[2012] UKFTT 303 (TC)
TC01989
Appeal number
TC/2009/15278
FIRST-TIER TRIBUNAL
FA 2001 – Aggregate Levy (NI) Tax Credit (Regulations)
2004 – FA 2004 – Aggregates Levy – failure to charge levy at the appropriate
rate – ignorance of requirements not accepted as a defence – appeal dismissed
TYRONE
SAND & GRAVEL LIMITED Appellant
-
and -
THE
COMMISSIONERS FOR HER MAJESTY’S
REVENUE
AND CUSTOMS ("HMRC") Respondents
TRIBUNAL:
IAN WILLIAM HUDDLESTON, TRIBUNAL JUDGE
Sitting in public in Belfast
on 9 June 2011
Mr. James Puzey, BL, of
Counsel
Mr. George Kelly, Director, on
behalf of the Appellant
© CROWN COPYRIGHT
2011
DECISION
Appeal
1. This
appeal arises out of the Appellant's acknowledged failure to charge aggregate
levy in relation to supplies made by it to customers in Northern Ireland
pursuant to the Aggregate Levy Scheme which operates under the Finance Act 2001
and the Aggregate Levy (Northern Ireland) Tax Credit (Regulations) 2004.
Facts
2. The
facts of the case are relatively straightforward. The Appellant was
incorporated and registered for VAT in Northern Ireland with effect from the 1
March 2005, operating from trading premises at Old Bridge Road, Victoria
Bridge, Strabane, BT82 9JR.
3. It
is a limited company involved in the business of extracting sand and aggregate from
a quarry site and then supplying it to traders both in Northern Ireland and in
the Republic of Ireland.
4. It
is accepted that the majority of supplies (circa 57%) are supplies of sand and
aggregate which are exported to customers in the Republic of Ireland.
5. HMRC
undertook a compliance visit to the Appellant's premises on the 1 November
2007. On that occasion, the particular HMRC Officer, Donagh Doran, noted that
the Appellant had failed to register for the Aggregate Levy Scheme.
6. In
his discussions with the Appellant it became clear that the Appellant had not
been aware of the requirement to register and, more significantly for the
purpose of this appeal, had not further been aware of the need to be included
in the Aggregates Levy Credit Scheme ("ALCS") and/or to obtain an
Aggregates Levy Credit Certificate ("ALCC").
7. The
benefit of registering under and complying with the scheme means that it allows
traders relief of up to 80% in respect of the aggregate levy which otherwise
becomes payable on aggregate which is sold in Northern Ireland.
8. A
further visit followed on the 8 July 2008, at which it was noted that the application
for registration for the ALCS had still not been submitted, and that the
Appellant continued charging at the rate of £4.20 per tonne for both sand and
gravel.
9. Subject
to that visit, the Appellant was issued with the relevant notice regarding
aggregates levy by HMRC, and invited to complete an application for registration
and submit the Appellant's first return under the scheme.
10. Following this
second visit the Appellant submitted an application to the Department of the
Environment for Northern Ireland seeking registration and the issue of an Aggregate
Levy Credit Certificate. The application itself was received on the 8 August
2008, but had an effective date of the 13 February 2008.
11. At that time,
the Appellant also lodged its first return in respect of aggregates levy for
the period from the 1 March 2005 to the 30 June 2008. That application was
received on the 31 July 2008 and disclosed a liability of £288,404.80. In
other words, the Appellant, by its own return, declared the liability to tax.
12. At this point it
should be noted that HMRC accept that the Appellant was entitled to apply the
80% relief from the 13 February 2008 through to the period of 31 July 2008 and
that therefore an adjustment to that figure is required.
13. For the period
prior to 13 February 2008 it is HMRC's position that the Appellant was not
eligible to apply the relief and that therefore aggregate levy should have been
charged at the prevailing rates, firstly £1.60p per tonne for the period from the
commencement of trading and after a change in rate, thereafter at the increased
rate of £1.95p per tonne until it was eligible to apply the rebate.
14. Except for the
adjustment referred to above in respect of the period from the 13 February
2008, HMRC's position is that the Appellant, on the foot of its first return,
correctly calculated the aggregates levy which was due (but had not been
accounted for) and that the liability, together with interest, is properly due
and owing by the Appellant.
The Appellant's Case
15. Mr. George Kelly
appeared on behalf of the Appellant and reiterated the Appellant's case as
disclosed by a Notice of Appeal which I quote below:
"Grounds for appeal are that the Company
was aware that a levy had to be charged, but believed that it was at the rate
of 32p per tonne, and that from the start of business all customers were
charged this rate. When it came to their (ie. the Appellant's) attention that
they should have registered for A.L. Credit Agreement, they did so and were
approved right away. The Revenue is now requesting aggregate levy at the rate
of £1.60 a tonne rate, even though the Company did not collect this level from
customers. The company is being heavily penalised for an administrative error."
