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	United Kingdom VAT & Duties Tribunals Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> Crusder Lines Ltd v Revenue & Customs [2006] UKVAT V19574 (15 May 2006) URL: http://www.bailii.org/uk/cases/UKVAT/2006/V19574.html Cite as: [2006] UKVAT V19574

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19574

DEFAULT SURCHARGE – Reasonable excuse – Insufficiency of funds – Appeal dismissed

CRUSADER LINE LIMITED Appellants

- and -

HM REVENUES AND CUSTOMS Respondents

Tribunal: Kameel Khan (Chairman)

Mrs Caroline De Albuquerque

Sitting in public in London on 14 December 2005

Jonathan Holl appeared for the Respondents

The Appellants were unrepresented

The matter proceeded on the basis of Regulation 26(2) Value Added Tax Tribunals Rules 1986, VATTR (SI 1986 590)

© CROWN COPYRIGHT 2006


 


1. This is an Appeal against a Default Surcharge Assessment for periods 06/04, 09/04, 12/04 and 03/05. The total amount due is £1,828.90. In this case the surcharges were raised as a result of failure to render the full payment of any tax due for periods shown for the relevant periods by the relevant due date.

Relevant Law

2. Default surcharges were introduced by Section 19 of the Finance Act 1985. This provision was later amended by Section 59 Value Added Tax Act 1994.
3. Section 59 provides as follows:
4. "If, by the last day on which a taxable person is required in accordance with Regulations under this Act to furnish a return for a prescribed accounting period –

a) The Commissioners have not received that Return; or

b) the Commissioners have received that Return but have not received the amount of VAT shown on the Return as payable by him in respect of that period, then that person shall be regarded for the purposes of this section as being in default in respect of that period."

5. When a person is in default HMRC serve a Surcharge Liability Notice on the taxable person specifying the surcharge period from the date of the Notice to the first anniversary of that last date of the VAT period or where the last day occurs during an existing surcharge period, a Surcharge Liability Notice Extension extending the existing surcharge period to the first anniversary of the last day of the VAT period. Where a person is in default, then a penalty is levied based on certain specified percentages.

Appellant's Case

6. While the Appellants was unrepresented it is possible to glean from the various communications with HMRC that the ground for the Appeal would be the following:

a) the business experienced a serious downturn in trade;

b) insufficiency of funds; and

c) that the surcharge was excessive.

7. Looking at the turnover of the Company over an 18 month period on 29 December 2004 to 2 June 2005 it is apparent that the turnover went from £49,813 to £36,324.
8. The Appellant has refinanced its business and have undertaken various property investment work including the creation of the building of rental accommodation of the premises. A loan was taken for this purpose of £420,000 with the Bank of Cyprus. This loan was used to undertake a refurbishment of the restaurant to make it more in line with a brasserie type restaurant which was more attractive in the area.
9. The Appellant did not provide any detail why there was a lack of funds for these specific periods in question and why the VAT was not accounted for by the due date. The financial information requested by HMRC including bank statements, overdraft facilities, accounts and other information was not provided to support the Appellant's case.

Respondents' Case

10. The Respondents argue that insufficiency of funds under Section 71(1) A VATA 1994 is not a reasonable excuse to a default surcharge. The evidential burden in this case falls on the Appellant who has not discharged the burden. It has not also provided specific information showing its financial difficulties in the relevant surcharge period.
11. HMRC's approach where cash bonuses are concerned, is that even if there is a downturn, in a cash business the money exists for paying the VAT.
12. HMRC also say that the default surcharge being levied were proportionate and did not contravene the European Convention on Human Rights (see Greengate Furniture Limited [2003] VATDR 178 (VTD 18280).

Decision

13. The Appellants have not discharged evidential burden required to show that they had a reasonable excuse. Mere insufficiency of funds to pay the VAT is not a reasonable excuse under Section 71(1)(a) VATA 1994.
14. In a cash business of this type the Appellant should have the funds to pay the VAT from the cash received from the customer and retail transactions.
15. The default surcharges should therefore stand. Appeal dismissed.

DR K KHAN

CHAIRMAN

RELEASE DATE: 15 May 2006

LON/05/0567