Souter (t/a Brodie Duncan Marketing) v Customs and Excise [2004] UKVAT V18515 (03 March 2004)

Misdeclaration penalty – Failure to disclose invoices – Full co-operation – Good compliance record – Mitigation allowed by Customs & Excise for these aspects – No further mitigation allowed – Appeal dismissed.

EDINBURGH TRIBUNAL CENTRE

	D J SOUTER T/A BRODIE DUNCAN MARKETING	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

			Tribunal:	 (Chairman)    Mrs G Pritchard, BL., MBA., WS

Sitting in Edinburgh on Wednesday 18th February 2004

for the Appellants		The Appellant by written submission only

for the Respondents	Mr A McCue

© CROWN COPYRIGHT 2004.

DECISION

Introduction
This is an appeal against the imposition of a mis-declaration penalty in respect of two under-declarations of tax.  The first was in respect of the quarter 04/98 when the gross amount of tax on the return was shown as £1,208.05.  The total amount which ought to have been declared was £8,225.05 so that £7,017 was under-declared tax for that period.  £7,000 of this related to one invoice for £47,000.  This amount had apparently been paid into the Appellant’s personal bank account.  When the accounts were examined by a visiting Customs Officer, he noted that only the net amount less VAT had been transferred from the Appellant’s personal bank to his business account.  The Appellant gave no reason for the retention of the VAT or the failure to make the return correctly.  The visiting Officer confirmed however that he was fully co-operative.

The second under-declaration occurred in the quarter 10/98 and the gross amount of tax on the return was £1,845.06 when the full gross amount was £4,487.06.  There was an under-declaration for that period of tax of £2,642.  Again no reason was given for the under-declaration.  Both transactions related to business with Dundee Football Club.

In determining whether a mis-declaration penalty is due, the amount of the mis-declaration must exceed 30% of the gross amount of tax due that quarter which applied in both these cases.

For the quarter 04/98 the full penalty in terms of Section 63 of the Value Added Tax 1994 Act would have been 15%, amounting to £1,052.  Similarly for the quarter 10/98 it would have amounted to £396.

The Appellant had asked for the decision with regard to the mis-declaration penalty to be reviewed.  The Reviewing Officer, Miss Cook, gave evidence that she had made enquiries of the visiting Officer as to the circumstances of the debts and had discovered that so far as the first invoice was concerned the Appellant had had to take legal action for recovery of the funds.  It was a substantial transaction.  He was fully aware of its importance and he appeared to have no reason for not having declared it.

The Appellant in his submission had asked for two matters to be given consideration.  The first was that his Accountants, Messrs Steven Kay & Co, had been struck off by their institute and carried no professional indemnity insurance.  However, on investigation it transpired that this had not occurred until 2000.

In addition he also advised that his father had died in February of 1999 and this had caused him some stress.  Although Miss Cook sympathised with him in the loss of his father, both of the under-declarations had occurred in 1998.  Although there is some room for taking compassionate grounds as a reasonable excuse, it would have required to have been an illness of staff or the Appellant himself.

`However the Reviewing Officer was able to take into account the fact that the Appellant had been fully co-operative and had mitigated the penalty by 10% in that respect.  She had also checked his compliance records with regard to his other VAT returns and found that they were reasonably satisfactory and she therefore mitigated the penalty by 15% in respect of that compliance.  These were standard national mitigations in respect of the investigations the Reviewing Officer made in respect of the mis-declaration penalty which itself carried no implication of fraud or dishonesty.

My obligation is to look at whether there were grounds for further mitigation.

In all the circumstances I could see no reason for further mitigation of the mis-declaration penalty.

The appeal is therefore dismissed.

No expenses are found due to or by either party.

Mrs G Pritchard, BL., MBA., WS
CHAIRMAN

RELEASE:  3rd March 2004

EDN/03/74