16. The grounds of
appeal were amplified to some extent in a letter of the 9 October 2008 written
on behalf of the Appellant by its accountants. In that letter, the Appellant's
accountants advised that the directors had been operating on incorrect advice,
which had suggested to them that the aggregate levy "was to be
abolished and that they should not register".
17. On that basis
the Company, when it commenced trading in Northern Ireland, had priced its
charges per tonne inclusive of aggregate levy but at the rate of 32p per tonne.
18. Mr. Kelly in his
evidence to the Tribunal emphasised the points that the Appellant had
previously raised in correspondence, namely:
(1)
that the directors had not previously traded in Northern Ireland, and
were not familiar with the aggregate levy scheme;
(2)
that they did not collect the higher level of duty and only priced in to
their charging structure the levels which prevailed in the locality;
(3)
that they contended that there was no overall loss of revenue, on the
basis that if the Company had priced at the higher rate of levy, that sales
would have moved to cheaper competitors in the area, with the consequent
reduction in turnover for the Appellant, and therefore the levy would never
have been collectible;
(4)
that the imposition of the higher level of levy at this stage was likely
to lead to the insolvency of the Company and threaten jobs; and finally
(5)
that the Company and the quarry site would have qualified for the
Aggregate Levy Scheme had the application been made as evidenced by the fact
that approval was given immediately after the application was made.
19. In short, the
Appellant's case can be condensed to the fact that it suggested, and Mr.
Kelly's evidence confirmed, that it was initially ignorant of the need to
register for the aggregate levy scheme, and that had they applied, they would have
been eligible and that it should not now be penalised.
HMRC's Position
20. The HMRC
position is quite clear – namely that the Appellant's own return is broadly
correct (subject to the mathematical alterations I have mentioned) and that the
tax is due.
Decision
21. Whilst this
Tribunal can have sympathy with an Appellant it must, nonetheless, consider
only the law which is at play.
22. Likewise, it is
clearly settled law that this Tribunal cannot have regard to the consequences
of its decisions in terms of the impact upon individual appellants.
23. The position is
relatively straightforward.
24. The Finance Act
2001 (Sections 30A(5)(a) and (b)), the Aggregate Levy (Northern Ireland) Tax
Credit (Regulations) 2004 and the Finance Act 2004 (Chapter 12, Part 6, Section
291(2)) govern the law which applies in this case.
25. Shortly put,
those provisions require a trader involved in the sale of aggregates to levy
the aggregate levy at the prevailing rate, unless and until it has registered
and been approved by the Department of Environment for Northern Ireland under
the Aggregates Levy Credit Scheme. After registration, the trader is allowed to
apply an 80% rebate in respect of the headline rate.
26. The Appellant,
by its own evidence, incorporated in Northern Ireland on the 1 March 2005 and
commenced supplies with effect from that date. Mr. Kelly, by his own evidence, admits
that he relied on advice which subsequently proved to be incorrect.
27. He acted on that
advice insofar as the Appellant's pricing model was to absorb the aggregates
levy at the lower rate (ie. 32p) into the amount the Appellant charged per
tonne.
28. The Appellant
said it was not aware of the requirement to charge the higher rate levy, and we
accept, as a matter of fact, that it did not do so.
29. Nonetheless,
however, that the failure to do so does not absolve the taxpayer.
30. The reality is
that the taxpayer failed to appraise itself of the requirements of the
aggregate levy scheme, notwithstanding the fact that it incorporated in
Northern Ireland specifically to operate within that sector.
31. It is quite
clear that the information on the scheme is clearly available to all traders,
either upon request from HMRC, or though online information which is supported
by HMRC.
32. Simply put, the
Appellant failed to undertake even that basic due diligence and cannot now seek
to rely upon that failure as a defence to its actions.
33. As we have said,
the law imposes upon traders the obligation to charge aggregate levy, save
where, subsequent to registration, it is entitled to apply the abatement of
80%.
34. Where a trader
fails to comply with the appropriate requirements then, whilst regrettable, it
must abide by the consequences.
35. In the present
circumstances, therefore, we find that the Appellant is liable for aggregates
levy at the higher (unabated) rate for the period from the 1 March 2005 until
the date upon which its registration became effective (ie. 13 February 2008).
That a recalculation of the liability (ie. in respect of the period from the 13
February 2008 to the 31 July 2008) is required with an appropriate adjustment
to the amounts returned.
36. Subject to that,
however, we find the Appellant liable to account to HMRC for the aggregates
levy attributable to that entire period.
37. It necessarily
follows that the appeal is dismissed.
38. No order as to
costs.
39. This document
contains full findings of fact and reasons for the decision. Any party
dissatisfied with this decision has a right to apply for permission to appeal
against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal)
(Tax Chamber) Rules 2009. The application must be received by this Tribunal
not later than 56 days after this decision is sent to that party. The parties
are referred to "Guidance to accompany a Decision from the First-tier
Tribunal (Tax Chamber)" which accompanies and forms part of this decision
notice.
IAN WILLIAM HUDDLESTON
TRIBUNAL JUDGE
RELEASE DATE: 4 May 2012
