United Kingdom VAT & Duties Tribunals Decisions

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You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> Apuzzo (t/a Casamia Restaurant) v Revenue & Customs [2006] UKVAT V19962 (15 December 2006)
URL: http://www.bailii.org/uk/cases/UKVAT/2006/V19962.html
Cite as: [2006] UKVAT V19962

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Ms Felicia Apuzzo (t/a Casamia Restaurant v Revenue & Customs [2006] UKVAT V19962 (15/12/2006)

19962

DEFAULT SURCHARGE – whether effect of divorce constituted reasonable excuse – no

LONDON TRIBUNAL CENTRE

MS FELICIA APUZZO T/A CASAMIA RESTAURANT Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY'S

REVENUE AND CUSTOMS Respondents

Tribunal: DR JOHN F AVERY JONES CBE (Chairman)

Sitting in public in London on 13 December 2006

Shaukat Rai FCA, S.Ray & Co for the Appellant

Jonathan Holl, Senior Officer, HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2006


 


DECISION

1. This is an appeal against a default surcharge at 15 per cent amounting to £790.87 for the period 08/05. The Appellant was represented by Mr Shaukat Rai and Customs by Mr Jonathan Holl.
2. I find the following facts:

(1) The Appellant carries on a restaurant business. The business receives payment in cash or by credit card. There were three of four employees but they were not capable of managing the business.

(2) The Appellant is in a default surcharge regime such that the default for the period 08/05 is the second one at which the surcharge is at 15 per cent.

(3) During the period the Appellant's divorce, which had been going on for six or seven years, was finalised and she was not able to devote all her time to the business. Her former husband did not work in the business.

(4) The turnover was £70,880 for the period 05/05 (and had been even higher in the past) and was much lower at £56,986 in the period 08/05, a drop of almost 20 per cent. This was caused by her inability to attend to the business because of the divorce. The net tax in those respective periods, on the other hand, increased from £4,140.07 to £5,272.66. This was because zero-rated business fell as a result of the closure of the delicatessen side of the business.

(5) The return for period 08/05 was prepared by S Ray & Co and is dated 28 September 2005. It would have been given to the Appellant for forwarding with a cheque. The return was received by Customs on 7 October 2005, suggesting that it had been posted on 5 or 6 October 2005.

3. Mr Rai, for the Appellant, contends that the effect of the divorce was considerable. The sharp drop in turnover demonstrated that she had been unable to give her full attention to the business in that period. Accordingly she had a reasonable excuse for the default.
4. Mr Holl, for Customs, contends that the Appellant was continuing to carry on business in the period in question. The return was ready to be sent in on 28 September 2005 and all that was required was to post it with a cheque. If there were a shortage of funds in spite of its being a cash business it is clear that funds were available shortly after because the cheque received on 7 October 2005 was met on presentation. If so, payment could have been made electronically without incurring a surcharge. The Appellant was in the surcharge regime already on account of shortages of funds, which had nothing to do with the divorce.
5. I announced at the end of the hearing that I did not accept that the Appellant had a reasonable excuse for the default and Mr Rai asked me to give my reasons in writing. The standard for a reasonable excuse is that of the reasonable conscientious businessman or woman who accepts the need to comply with VAT requirements. It is not that of a wholly objective reasonable businessman but rather one who finds himself in the same situation as the particular taxpayer. Thus if the taxpayer suddenly falls ill just before the return is due, one asks what a reasonable conscientious businessman would have done in the same circumstances, to which the answer is likely to be that he could have done nothing, in which case the taxpayer has a reasonable excuse. Here the Appellant was going through a divorce which clearly affected her ability to attend to the business as is demonstrated by the 20 per cent drop in turnover in this period compared to the previous one. However, it did not prevent her completely from carrying on the business, as is demonstrated by the turnover in the period of £56,986. The VAT return was prepared by S Ray & Co. A reasonable businessperson in the Appellant's position had the certainty of knowing that if the payment for that period is late there will be a surcharge of 15 per cent. While I accept the disruption to her life caused by the divorce was considerable and was the cause of the 20 per cent drop in turnover in this period, I regret that I am unable to accept that it was such that a hypothetical reasonable businesswoman in her position would have been unable to appreciate that late payment would incur a surcharge at 15 per cent, and would have been unable to make sure that the payment was made on time. If, despite its being a cash business, the drop in turnover coupled with the increased net VAT liability caused a shortage of funds with which to pay the VAT, this shortage can only have been temporary as is demonstrated by the payment being received on 7 October 2005, which is within the time for making an electronic payment.
6. Accordingly I dismiss the appeal.

JOHN F. AVERY JONES

CHAIRMAN

RELEASE DATE: 15 December 2006

LON/06/566