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You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> Smartcomm Ltd v Revenue & Customs [2006] UKVAT V19640 (28 June 2006) URL: http://www.bailii.org/uk/cases/UKVAT/2006/V19640.html Cite as: [2006] UKVAT V19640

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Smartcomm Ltd v Revenue & Customs [2006] UKVAT V19640 (28 June 2006)

19640

DEFAULT SURCHARGE – Reasonable excuse – Insufficiency of funds – No evidence as to cause depriving Appellant of means to pay – VATA 1994 s.71 – Appeal dismissed

LONDON TRIBUNAL CENTRE

SMARTCOMM LTD Appellant

and –

THE COMMISSIONERS FOR HER MAJESTY'S REVENUE & CUSTOMS Respondents Tribunal: THEODORE WALLACE (Chairman) MRS CAROLINE de ALBUQUERQUE

Sitting in public in London on 14 June 2006

Mark Calder, finance manager, for the Appellant

Simon Chambers, advocate, for the Respondents

© CROWN COPYRIGHT 2006
DECISION
1. This was an appeal against a default surcharge of £5,304.63 for the period ending 30 November 2005.
2. There was no real dispute as to the facts.
3. The return for 11/05 was recorded as having been received by Customs on 16 January 2006 with the payment of £35,364.22. The Appellant's office closed for a break before Christmas and re-opened on 5 January 2006. The return and payment were not despatched until after the office re-opened.
4. Mr Calder told us that last year was a very bad year for the Appellant and it lost £180,000. He said that the Appellant was waiting for a payment of £31,000 invoiced to a customer in late December. This payment with a further £44,000 for January arrived during the Christmas closure and enabled the Appellant to pay the VAT. The Appellant was at its overdraft limit of £175,000.
5. He said that there was an oral agreement to pay the £31,000 invoice by return but accepted that even if it had been paid by return it would have arrived during the break and would not have made payment of the VAT possible until re-opening.
6. He said that he thought that there might be some leniency over payment of VAT over Christmas. He said that the surcharge was a very large amount for a company of the Appellant's size and would be very detrimental to its business.
7. Mr Chambers said that there was a default if payment was even one day late. Insufficiency of funds was excluded as a reasonable excuse by section 71 of the VAT Act 1994. The cheque was dispatched after the due date. The £31,000 invoiced in late December was not large in terms of the Appellant's customer base.

Conclusions

8. There was no dispute that there was a default. The Tribunal has no power to mitigate the penalty. The only issue is whether there was a reasonable excuse. It is clear that the Appellant lacked sufficient funds to pay the tax by the due date, however that by itself is excluded by section 71 from constituting a reasonable excuse. The underlying cause of an insufficiency of funds may give rise to a reasonable excuse if the Appellant was unavoidably deprived of the means to pay. However that cause must go beyond a mere shortage of funds or unprofitable trading. Mr Calder was not able to identify any cause going beyond insufficiency of funds. The fact that the business was closed for Christmas is not a reasonable excuse.
9. The appeal is dismissed.
THEODORE WALLACE CHAIRMAN RELEASED: 28 June 2006

LON/06/238