United Kingdom VAT & Duties Tribunals Decisions

Snaddon v Revenue & Customs [2006] UKVAT V19964 (15 December 2006)

19964

VALUE ADDED TAX — late registration penalty — Appellant registering more that three years late — penalty of 15 per cent — VATA 1994, s 67(4) — mitigation of 25 per cent allowed for voluntary registration — whether further reduction of penalty appropriate — no evidence provided — appeal dismissed.

MANCHESTER TRIBUNAL CENTRE

JOHN SNADDON Appellant

- and -

THE COMMISSIONERS FOR

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: Colin Bishopp (Chairman)

Sitting in public in Birmingham on 13 December 2006

The Appellant did not appear and was not represented

Richard Mansell of their solicitor's office for the Respondents

© CROWN COPYRIGHT 2006


 


DECISION

1. This is an appeal by John Snaddon, who trades as "Kitchen Design Associates" in Nottingham, against a penalty imposed on him for the late registration for VAT of his business. It appears from correspondence sent on Mr Snaddon's behalf by his accountant that it is accepted that a penalty was correctly imposed; the challenge is to its amount. The issue is one of principle rather than arithmetic.
2. When the appeal was called on for hearing the Respondents were represented by Richard Mansell of their solicitor's office, but the Appellant did not appear and was not represented, although the appeal had been pursued on her behalf by his accountant. I agreed to Mr Mansell's request that I hear the appeal in the Appellant's absence, because there was no apparent reason why he and his representative were not present and notice of the hearing appeared to have been sent correctly and in good time. If Mr Snaddon is dissatisfied with this decision, he may apply for a direction that it be set aside; such an application must be made within 14 days of the release of the decision.
3. Mr Snaddon applied for registration, using the standard form VAT 1, in September 2005 (although the form appears not to have been received by the Commissioners until 2 November). He disclosed in the application that his turnover had exceeded the registration threshold on 30 June 2002, rendering him liable to registration from 1 August 2002. At his own request he was registered from 1 July 2002, and I understand he has since accounted to the Commissioners' satisfaction for the tax which is due for the time when he was not, but should have been, registered. The fact that his application was received more than three years later than it should have been has triggered the imposition of the penalty.
4. The obligation to apply for registration stems from section 3(2) of, and paragraph 1(1) of Schedule 1 to, the Value Added Tax Act 1994. Paragraph 1(1)(a) provides that a person making taxable supplies becomes liable to register at the end of any month if the value of his taxable supplies in the year then ending has exceeded the threshold for the time being. It appears to be accepted that this is the provision which made Mr Snaddon liable to register. Paragraph 5 of Schedule 1 requires a person who has become liable to register to apply for registration within 30 days of the end of the relevant month. Mr Snaddon clearly did not comply with that requirement; his application was over three years late.
5. The provisions relating to the imposition of a penalty for late registration are to be found in section 67 of the 1994 Act. So far as presently material, that section provides:

"(1) In any case where—

(a) a person fails to comply with any of paragraphs 5 … of Schedule 1 …

he shall be liable, subject to subsections (8) … below, to a penalty equal to the specified percentage of the relevant VAT or, if it is greater or the circumstances are such that there is no relevant VAT, to a penalty of £50 …

(3) In subsection (1) above 'relevant VAT' means …—

(a) in relation to a person's failure to comply with paragraph 5 … of Schedule 1, … the VAT (if any) for which he is liable for the period beginning on the date with effect from which he is, in accordance with that paragraph, required to be registered and ending on the date on which the Commissioners received notification of, or otherwise became fully aware of, his liability to be registered; …

(4) For the purposes of subsection (1) above the specified percentage is—

(a) 5 per cent where the relevant VAT is given by subsection (3)(a) … above and the period referred to in that paragraph does not exceed 9 months …;

(b) 10 per cent where that VAT is given by subsection (3)(a) … above and the period so referred to exceeds 9 months but does not exceed 18 months …; and

(c) 15 per cent in any other case …

(8) Conduct falling within subsection (1) above shall not give rise to liability to a penalty under this section if the person concerned satisfies the Commissioners or, on appeal, a tribunal that there is a reasonable excuse for his conduct."

6. Mr Snaddon's case, as it has been put by his accountant, is that the penalty should not have exceeded 5 per cent, as that was the scale of the penalty imposed on others of his clients who had also registered late. The accountant does not, however, appear to have addressed subsection 67(4), which provides for an increase in the penalty from an initial 5 per cent as the period of delay lengthens. Mr Snaddon's delay exceeded 18 months and the correct penalty was that imposed, namely 15 per cent. Neither the Commissioners nor I have any power to vary the basic amount of the penalty. It is possible to quash the penalty if the person concerned establishes a reasonable excuse (as subsection (8) shows) or to reduce the penalty if there are mitigating circumstances: see section 70 of the 1994 Act. No reasonable excuse has been suggested in this case.
7. The Commissioners, as I have said, have allowed a 25 per cent reduction because Mr Snaddon registered voluntarily, and not after intervention by the Commissioners themselves. That, it seems to me, is entirely appropriate. No other reason has been advanced for the reduction of the penalty, save that it is greater than the penalties exacted against others of the accountant's clients. But that is not mitigation; it is merely a complaint that the penalty is too great. As Parliament has determined that the penalty should increase over time, it would be quite inappropriate for me to adopt a course, even if I were minded to, which would have the effect of frustrating that determination.
8. Since no proper grounds have been advanced which would enable me to interfere, the appeal must be dismissed. I make no direction in respect of costs.

Colin Bishopp

CHAIRMAN
Release Date: 15 December 2006

MAN/06/0600