Diamond v Revenue and Customs [2005] UKVAT V19368 (07 December 2005)

19368
Default Surcharge – Whether reasonable excuse – On the facts – No

london tribunal centre

Ian Paul Diamond	Appellant

 -and –

HER MAJESTY’S COMMISSIONERS OF
REVENUE AND CUSTOMS	  Respondents

Tribunal: Charles Hellier	(Chairman)
Elizabeth Macleod

Sitting in public in London on 9 November 2005.

The Appellant was not present or represented.

Simon Chambers - for the Respondents

© CROWN COPYRIGHT 2005
DECISION

1.	This is an appeal by Mr Diamond in respect of a 10% default surcharge of £434.20 made in respect of the period 01/05 being the period to 31 January 2005.

2.	Mr Diamond did not appear at the hearing nor was he represented. Enquiries made by the tribunal staff of the clerk at Mr Diamond’s chambers produced the information that he was in Sweden. A letter from Mr Diamond to the tribunal centre included a suggestion from Mr Diamond that the appeal should proceed on the basis of the papers submitted.

3.	In these circumstances we decided to hear and to determine the appeal in Mr Diamond’s absence.

4.	There was no suggestion in any of the correspondence in the tribunal centre’s file, or in the correspondence shown to us by HMRC that Mr Diamond disputed that the surcharge liability notice, a copy of which we were shown, had not been received by Mr Diamond or that the default surcharge period had not been properly extended by further notices (copies of which were before us) properly served on Mr Diamond. Neither was there any suggestion that the percentage surcharge applicable by virtue of section 59(5) VATA 1994 was anything other than 10%, or that the VAT to which it applied was anything other than the amount shown on the VAT return signed by Mr Diamond (a copy of which was before us) of £4,347.01.

5.	Accordingly we find that absent a reasonable excuse Mr Diamond is properly liable to a default surcharge of £434.20.

6.	The payment summary for 12 June 2003 indicated that Mr Diamond calculated his VAT liability for a period on the basis of payments received in the period, rather than invoices delivered. It therefore seemed that Mr Diamond would have no excuse for not paying his VAT for the relevant period on time based on the failure of those whom he invoiced to pay.

7.	In his letter of 23 March 2005 Mr Diamond says that “Due to cash flow problems, the sums [the VAT payment due] are paid towards the end of the period (+ month)” and that “The reason that there are cash flow problems is that I have (sic) a three year break… - this means I have tax demands for years when I was out of the country that I am trying to satisfy:”. Likewise, in his letter of 10 May 2005, Mr Diamond refers (at paragraph 5) to the fact that he was “cashing in two endowment policies and my children’s saving fund” to satisfy the current tax demand.

8.	Section 71 VAT 1994 provides that an insufficiency of funds to pay any VAT due is not a reasonable excuse.

9.	We saw nothing in the letters from Mr Diamond before us to indicate that Mr Diamond’s cash flow problems were anything other than an insufficiency of funds. Accordingly, we do not find that he has any reasonable excuse on those grounds.

10.	In his letter of 23 March Mr  Diamond says that “payment [for 01/05] cannot have been more than a few days late; it may have been that my wife was meant to have posted it and she would not have prioritised it”.

11.	Section 71 VATA 1994 provides that neither the reliance upon placed on another person, nor their dilatoriness or inaccuracy can constitute a reasonable excuse. If Mr Diamond is asserting that his reliance on his wife can found a reasonable excuse, section 71 makes it clear that it cannot.

12.	In any event, Mr Diamond’s cheque and the VAT return for 01/05 are both dated 1 March 2005, so however speedy his wife could have been, neither the return nor the VAT would have been received by the due date (28 February 2005).

13.	Accordingly we see no grounds for a reasonable excuse in the quoted statement from Mr Diamond’s letter.

14.	Mr Diamond says in his letter of 10 May 2005 that a lot of effort and hard work had to be put into rebuilding his practice after a three year break. The turnover figures apparent from his payment summaries and his VAT return suggest that he has had some success in this endeavour.

15.	However, we do not see the expenditure of that effort in those circumstances as a reasonable excuse for the 01/05 default.

16.	Mr Diamond, in the same letter, speaks at paragraph 4 about the loss in July 2004 of a plastic bag of receipts. That loss did not seem to us to have any bearing on the contents of the 01/05 VAT return or the VAT due thereon. We had in mind that that return covered the period of 3 months from 1 November 2004 to 1 January 1005 on which period July 2004 had little bearing. It therefore did not, in our view, constitute a reasonable excuse.

17.	In paragraph 6 of his letter of 10 May 2005, Mr Diamond indicates that he “simply got into bad habit[s]” with his VAT compliance, and did not realise that the sanction was “disproportionate”. We do not think either or both of these circumstances constitute a reasonable excuse.

18.	Nothing else in Mr Diamonds letters [before us] suggested anything else which could be called an excuse and especially not a reasonable one.

19.	We therefore dismiss Mr Diamond’s appeal. He is liable to the surcharge.

Charles Hellier 

CHAIRMAN

RELEASED: 7 December 2005

LON/