20666

DEFAULT SURCHARGE – Reasonable excuse – Late payment – Appellant offered to enter into “time-to-pay” agreement – Respondents did not undertake to waive default surcharge – Appeal dismissed

LONDON TRIBUNAL CENTRE

	STEPHEN RUBIE	           Appellant

-	and –

	THE COMMISSIONERS FOR HER MAJESTY’S REVENUE & CUSTOMS 	 Respondents

				Tribunal:	SIR STEPHEN OLIVER QC (Chairman)
						SHAHWAR  SADEQUE 					

Sitting in public in London on 16 April 2008

The Appellant in person

Gloria Orimoloye for the Respondents

© CROWN COPYRIGHT 2008

DECISION

1.	Stephen Rubie, who trades under the name 606 Club, appeals against a 5% default surcharge imposed in respect of the 07/07 period.  The taxable amount for the period was £21,029. It was in fact paid by three instalments on 14, 21 and 28 September.  All payments were therefore received after the due date.

2.	Stephen Rubie gave evidence.  He said that on 6 September 2007 he had called his VAT office at about 2.00pm.  He says that he explained to the person at the office, a Ms B, that he wished to make a late VAT payment for the current period for cashflow reasons.  He says he told Ms B that his understanding was that he was able to pay late “once a year” without incurring penalties.  He says that he had specifically explained that it had been his understanding that if he paid late for the 07/07 quarter there would be no surcharge imposed.  Ms B did not, Stephen Rubie said, contradict him.  Ms B did not attend and give evidence.  Her notes of the telephone call records only Stephen Rubie’s statement that he would be paying by the three instalments.

3.	It is not in dispute that, on 6 September 2007, Stephen Rubie was covered by a SLNE issued on 15 September 2006; this extended the surcharge period to 31 July 2007; the 07/07 period was therefore covered by the SLNE.  Nor was it in dispute that Stephen Rubie had previously made time-to-pay agreements with HMRC.  On both of those occasions he had been advised that “Acceptance of this agreement does not prevent or cancel the recording of defaults, liability to surcharge and interest where applicable.”

4.	Nor was it in dispute that Stephen Rubie could have made arrangements to pay by CHAPS by the end of 7 September, in which case the payment would have been in time.  At the same time it was no part of Stephen Rubie’s case or his evidence that he had told Ms B of his ability to pay by the end of 7 September.

5.	We start by asking whether in those circumstances Ms B either misdirected Stephen Rubie as to the default surcharge position or whether she actually gave him a positive direction that no default surcharge would be imposed if he paid late.  

6.	On the misdirection question, HMRC recognised in correspondence that it had been regrettable that Stephen Rubie had not been told, on 6 September, that a default surcharge could still be imposed notwithstanding their acceptance of late payment through a time-to-pay agreement.  That is not, however, the same thing as recognising that Stephen Rubie had been misdirected.  Indeed the only basis for alleging misdirection is the fact that Ms B said nothing in response to Stephen Rubie’s explanation to her that he thought 07/07 was a penalty-free period.   This is not, we think, a situation in which silence can be construed as a direction or even as a misdirection.  

7.	We have already noted that the most Stephen Rubie said to Ms B was that he understood that he was entitled to his annual default surcharge free late payment.  That was plainly a misunderstanding on his part; the letter of 15 September 2006 stated that the 07/07 period was within the extended surcharge period.  Nothing that was said, or not said, by Ms B can be taken as having displaced that.  In other words her silence cannot be taken as having contradicted the terms of the 15 September 2006 letter.  Nor, we think, did Ms B purport to make any positive direction that if Stephen Rubie carried out his offer to pay by instalments, HMRC would in return waive the default surcharge that would otherwise be imposed.  A direction of that nature, which had the effect of altering the legal position of HMRC, would have required clear and unequivocal evidence to support it.

8.	It seems to us that the reason why Stephen Rubie telephoned HMRC on 6 September 2007 was to obtain their agreement that 07/07 was a penalty-free period notwithstanding the terms of the SLNE letter of 15 September 2006.  He may have misunderstood his legal position.  But nothing done by HMRC and no answer on the point had the effect of endorsing or agreeing with his misunderstanding.  He may have been seeking advice, but he did not receive wrong advice.

9.	We are left with the state of affairs as presented by Stephen Rubie.  He could not pay the VAT because revenues had been low, as usually happens, during the summer.  His own funds were insufficient to enable him to pay by 7 September.  Shortage of funds is ruled out as a reasonable excuse.  It is beside the point that he might have made other arrangements to enable him to pay.  

10.	Attractively though Mr Rubie presented his case, we are left with no alternative but to dismiss his appeal.  He has established neither a misdeclaration, nor a positive declaration by Ms B waiving the default surcharge provisions, nor a reasonable excuse for his default.

11.	For those reasons we dismiss the appeal.

SIR STEPHEN OLIVER QC
CHAIRMAN

RELEASED: 2 May 2008

LON 2008/0389