20873

VAT – Default surcharge – Reasonable excuse – Illness asserted in correspondence – Inadequate evidence before the Tribunal – Appeal dismissed

LONDON TRIBUNAL CENTRE

	IMPACT SERVICES LTD T/A ECOCLEAN FRANCHISE	           Appellant

-	and –

	THE COMMISSIONERS FOR HER MAJESTY’S REVENUE & CUSTOMS 	 Respondents

				Tribunal:	CHARLES HELLIER (Chairman)
						MICHAEL JAMES

Sitting in public in Plymouth on 25 September 2008

The Appellant was not represented

Simon chambers, advocate, for the Respondents

© CROWN COPYRIGHT 2008

DECISION

1.	This was an appeal against a default surcharge assessed under section 59 VAT Act 1994 in respect of the VAT period ending 30 September 2007 (the “09/07 period”).

2.	Two earlier hearings for the appeal had been postponed.  The Appellant did not appear and was not represented, but we were told by Mr Chambers had been in contact with Cloe Gormer, the Respondents’ officer responsible for the administration of the Respondents’ response to the appeal.  Mr Chambers told us that Jerome Ellis, a director of the Appellant, had e-mailed Ms Gormer indicating that he could not attend the hearing of the appeal, and wished to agree a plan to pay.  He had said that he did not wish to pursue the appeal and that it was withdrawn.

3.	Rule 16 of the Tribunal’s Rules provides that an appellant may withdraw an appeal by serving notice at the appropriate tribunal centre.  The Appellant’s notice to HMRC was not notice to the tribunal centre and could not therefore be treated by us as a withdrawal of the appeal under that rule.  It was however capable of being a clear indication that the Appellant did not intend to argue its case before us.

4.	Rule 26 of the Tribunal’s Rules permits the tribunal to hear an appeal in the absence of a party.  We decided to continue to hear the appeal.

5.	The bundle of papers before us included correspondence between the Appellant and the Respondents in relation to the events giving rise to the surcharge under appeal.  These papers were the only evidence before us.  We find the following background facts:-

(i)	the Appellant had paid its VAT late in respect of each of the five 	quarterly periods beginning with the quarter ending 31 December 2005 	and also in respect of a number of earlier periods;
(ii)	the Respondents had served surcharge liability notices or surcharge 	liability extension notices in respect of each of those periods;
(iii)	the Appellant was late in the payment of its VAT for the 09/07 period.

6.	We conclude that unless section 59(7) VAT Act 1994 applies in relation to the late payment for 09/07 the conditions prescribed by section 59 for the incurring of the default surcharge assessed for the 09/07 period were satisfied.

7.	Section 59(7) provides (so far as material):

“If a person who, apart from this subsection, would be liable to a surcharge … satisfies the Commissioners or, on appeal, the tribunal that …
(a)	… the VAT shown on the return was dispatched at such time 	and in such a manner that it was reasonable to expect that it 	would be received by the Commissioners within the appropriate 	time limit, or 
(b)	there is a reasonable excuse for the … VAT not having been so 	dispatched
he shall not be liable to the surcharge …”

8.	The bundle before us, and the Appellant’s notice of appeal indicated that the Appellant maintained that the reason for the late payment of VAT for the 09/07 period was that the only two persons (the directors Jerome and Karen Rellis) authorised by the Appellant to instigate payments from its bank had been seriously ill with a viral infection in the period in which the VAT should, and otherwise would, have been paid.  It seemed to us that such an illness could constitute a reasonable excuse in appropriate circumstances.

9.	The papers also indicated that HMRC had sought further documentary or other evidence of these persons’ illness but that none had been forthcoming.

10.	As we note in paragraph 8 above, it seems to us that an illness could constitute a reasonable excuse, but the Act requires us to be satisfied that there is a reasonable excuse.  On the evidence before us we were not so satisfied: we did not hear or see the directors and so we could not come to a view on their truthfulness or the fairness of the written representation made to HMRC; there was no other corroboration of their illness; we were unable to evaluate the effect of their illness; and we could not satisfy ourselves that making the payment was not reasonably possible.

11.	We therefore conclude that section 59(7) does not afford the Appellant exemption from liability to the default surcharge, and dismiss the appeal.

12.	Our decision was unanimous.

CHARLES HELLIER
CHAIRMAN

RELEASED: 20 November 2008

LON 2008/0096