether in relation to the various accounting periods in 2002 and 2003 the taxpayer could establish a reasonable excuse.

Technically the taxpayer, being a partnership, reliance on one of the partners to complete the forms means that the partnership cannot rely on lack of diligence of that person to provide a reasonable excuse. However the Commissioners and the Tribunal were prepared to regard the circumstances of this taxpayer as being such that Mr Ewen was the equivalent of the owner and an excuse which was good for him would be good for the partnership.

The matters which Mr Ewen sought to found upon in relation to the original series of surcharges were firstly a fire at his premises. That was not initially accepted but after a visit from officer Harrison was. The surcharge relating to that matter was withdrawn.

Secondly the health of Mr Ewen was mentioned. The Tribunal accepts that he was if not in imminent actual danger he was reasonably apprehensive that his health was very poor and deteriorating and that that occasioned him considerable worry.

The third matter was the alcoholism and drug addiction of his partner son which caused him considerable concern. That combined with his own ill health was regarded by Mr Harrison as a reasonable excuse for the period 09/02.

The other matter mentioned was the indifferent health of Mr Ewen's mother. Mr Harrison, in the view of the Tribunal, rightly disregarded this as being a sufficient excuse for the partnership.

The effect of the delay in relation to the returns manifested itself in the period 06/02 and 09/02. Mr Harrison accepted that for 09/02 there was a reasonable excuse and the surcharge could be withdrawn. However both these returns were submitted at the same time and it appeared to the Tribunal that if one was affected by a reasonable excuse so was the other. On the whole matter the Tribunal considered that there was reasonable excuse for the delays up until the period 09/02.

Thereafter the delays occurred from 03/03 to 12/03. In relation to the periods 06/03 and 09/03 a similar delay occurred as had for 06/02 and 09/02.

The Tribunal accepted that there were still at that time health and family concerns and that Mr Ewen was under stress in relation to his affairs. However the return for the period 12/02 was not late and accordingly it was apparent that returns could be produced in time irrespective of the health of Mr Ewen. In any event even if there were difficulties the time had by then arrived when assistance would require to be called in since the primary responsibility for submitting returns on time for the partnership had not been met.

On the whole matter therefore extending Mr Harrison's reasonable view of the circumstances which had pertained up until the period ending 09/02 the Tribunal discharges the assessment to surcharge in relation to all periods up until the period 03/03.

T GORDON COUTTS, QC

CHAIRMAN

RELEASE: 10 OCTOBER 2005

EDN/04/69