20975
DEFAULT SURCHARGE – whether reasonable excuse – no – appeal dismissed
LONDON TRIBUNAL CENTRE
RICECOOKER LIMITED T/A LIQUORISH Appellant
- and -
THE COMMISSIONERS FOR HER MAJESTY'S
REVENUE AND CUSTOMS Respondents
Tribunal: DR JOHN F AVERY JONES CBE (Chairman)
RAY BATTTERSBY
Sitting in public in London on 11 March 2009
Ashkhan Candey, solicitor and director of the Appellant, for the Appellant
Gloria Orimoloye, Senior Officer HM Revenue and Customs, for the Respondents
© CROWN COPYRIGHT 2009
DECISION
(1) The Appellant runs a restaurant in Dulwich which has been in operation for about five years. In October 2007 the general Manager was asked to leave and the deputy manager, Mr Salugo, took over as general manager in November 2007.
(2) Mr Salugo over-ordered stocks in advance of Christmas. Mr Candey, who described himself as in effect the managing director, went abroad on 26 December 2007 and did not return until 13 January 2008. The other director Mr Anderson was available and signed the VAT return on 9 January 2008.
(3) The VAT for the period 11/07 was due on 31 December 2007 but due to a shortage of funds this was not paid until 21 January 2008 when the Vat return was received by HMRC. Mr Candey on his return advanced further funds to the Appellant and out of these funds the VAT was paid.
(4) The Appellant had defaulted in payment of VAT on time for periods 02/07 (surcharge liability notice issued); 05/07 (2 per cent surcharge); 08/07 (5 per cent surcharge). This caused the 10 per cent surcharge for period 11/07 of £666.28 that is in issue in this appeal.
(5) The surcharge liability extension notices for periods 08/07 and 11/07 were wrongly addressed to the Appellant at 123 Lord Land, rather than Lordship Lane, but the Appellant does not claim that they were not received.
That said, there must be limits to what could be regarded as a reasonable cause. Nolan LJ, as I read his judgment explaining and expanding on his judgment in Customs and Excise Comrs v Salevon Ltd [1989] STC 907, is saying that if the exercise of reasonable foresight and of due diligence and a proper regard for the fact that the tax would become due on a particular date would not have avoided the insufficiency of funds which led to the default, then the taxpayer may well have a reasonable excuse for non-payment, but that excuse will be exhausted by the date on which such foresight, diligence and regard would have overcome the insufficiency of funds.
Scott LJ on the other hand is of the opinion that the underlying cause of the insufficiency of funds must be an 'unforeseeable or inescapable event'. I have come to the conclusion that this is too narrow in that (a) it gives insufficient weight to the concept of reasonableness and (b) it treats foreseeability as relevant in its own right, whereas I think that 'foreseeability' or as I would say 'reasonable foreseeability' is only relevant in the context of whether the cash flow problem was 'inescapable' or, as I would say, 'reasonably avoidable'. It is more difficult to escape from the unforeseeable than from the foreseeable.
It follows that if I have correctly interpreted the two judgments, I am in agreement with Nolan LJ rather than Scott LJ. On the other hand if I have incorrectly interpreted either or both, my views are those that I have attributed to Nolan LJ.
JOHN F AVERY JONES
CHAIRMAN
RELEASE DATE: 13 March 2009
LON/08/2442