18667

Assessment  penalties; failure to submit EC Sales List by due date; list sent at a time when it was reasonable to expect that it would be received before it was recorded as received; whether power to restrict period of default, penalty remitted to period of probable default – VATA s66(7) and s59(7).

EDINBURGH TRIBUNAL CENTRE

	SEAN MAGUIRE
	T/A SKIAN MHOR	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	       Respondents

			Tribunal:	 (Chairman):  T Gordon Coutts, QC
					 (Member):     Mrs Charlotte Barbour, CA., ATII

Sitting in Edinburgh on Monday 7 June 2004

for the Appellant		Mr Sean Maguire

for the Respondents	Mr R MacLeod, Shepherd & Wedderburn, WS

© CROWN COPYRIGHT 2004.

DECISION

Introductory
Several grounds of appeal were put forward by the Appellant in relation to his Value Added Tax matters.  The first 2 of these were in connection with an assessment in the sum of £1,906 plus interest made on 8 September 1999 under Section 73(1) of VATA 1994.  Prior to the commencement of the Hearing only 2 sums in part of that assessment were still in dispute and at the Hearing the sum of £206 in respect of the period 03/97 was conceded by the Appellant.  Accordingly the dispute was in relation to £595.75.

In relation to this the Appellant agreed that he was unable to provide VAT invoices for the work which he said had resulted in the claim he had made for input tax.

His contention appeared to be that he had genuinely lost the receipts but could provide cheque stubs to show that the sums had been paid.  He contended that this was a matter which could be allowed under a “give and take” principle in that documents can get lost and there was no doubt that he had paid out the sums.

That contention is un-sound.  In the first place by Part 5 of Statutory Instrument 1995/2518 Regulation 29 it is provided that a person seeking a deduction must hold a VAT Invoice as supplied by the taxable person at the time of claiming deduction of input tax.  Since there are no such invoices the deduction was improperly claimed.  The provision of evidence of payment is of no assistance whatsoever because the payments could well have been made to a person not registered for VAT and there was accordingly no indication that any payments were of VAT inclusive sums.

Failures to Complete European Community Sales Statement
There were 3 penalties imposed as a result of failures in completing these statements.  With regard to the first 2 no statements have ever been produced.  The fact that European Community Sales had taken place was evidenced to the Commissioners’ satisfaction in the Appellants VAT return.  There was a further penalty imposed for the period 01/07-31/09/02 which is more fully discussed below.

There were no other relevant matters appealed to the Tribunal.

The Law in Relation to Sales Statements
EC Sales Statements
Part IV of Statutory Instrument 1995/2518 regulation 22 (1) requires every taxable person who has made a supply of goods to a person who is registered in another member state to submit to the Commissioners a Statement no later than 42 days after the end of the quarter in which he has made a supply.

Regulation 22(3) specifies the information that the Statement must contain.

Section 66(1) provides that if a person fails to submit an EC Sales Statement by the last day prescribed they shall be regarded as being in default until it is submitted.
Section 66(2) provides that where a person is in default the Commissioners may serve a notice on him stating that he is in default in relation to the statement specifying in the notice the statement that the default relates to and advising that no action will be taken if the default is remedied within 14 days from the day following service of the notice.  If the default is not remedied the person will become liable to penalties calculated on a daily basis.
Section 66(4) further provides that any subsequent defaults will result in liability without further notices being served until a period of 12 months elapses without any default.
Section 66(5) and (6) provides the amount of the penalty for which a person is liable as being whichever is the greater of £50 and £5 (for the first default) £10 (or the second default) or £15 (in every other case) for every day that the person is in default.
Section 66(7) provides that if a person satisfies the Commissioners or a tribunal that the EC sales statement has been submitted at such time that it was reasonable to expect it would be received by the Commissioners within the appropriate time limit, or, that there is a reasonable excuse for the statement not having been dispatched, he shall be treated as not having been in default in relation to that statement.

The Third Penalty
This Penalty was imposed in relation to a European Sales List not being submitted timeously.  It was due to have been submitted by 11 November 2002.  The corresponding VAT return was due to be submitted by 31 October 2002.  The Appellant produced a copy of that return which he had signed and dated 15/11/02.  It showed a re-payment claim.  The EC Sales List was also dated 15/11/02 and the Appellant maintained that he had posted off the list shortly after that date.  The details of the list required correction and it was returned by Customs after receipt for the corrections.  Those were made within a day or two thereafter.  They did not affect the matter of penalty.  There was no evidence about the posting or receipt of the relevant VAT return.

The EC Sales List which Customs held was produced by them and it bore a date stamp 3 February 2002.  The Tribunal heard evidence from Mr Alter the Officer then in charge of such matters who deponed that date stamps were fixed on receipt of the document.  That date was ascertained by a post office batching stamp on a bundle of envelopes.  No attempt was or indeed could reasonably be made by Customs to check the postmarks on the envelopes themselves.

It is always open to a trader whose return has been received late by the Commissioners to establish that he did post it at a time when it should have been received earlier than it was.

Accordingly the question for the Tribunal in relation to this penalty and this penalty only was whether there was either a reasonable excuse or some failure in the postal system which should have meant an earlier receipt.  There was no reasonable excuse for the return being late.  Nor was it posted at a time when it would or could have been received by Customs within “the appropriate time limit”.

The Appellant would have known and indeed must have known because of the penalties which had been visited upon him earlier that these statements required to be submitted in time.  It can reasonably, we think, be inferred that it is more likely than not that the statement was submitted earlier than the two and a half months following its date and that its receipt by the Respondents was due to some unexplained failure in delivery.  Although with considerable hesitation we were persuaded by the Appellant that he did at some date prior to 30 November 2002 submit this last sales statement.  He said so and we would require to describe him as a liar if we did not so accept.  We were not persuaded that we would be entitled to do that particularly in view of his frankness in relation to the other matters in dispute about which his appeal fails.

Decision
It accordingly follows that we hold that in relation to the submission of the EC Sales List the Appellant was in default from 12 November 2002 to 30 November 2002 and would be liable to a penalty of 18 days at £15 per day the sum of £270 if the legislation can be so interpreted.

The wording of Section 66(7)a mirrors that of Section 59(7)a.  However the penalty calculations are different.  A Default Surcharge is incurred whenever the default occurs and at a fixed percentage.  The penalty for failure to submit the sales statement runs from day to day but there is no obvious statutory remedy for a person submits a return late which ought to have been received at an earlier date than it was.  The appropriate time limit for receipt is 11 November 2002.  Once that date is passed, admittedly by way of a failure by the Appellant, there would on the face of the statute appear to be no provision for the remedying of the default.  

By analogy however we feel entitled to interpret the provisions of Section 66 which apply a penalty for every day for which the default continues as entitling us to terminate that default at a date at which it was reasonable to expect that the statement would be received by the Commissioners, ignoring the phrase “within the appropriate time limit” and thereby limiting the extent of the default without making a finding of no default and remitting the whole penalty.  It could not have been the intention of the legislative it is suggested that a defaulter who remedies his default by submission of the list at such a time that he would be entitled to expect it to have been received by the Commissioners earlier than it was so received in fact should be subjected to additional and unnecessary penalty.

Result
In the result we allow the appeal to the extent only of remitting the imposed penalty of £1,260 to the sum of £270 but otherwise refusing the appeal.

T GORDON COUTTS, QC

CHAIRMAN

RELEASE:  21 JUNE 2004

EDN/03/121