18433
VALUE ADDED TAX — default surcharge — reasonable excuse — whether default for which a reasonable excuse is established is revived by further delay in submission of return and payment — no — appeal allowed
MANCHESTER TRIBUNAL CENTRE
VORTEK FIRE AND SECURITY LIMITED
Appellant
- and -
THE COMMISSIONERS OF CUSTOMS AND EXCISE
Respondents
Tribunal:Colin Bishopp (Chairman)
Sitting in public in Birmingham on 26 November 2003
Mark Winsper, director, for the appellant
Christopher Owen of their solicitor’s office for the respondents
© CROWN COPYRIGHT 2003
DECISION
1This appeal against the imposition of a default surcharge for the late submission of the appellant’s VAT return for the period 11/02 raises this short point: if a return is late in circumstances which afford the trader a reasonable excuse for the lateness, is that reasonable excuse nullified or cancelled, or is the default revived, by any additional delay on his part for which he has no such excuse?
2Mark Winsper, who represented the appellant at the hearing, is its sole director and the only person able to sign cheques drawn on its bank account. The appellant is very small, its staff consisting of Mr Winsper, one engineer and a part-time secretary and bookkeeper, Miss Cotterill. The appellant uses a standard computerised accounting package, which is operated by Miss Cotterill, who prepares the appellant’s VAT returns and sometimes signs them, though Mr Winsper told me he always checked them before they were sent to the Commissioners. The relevant return was due to be sent to the Commissioners so as to arrive by 31 December 2002. The appellant was at that time within the default surcharge regime (see section 59 of the Value Added Tax Act 1994) though it had not defaulted in respect of its last two returns.
3Mr Winsper and his family took a week’s Christmas holiday in Majorca, where they shared accommodation with Mr Winsper’s brother and his family, who live in South Africa. They were intending to travel together to the United Kingdom at the conclusion of their holiday on 28 December 2002. That day was a Saturday; had all gone according to plan Mr Winsper would have been able to attend his office on Monday 30 December, check the return and sign the necessary cheque in order that the return and payment could be posted that day, in time to arrive by 31 December. He was certainly cutting things fine, but it would nevertheless have been possible to send in the payment and return on time, and I am willing to assume in the appellant’s favour that the attempt would have been made.
4Unfortunately, Mr Winsper’s return to the United Kingdom was delayed because his brother’s daughter contracted chicken pox, and they were advised that none of the party (which included several children) should fly until the contagious period had passed. Eventually Mr Winsper arrived home on Sunday 5 January 2003. By then, the VAT return was already late, but it was still not sent to the Commissioners, as Mr Winsper acknowledged, until 13 January. He explained that he had other, in his view more pressing, matters to attend to and had not been able to find the time to deal with the return until that day.
5I take the foregoing from what Mr Winsper said at the hearing, which in any event was not challenged.
6Christopher Owen of their solicitor’s office, who appeared for the Commissioners, suggested that Mr Winsper should have left a signed cheque with Miss Cotterill in order that she could complete the return and send it off in good time. Mr Winsper said that he was unwilling to leave signed but otherwise blank cheques with an employee. Mr Owen also commented adversely on the delay after Mr Winsper’s return home before he attended to the VAT return, arguing that even if there had been a reasonable excuse for the initial delay, there was none for the further delay and that the penalty remained appropriate.
7I am satisfied that the delay in Mr Winsper’s return from Majorca was caused by factors outside his control which he could not have predicted, that he could not reasonably be expected to have taken steps to guard against the possibility of his being delayed and that there is correspondingly a reasonable excuse for the initial delay in sending in the return and payment. I am not persuaded that Mr Winsper is to be criticised for not leaving a signed cheque with his secretary. Although some in his position might do so, the risks—even on the assumption that Miss Cotterill is herself scrupulously honest—are obvious and I do not think it can be right to penalise a trader because he is unwilling to expose himself to the risk of fraud. In any event, if Mr Winsper had not been delayed in Majorca it would have been unnecessary to adopt this course, even though time was short.
8I accept Mr Owen’s argument that there is no reasonable excuse for the further delay after Mr Winsper’s return home. While I acknowledge that he would have had other matters to occupy his time, the more so because of the unexpected delay in his return to the United Kingdom, and that the rendering of his VAT returns is only one of many concerns facing a trader, the delay of a further week in submitting the return cannot be justified by what Mr Winsper told me. I accept that a week is not a very long time, but he appears to have attached little importance to attending to his return—and surprisingly so, given the appellant’s history of defaults—and I do not find that there is a reasonable excuse for that period of delay.
9However, it does not seem to me that the further delay is relevant. The scheme of section 59 of the Act is that a surcharge will be imposed, if various conditions which it is not necessary to set out here are satisfied, when the Commissioners have not received a trader’s return or payment, or both, by the due date; that is the default at which the section is aimed. The surcharge is aimed at that single fact and the degree of lateness is not a material factor. If there is a reasonable excuse for the default, the trader is not liable for the surcharge: see subsection 59(7). Since I am satisfied that there is indeed a reasonable excuse for the default, it follows that the appellant is not liable for the surcharge. Section 59 contains no mechanism by which additional lateness is penalised. Thus, it seems to me, once a default is excused it is spent and no amount of further delay can revive it. If the default cannot be revived, the presence or absence of any excuse for the continuing delay is of no moment.
10The appeal is, therefore, allowed.
COLIN BISHOPP
Chairman
Release Date: 8 December 2003
MAN/2003/0377