19771

VAT – EC SALES LIST – Appellant contended that it did not receive the penalty liability notice and that the penalty was harsh which caused financial hardship – satisfied the notice was served – no grounds found for reasonable excuse – Appeal dismissed.  

MANCHESTER TRIBUNAL CENTRE

	TFA BOX COMPANY LIMITED	Appellant

	- and -

	HER MAJESTY’S REVENUE and CUSTOMS	Respondents

			Tribunal:	MICHAEL TILDESLEY  OBE (Chairman)
					 WARREN SNOWDON JP         (Member)

Sitting in public in York on 14 July 2006

The Appellant did not appear

Bernard Hayley of the Solicitor’s Office for HM Revenue & Customs, for the Respondents

© CROWN COPYRIGHT 2006

DECISION
The Background
1.	The Appellant was appealing against a civil penalty in the sum of £500 imposed for failure to submit EC Sales List (ESL) for the quarter 05/03 by 11 November 2005.
2.	On 9 November 2005 the Respondents sent the Appellant a Penalty Liability Notice – EC Sales List telling the Appellant to submit the ESL for the 05/02 by 24 November 2005. The Notice also advised the Appellant that if it failed to submit further ESLs within a period of 12 months from the date of the Notice it would be penalised without any further notices being served.
3.	The Appellant submitted 05/02 ESL following issue of the Notice dated 9 November 2005.
4.	On 9 March 2006 the Respondents issued a civil penalty of £500 for failure to submit 05/03 ESL due on 11 November 2005.
5.	The Appellant sent a letter to the Respondents dated 18 March 2006 disputing that it  received the Penalty Liability Notice dated 9 November 2005. The Appellant also considered that the size of the penalty was disproportionate for an administrative failure which has not resulted in a revenue loss. Further the Appellant was in financial difficulties which would be made more difficult by the penalty.
6.	The Respondents replied on 21 March 2006 upholding the penalty. The Respondents also considered that the Appellant had received the 9 November Penalty Liability Notice because it sent the outstanding 02/05 ESL immediately after the issue of the Notice.
7.	On 7 May 2006 the Appellant lodged a Notice of Appeal with the Tribunal against the civil penalty.
8.	On 10 May 2006 the Tribunal notified the Appellant of the hearing date of 14 July 2006 at York.
9.	On 14 June 2006  Mr Davey, director of the Appellant company enquired whether it was necessary for him to attend the hearing because he did not have the time to appear before the Tribunal, particularly as the venue was some distance from the Appellant’s office in Grimsby.
10.	On 16 June 2006 the Tribunal advised him that he did not have to attend the hearing but it was in the Appellant’s best interests to do so. The Tribunal, however, would accept and consider written representations. 
11.	On 10 July 2006 Mr Davey submitted written representations on behalf of the Appellant. He also added that he reluctantly could not attend the hearing because he was a chronic asthmatic. The Tribunal notice did not provide details of the facilities for persons with disabilities. The Tribunal contacted Mr Davey by phone advising him that the hearing room was on the ground floor and that arrangements would be made for him to park his car outside the hearing centre.
12.	The Appellant did not attend the Appeal hearing on 14 July 2006 at York. We decided to proceed in the absence of the Appellant particularly as we had received from the Appellant detailed written representations.
The Appellant’s Representations
13.	The Appellant made four substantive points:
(1)	The Appellant had been in business for over 20 years. This was the first time that it had been penalised for a breach of regulations. The Government had imposed increasing burdens on small businesses which had no redress against the Government when it mishandled its responsibilities.
(2)	The Respondents had instructed bailiffs to distrain goods to the value of the penalty. The Appellant contacted the bailiffs to advise them that the penalty was subject to Appeal. The balliffs, however, took no notice and visited the Appellant’s premises which was extremely damaging to the Appellant’s reputation.
(3)	The Appellant was trading at a loss. The penalty if upheld would result in financial hardship which could endanger the jobs of the Appellant’s employees.
(4)	Mr Davey denied receiving the penalty liability notice issued on 9 November 2005. The Appellant had moved offices at the time. The Royal Mail did not offer a redirection service because the Appellant’s new premises had multiple occupation. Also the Appellant’s previous landlord had wrongfully disposed of paperwork and files belonging to the Appellant. Mr Davey also considered that the Notice should have been sent by recorded delivery. 
Reasons for Our Decision
14.	Section 66 of the VAT Act 1994 imposes a penalty on a person who fails to return an ESL by the due date. Before a penalty can be imposed the Respondents must serve a penalty liability notice upon the person. The notice will cover any default which takes place within 12 months from the date of its service. The penalty is a daily penalty of £5 for each day in default to a maximum of £500. 
15.	A person can avoid a penalty if he satisfies the Tribunal on the balance of probabilities that he has a reasonable excuse for not sending the ESL by the due date. The purpose of the legislation, however, is to ensure compliance with the reporting requirements. Thus the range of circumstances that can amount to a reasonable excuse are strictly limited. Insufficiency of funds cannot amount to a reasonable excuse by virtue of section 71 of the Act. The Tribunal has no power to mitigate the penalty. Essentially a reasonable excuse relates to some event which is outside the control of the person, and which could not be anticipated by the exercise of reasonable foresight.
16.	The Appellant failed to return 05/03 ESL return by the due date of 11 November 2005. The Appellant was more than 100 days in default by the time the civil penalty was issued. The Appellant was, therefore, liable to the maximum penalty of £500.
17.	The Appellant contended that it did not receive the Penalty Liability Notice issued 9 November 2005. The Appellant stated that it had moved address and that the previous landlord wrongfully retained papers and files belonging to the Appellant. Mr Alter of HM Revenue and Customs, however, pointed out in his letter dated 26 March 2006 that the only ESL sent by the Appellant since May 2004 was the one received immediately following the issue of the 9 November 2005 Notice. The Appellant has not provided a satisfactory explanation for the anomaly identified by Mr Alter. In the absence of a satisfactory explanation we are satisfied that the 9 November Notice was served upon the Appellant.
18.	The Appellant stated that the penalty would result in financial hardship. Unfortunately the Tribunal does not have the power to mitigate the penalty on grounds of hardship. The fact that the Appellant may have insufficiency of funds does not amount in law to a reasonable excuse for not sending the ESL return by the due date. Likewise the burden imposed on small businesses by the Government is not a ground upon which the Tribunal can remove the penalty. We note, however, that Mr Alter as a gesture of goodwill waived the penalty for 05/04 return.  
19.	We are concerned about the Appellant’s complaint regarding the bailiffs. The Tribunal, however, has no jurisdiction to deal with complaints about how HM Revenue and Customs exercise its care and management powers.  The Appellant should complain first to HM Revenue and Customs, and then to the Adjudicator, The Adjudicator’s Office, 6th Floor, Haymarket House, 28 Haymarket, London SW1Y 4SP.
20.	We are, therefore, satisfied that the 9 November 2005 Penalty Liability Notice was served on the Appellant and that the Appellant did not have a reasonable excuse for not returning the 03/05 ESL by the due date. We dismiss the Appeal and make no order for costs.  
 
MICHAEL TILDESLEY

CHAIRMAN
RELEASE DATE:7 September 2006

MAN/