Appeal – Misdeclaration alleged – Penalties claimed – Whether justified – Appeal allowed

BELFAST TRIBUNAL CENTRE

	MICHAEL EGAN	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

			Tribunal:	HIS HONOUR JOHN McKEE QC  (Chairman)

Sitting in public in Belfast on 4 July 2003

The Appellant appeared in person

Mr Puzey of counsel, for the Respondents

© CROWN COPYRIGHT 2003

DECISION

1.	The Appellant, who resides in Belfast, by his Notice of Appeal dated 18 January 2003 appealed against the decision to impose two penalties in the form of Default Interest and Misdeclaration penalties together totalling £715.78.  This figure was corrected at the hearing by Mr Puzey and amended to read £691.29 being a Misdeclaration Penalty measured in the sum of £375.00 and Default interest calculated in the sum of £316.29

2.	On 25 August 2000 the Appellant imported a Toyota Celicia motor car from the Republic of Ireland into the United Kingdom.  The vehicle, which was purchased in Dublin and driven to Belfast, was intended for the Appellant’s own personal use.  It appeared to the Appellant that, though he was registered for VAT, nevertheless he could not reclaim tax.  He did not, therefore, include any reference to the purchase and importation in his VAT returns.

3.	The Appellant completed forms directed to HM Customs and Excise.  The first of these is headed “Appendix D: New Means of Transport – Notification of Acquisition” and is dated 28 August 2000.  The Appellant did not indicate in that form whether or not he was seeking “relief from VAT claimed”.  The second form is dated 31 August 2000 and this is explicitly a Customs and Excise form identified as “VAT 414” and headed “Vehicles brought into the United Kingdom”.  The Appellant explained that this form was presented to him when he attended to tax the vehicle and it was made clear to him then and there that he would not be allowed to tax the car unless he completed this for,.  This advice was given to the Appellant notwithstanding the instruction set out in Note 2 overleaf.  The Note says:-

“(a)	If you are VAT registered you should normally complete this form.  However if you are acquiring a new means of transport (…) for your personal use,, you should not complete this form, but obtain a status document from the address given (b) below.”

It was common case that the Appellant should not have been required to complete this form.  The Appellant completed this form, because he was required to do so, but in answer to each of questions 5 and 6(“5.  Has VAT and duty (if applicable) been paid in the EC?” and “6.  Will the VAT be accounted for on a VAT return?) he replied “No”. Question 6 continued: “If yes, please state (a) VAT registration number (b) Name and address of trader” and in answer the Appellant furnished his VAT registration number and his named and address.  This was a mistake clearly attributable to a misreading of Question 6.  It did, however, mean that any official in Customs and Excise knew exactly what the Appellant intended and how to resolve the problem.

4.	For his part the Appellant concluded that, in each of the two forms he had submitted, he had furnished HM Customs and Excise with all the information he had at his disposal and that in the fullness of time he could expect to hear from them.  If his inconsistent answers caused confusion to an official of Customs and Excise, which would have been quite understandable, then a simple enquiry in the form of a letter would quickly make all clear.  While he was actually advised along these lines by his accountant, the Tribunal pointed out that he could not rely on that advice to avoid any liability.

5.	The next step in the procedure occurred when an official from Customs and Excise wrote to the Appellant by letter dated 12 August 2002 asking him to make contact.  The Appellant did so promptly and gleaned the impression that his returns had been mislaid.  Accordingly by fax dated 19 August 2002 he sent to HM Customs and Excise copies of (i) the dealer’s invoice dated 25 August 2000, (ii) the dealer’s receive dated 25 August 2000 and (iii) the HM Customs and Excise return dated 28 August 2000.  He does not seem to have forwarded form VAT 414 which he completed on registering and taxing his car.

6.	By letter dated 17 September 2002 the Respondents notified their assessment of a Misdeclaration penalty to which the Appellant replied by letter dated 4 October 2002 pointing out that:

“In addition I do not believe I am liable for the penalty or interest elements of the demand for the following reasons;

1.	At no stage did I receive any previous demand for payment, and
2.	I have not declined or failed to pay any earlier demand for payment”

He added:-

“As the delay in this case, if any, does not appear to be due to me I accordingly do not consider myself liable for those elements of the charge.”

7.	The Respondents replied by letter dated 20 November 2002 referring to the Appellant having completed Form VAT 414 and suggesting that on that form he had “… declared you would account for VAT.”  This is clearly the complete opposite to the declaration the Appellant actually made in Form VAT 414.  It is not easy to understand how Ms Bates, who signed that letter, could have made that unfounded assertion if she had read the Appellant’s actual entries on that form.  It was clearly mainly on that basis, namely that the Appellant had given this undertaking which he had failed to honour, that the Respondents had claimed the Misdeclaration Penalty and the interest.  Ms Bates in her letter dated 20 November 2002 mentioned Public Notice 725, Section 7.10.  The Tribunal has examined this notice and accepts Mr Puzey’s concession that this is ambiguous and cannot therefore be accepted as valid grounds for exacting the penalty or the interest.  In any event that Notice tends to fortify the Appellant’s perception that his declaration of the importation of the car into the United Kingdom, without more, would trigger a claim for VAT from the Respondents so that all he had to do was to make the declaration and await the Respondent’s assessment.

8.	This Tribunal was referred to De Voil at Section V paragraph 343.  The question canvassed was whether the Appellant can claim “reasonable excuse” to avoid paying the penalty or the interest claimed.  The alternative question is whether the Respondents have shown a basis on which they could properly impose a penalty or levy interest.  In view of the fact that the Appellant has behaved honestly throughout, being a point which, in the opinion of this Tribunal, Mr Puzey properly conceded and that he responded fully and promptly to every request made, I am not satisfied that the letter of 20 November 2002 does set out a proper basis for the Respondent’s claims involving, as it does, a presumably inadvertent misreading of the Appellant’s entries on form VAT 414 dated 31 August 2000.  If the question of  “reasonable excuse” arose this Tribunal would find for the Appellant on that ground also.

9.	This appeal is allowed with no Order as to costs.

HIS HONOUR JOHN McKEE QC
CHAIRMAN

RELEASED:

LON/03/102