United Kingdom VAT & Duties Tribunals Decisions

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Cite as: [2006] UKVAT V19478

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Hellesdon Leather & Cloth Furniture Co Ltd v Revenue and Customs [2006] UKVAT V19478 (27 February 2006)

19478

DEFAULT SURCHARGE – Late payment – Whether return and payment made in time – No – Appeal dismissed

LONDON TRIBUNAL CENTRE

HELLESDON LEATHER & CLOTH FURNITURE CO LTD Appellant

and –

THE COMMISSIONERS FOR HER MAJESTY'S REVENUE & CUSTOMS Respondents

Tribunal: STEPHEN OLIVER QC (Chairman)

SUNIL K DAS LLM, ACIS

Sitting in public in London on 15 February 2006

No attendance for the Appellant

Michael Chambers for the Respondents

© CROWN COPYRIGHT 2006

DECISION

In this appeal Hellesdon Leather & Cloth Furniture Co Ltd ("Hellesdon Leather") appeal against a default surcharge of £2,526 for the period 07/03.

The reason for the imposition of the surcharge was that the return with payment enclosed was recorded and date-stamped as received at the Colchester VAT office on 10 September 2003 and as received by "Southend" on 12 September. They were received at least ten days after the due date (i.e. by the end of August, i.e. Sunday 31 August).

When the case was called on for hearing there was no one to represent Hellesdon Leather. We checked to see that they had been duly notified of the hearing. They had: so we decided to proceed in Hellesdon Leather's absence as rule 26(2) of the Tribunals Rules allows us to do. Rule 26(3) allows the absent party, if unsuccessful, to apply to the Tribunal within 14 days to have their decision set aside and, if appropriate, to have a re-hearing.

Unfortunately for Hellesdon Leather their director, Mr Trevor Milton, had mistakenly gone to Somerset House for the hearing. He arrived at the Tribunal centre ten minutes after the necessarily short hearing was over and the oral decision had been given against Hellesdon Leather. By then the representative for the Customs and the lay member of the Tribunal had left the building and it was not possible to reconvene the hearing.

The reason for Mr Milton's mistake was this. A few days before the hearing he had been sent the Customs' bundle of documents (VAT 970A SUR) by the Customs. These were accompanied by a letter from "West Wing, Somerset House". Mr Milton took the letter as indicating a change of venue for the hearing. The mistake is understandable, though the chairman has not come across it before.

When Mr Milton arrived at the Tribunal the chairman, sitting alone and in the absence of any representative for the Customs, heard his reason for being absent at the time when the hearing had taken place. The chairman decided that Hellesdon Leather should have a new hearing of their appeal, if they chose to take this opportunity. A separate direction to this effect has been given by the chairman.

The rest of this decision contains our determination at the hearing on 15 February 2006. We start with the circumstances. It will be relevant to quote in full a letter from Hellesdon Leather dated 20 August 2004 and signed by Mr Trevor Milton:

"Further to my conversation with your office today regarding surcharge for late payment for period 07/03 … , amount £2,526.04. I wrote to VAT, Southend on 3 October 2003 stating that payment was sent on time to Colchester, Debt Management Office for £16,840.31. The cheque … was sent on 30 August 2003 which was a bank holiday period when offices close and there is no post. This cheque was received at Southend on 9 September 2003 and it cleared our bank, NatWest, on 17 September 2003. Eight days to clear. Copy of bank statement enclosed … . As decision on 10/03 default surcharge £2,929.74 has now been withdrawn after an appeal. Please consider penalty for period 07/03 as we followed orders from … Colchester office. In future payments sent direct to Southend recorded delivery. We await your decision."

Michael Chambers for the Customs pointed out the following:

(a) 31 August 2003, the last in-time date for receipt by Customs of returns and payments for the 07/03 period, was a Sunday. (The bank holiday weekend that year had been 23-25 August.)

(b) For a return with cheque enclosed to reach the Customs by the due date, the end of August 2003, it would have had to have been posted well before the end of August, i.e. on 28 or at the latest on 29 August.

(c) The return was dated 31 August 2003 and the box showing that payment was enclosed is ticked.

(d) It follows that, even if the return and the cheque had been despatched on Saturday 30 August 2003 (the date referred to in Hellesdon Leather's letter of 20 August 2004) it could not have reached the Customs by the end of August 2003.

The points made by Mr Chambers suggest to us that Hellesdon Leather had been late in making their 07/03 return and payment. On any reckoning the cheque could not have been received by the Customs until Monday 1 September. An no reasonable excuse has been advanced for late payment.

Mr Chambers went on to make the following points:

(e) Can any conclusion in Hellesdon Leather's favour be drawn from the fact that the cheque, said by Hellesdon Leather in its letter of 20 August 2004 to have been received at Southend on 9 September was not cleared until 17 September 2003? The date-stamping on the return shows the return and the enclosed payment as having been received at Southend on 12 September, a Friday. Clearing by Wednesday 17 September, i.e. 3/4 working days after that, is to be expected. Even if the cheque had been received by Southend on 9 September, as suggested in Hellesdon Leather's letter, it would still have been received well after the due date.

On that basis also we think that Hellesdon Leather's VAT payment for the 07/03 period must have been sent late. There may be another way of looking at the circumstances (which Mr Milton will have the opportunity to explain if he takes up the right to a re-hearing); but on the evidence and in the light of the information available to us, we cannot see any other explanation or any reasonable excuse.

The other point taken by Hellesdon Leather in correspondence related to the circumstances of the 10/03 period. The background to this appears to be as follows:

(a) In May 2003 Debt Management Unit at Colchester instructed Hellesdon Leather to send all payments to Colchester instead of Southend.

(b) The 10/03 return shows that it was signed and dated by Hellesdon Leather on 27 November 2003: the payment box is ticked. It is date-stamped as received by Southend on 8 December 2003. A default surcharge was issued to Hellesdon Leather on 24 December 2003.

(c) Customs accepted that there was no evidence to show that the return and payment had ever been received by Colchester VAT office. Nonetheless it was possible that the 10/03 return and the enclosed payment had been sent to Colchester in time. For that reason the Customs withdrew the default surcharge for that period.

Mr Milton asks: Why did Customs not also withdraw the default surcharge for the 07/03 period? The answer, we think, lies in the fact that the Customs have evidence that the 07/03 return and payment were actually received at Colchester. The date-stamping shows this to have been the case. The return and the payment must therefore have been sent late. By contrast the 10/03 return and payment may have been sent in time: there is no evidence to the contrary.

For all those reasons we dismiss the appeal. But we recognize that Hellesdon Leather may have a better case which can be presented if they decide to call for this appeal to be re-heard.

Appeal dismissed.

STEPHEN OLIVER QC

CHAIRMAN

RELEASED: 27 February 2006

LON/05/1128