Default surcharge – Late payment due to shortage of funds – Money taken out of company to pay for flight to Thailand after Director taken ill – Whether reasonable excuse – Appeal dismissed

LONDON TRIBUNAL CENTRE

	THAI PALACE CO LTD	Appellant

-	and –

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	MISS J C GORT   (Chairman)
						MISS S O’NEILL 

Sitting in public in Bristol on 25 February 2004

Mr P Tan, company secretary, for the Appellant 

Mr Jonathan Holl senior officer, for the Respondents

© CROWN COPYRIGHT 2004

DECISION

1.	This is an appeal against a default surcharge imposed on the Appellant in respect of the period 04/02 in the sum of £993.13.    

2.	The Tribunal heard evidence from Mr Tan, who was a financial adviser in addition to being Company Secretary. The Appellant company is a restaurant in Bristol. The manager of the company, a Mrs Moracot Ladtai, had been taken ill with a brain tumour some time in the year 2000.  In December 2000 she underwent surgery and on her discharge underwent a course of radiotherapy. There is medical evidence from the consultant neurosurgeon who treated her and in his letter he states that she was “generally well” until October 2001 when she was admitted to hospital for emergency treatment.  She remained in hospital, but by the end of December 2001 the prognosis was poor and she was given a short life expectancy.  It was Mrs Ladtai’s wish that she should return to Thailand to die.  A journey was arranged and she did in fact die in January 2002. 

3.	Mrs Ladtai was a director of the company, as was her husband. Mrs Ladtai ran the business herself, and, although her husband had a restaurant of his own of the same type, he was not a strong character and allowed Mrs Ladtai to make all the decisions with regard to the Appellant company.

4.	The restaurant was staffed by students from the university.  During the early stages of her illness Mrs Ladtai employed five staff.  It was Mr Tan’s evidence that the restaurant could have operated properly at that time with only four members of staff. Mr Tan also gave evidence that Mrs Ladtai would make purchases from Tesco’s store rather than the cash and carry in the later stages of her illness. During the time she was ill Mrs Ladtai had both recruited and fired staff regularly. The staff were said to be, unhappy, and the customers were not properly looked after. The business deteriorated during this period. When time came for Mrs Ladtai to fly out to Thailand the money for the journey was taken out of the company, and it was this expenditure which was said to have resulted in the inability of the company to pay its value added tax on time in respect of the period 04/02.

5.	It was however clear that the company had been in financial difficulties for a considerable time and there had been regular defaults from early 2000.

6.	Mr Tan himself had helped the company from his own resources, transferring funds to the business and remortgaging his own house. Mr Ladtai had also remortgaged his house. Mr Tan had made arrangements with the bank that they would meet cheques to the Customs and Excise at a time when they were not meeting other cheques, but those cheques were not always met by the bank.  

7.	Whilst we have every sympathy with the predicament that the business was in, and accept that Mr Tan made considerable efforts to deal with the situation, there is not sufficient direct evidence as to the cause of the shortage of funds.  We accept that Mrs Ladtai’s illness was bound to have an effect on the way she ran the business, but her husband was a director and worked in the same business, and Mr Tan as Company Secretary, also had a responsibility for the running of the business and seeing that the value added tax was paid on time.  We have seen no documentary evidence to bear out the assertion of rash expenditure and inappropriate behaviour by Mrs Ladtai. It is also a fact that the business is a cash business, and therefore the money which was due to the Commissioners would have been received by the Appellant.

8.	Mr Tan asked that the appeal be allowed on compassionate grounds.  Unfortunately there are no provisions in the legislation for appeals in default surcharge cases to be allowed on such grounds, nor does the Tribunal have power to mitigate the tax owing.  We do not find that the Appellant has a reasonable excuse for late payment of its tax for the period 04/02.  

9.	The appeal is dismissed, no order for costs.

MISS J C GORT
CHAIRMAN

RELEASED:

LON/02/792