Jones (t/a GW Jones Contractors Ltd) v Revenue & Customs [2006] UKVAT V19704 (07 February 2006)

19704

DEFAULT SURCHARGE – Reasonable excuse  - Late payment – Whether Customs had wrongly date stamped the date of receipt – No – Whether earlier overpayments of tax were cause of late payment – No – Whether postal strike delayed receipt of payment – No – Appeals dismissed

LONDON TRIBUNAL CENTRE

GORDON WYN JONES	           Appellants
G W JONES CONTRACTORS LTD

-	and –

THE COMMISSIONERS FOR HER MAJESTY’S REVENUE & CUSTOMS 	 Respondents

Tribunal:	STEPHEN OLIVER QC (Chairman)
ROBERTA JOHNSON

Sitting in public in London on 1 February 2006

No appearance for the Appellants

Simon Chambers for the Respondents

© CROWN COPYRIGHT 2006

DECISION

1.	The two default surcharge assessments to which these appeals relate were heard together.  Because the defaults and the excuses were the same in both cases, we decided to join the appeals and produce a single decision.

2.	G W Jones Contractors Ltd appeals against a default surcharge at 15 per cent in the amount of £2,713 in respect of the period 10/04.  Gordon Wyn Jones appeals against a default surcharge at 15 per cent for the 10/04 period; the amount of his surcharge is £5,339.  

3.	Both appeals were lodged in September 2005 and the grounds of appeal for both were that insufficient consideration had been given to postal strikes in the Northampton area.

4.	Chantrey Vellacott DFK have represented both Appellants since at least March 2005. They have conducted correspondence with the Customs. They lodged the notices of appeal. No one for the Appellants attended the hearing listed for 10.30am on 1 February. We adjourned the starting time until 11.30am.  Shortly before 11.30am we received a fax message from Chantrey Vellacott DFK which stated as follows:

“I write further to our discussion of earlier to request an adjournment of the above hearing. 

Having spoken to our client it is clear he has a case but that documentary evidence is required.  

We apologize for the late notice.  We were only asked to represent at the hearing very recently”.

The notice of appeal for both appeals shows Chantrey Vellacott DFK as the “Representative”. 

5.	We decided not to allow the adjournment. The Appellants should have known better. They had plenty of time in which to assemble the documentary evidence. Having said that, they and Chantrey Vellacott DFK will no doubt be aware of the rights of the Appellants given by rule 26 of the VAT Tribunal Rules.  

6.	The first excuse put forward by Chantrey Vellacott DFK is found in a letter of 9 March 2005 it reads as follows:

“Upon checking his bank accounts my client has advised that both cheques [the cheques for the VAT payable for the 10/04 period by both Appellants] passed through his account on 20 December 2004.  

There would appear to be a discrepancy between the date my client believes he posted those cheques to HM Customs & Excise and the date HM Customs & Excise have logged receipt of those cheques.  

I am at lost to understand how these cheques cleared my client’s account on 20 December 2004 and your offices have advised that they were logged as received on 20 December 2004 and the 23 December 2004 respectively.  It seems improbable to me that on the date my client’s cheques were logged on to your system they also cleared his account as cheques take five working days to be cleared by banks.

In view of this discrepancy I believe the justification for levying this default surcharge is in doubt.”

7.	In this connection it will be noted that the VAT returns for both Appellants were signed on the last day of November 2004.  The box has been ticked in both returns showing that payment accompanied the returns.  It follows that, whenever the cheques were cleared, they could not have reached Customs & Excise by the end of November 2004.  On any reckoning therefore payment must have been late.  

8.	Turning to the point made by Chantrey Vellacott DFK in their letter of 9 March 2005, the prima facie evidence of receipt by the Customs is the date stamp, i.e. 20 December 2004.  What is there to displace this?  The only possible evidence is the VAT returns of both Appellants.  Both these show that the returns were signed no earlier than the last day of November 2004.  We accept that the bank clearance procedures may not have taken place according to the normal course of events.  Nothing, however, persuades us that the point taken as to the bank clearance dates has any validity as regards the appeals.  

9.	The second excuse was put forward in Chantrey Vellacott DFK’s letter of 6 April 2005.  This explains the grounds of the appeal as follows:

“The VAT return in respect of the quarter ended 31 July 2003 was incorrect.  Output tax of some £36,000 had been overdeclared and paid to you.  This obvious error, not surprisingly played havoc with the cashflow of both companies throughout the latter period of 2003 and 2004.  It was only when our firm was preparing the year end accounts that this potentially catastrophic mistake was noted.  We then advised the client to submit a VAT 652, which was duly submitted, and the result and balance repaid to the limited company on 4 November 2004.”

We note that the VAT return for 07/04 submitted by Mr G W Jones shows that the return was made in time and that there was no problem as regards payment.  So far as G W Jones Contractors Ltd  was concerned, it had no defaults in 2004 until the 10/04 period.  It appears from the records of the Commissioners, set out in a letter to Chantrey Vellacott DFK of 19 January 2006 that the amounts overpaid by the two Appellants had been cashed by them, in one case on 27 September 2004 and in the other on 17 November 2004.  It follows from this that neither of the two Appellants can rely on the earlier overpayment of VAT as an excuse for their cashflow problems given rise to the defaults for the 10/.04 period.  In any event, shortage of funds is not a reasonable excuse.

10.	The third excuse put forward by both Appellants concerns the postal strike in the Northampton area.  No explanation of this had been given in the Notice of Appeal nor, so far as we are aware, in any subsequent letters from either the Appellants or Chantrey Vellacott DFK to the Customs.  Customs have done some research on this matter.  The outcome of their research was available at the hearing and could have been answered had the Appellants chosen to attend.  

11.	It will be recalled that the due date for payment was Tuesday 30 November 2004.  On Monday 22 November, according to the “Northampton Today” news release, the members of the Transport and General postal workers voted to strike.  There was therefore an early warning of postal difficulties.  The Chronicle and Echo, “Northampton Today” news release, of 22 November gave a fuller account of the impending postal strike stating that Mr Barron, a union secretary, had said that if a strike was to go ahead it would happen by November 30th at the earliest.  The news release for Monday 29 November states that the postal workers are due to come out for the first of two twenty-four hour strikes “this Friday”.  The Friday would be 3 December 2004.  This makes it clear to us that, even if the two Appellants had posted their returns and VAT payments to the Customs before the end of November, they should have escaped the impact of the postal strike in the Northampton area.  

12.	For all those reasons we cannot see any merit in any of the excuses put forward for the two Appellants.  We therefore dismiss their appeals reminding them of their rule 26 rights.

STEPHEN OLVIER QC
CHAIRMAN

RELEASED: 7 February 2006

LON/05/1074
LON/05/1081