20099

LATE REGISTRATION PENALTY – reliance on former accountant’s wrong advice – unprompted registration following taking further advice – mitigation given at 25%  –  increased  to 40%

LONDON TRIBUNAL CENTRE

	DAVID TAYLOR	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

			Tribunal:	DR JOHN F AVERY JONES CBE (Chairman)

Sitting in public in London on 4 April 2007

Clive Coleman, accountant, for the Appellant

Pauline Crinnion, Senior Officer HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2007

DECISION

1.	David Taylor appeals against a late registration penalty of £1,715 (after 25 per cent mitigation).  The Appellant was represented by Mr Clive Coleman and Customs by Mrs Pauline Crinnion.
2.	I find the following facts:
(1)	The Appellant carries on business as an installer of security doors and works as a subcontractor.
(2)	He expected to enter into a partnership with another person and for that purpose registered the partnership under the name Doorstyle for VAT.  The other person did not have a CIS 6 subcontractor’s certificate and pending his obtaining one the Appellant continued to carry on business as a sole trader unregistered for VAT.
(3)	He seems to have invoiced his work and also work performed by the other person under the business name DT Services.  His then accountants treated them as two separate sole traders who were both under the registration limit.
(4)	He was uneasy about the arrangement and in 2002 spoke to a friend, Mr Coleman, who represented him at the hearing.  Mr Coleman considered that he had received wrong advice and he calculated that the Appellant’s invoices issued under the name DT Services made him registrable from 31 January 2000.
(5)	The Appellant applied for registration on a form apparently dated 29 April 2002, but received by Customs on 13 June 2002.
(6)	Customs imposed a penalty at 15 per cent for the period 1 March 2000 to 12 June 2002.  This was originally based on the turnover estimated in the registration form but subsequently based on the return.  Customs mitigated the penalty by (1) 15 per cent because there were no penalties or surcharges on the file (which means that the first return was submitted and paid on time), and (2) 10 per cent for “efforts made to seek advice,” a total mitigation of 25 per cent.
3.	Mr Coleman does not dispute the registration date of the basic amount of the penalty but contends that the mitigation was insufficient in all the circumstances.
4.	Mrs Crinnion contends that Customs have considered all the Appellant’s representations and have mitigated the penalty by a sufficient amount.  The former accountant may have been at fault but that is a matter between the Appellant and the former accountant and not something that can be taken into account in mitigation.
5.	Mrs Crinnion was unable to tell me if there was a published scale of mitigation for late registration penalties, as there is for civil fraud penalties.  I subsequently confirmed from the internet that there was no published material on this.  I do not therefore have any guidelines.  Section 70(4) of the VAT Act 1994 provides that I cannot take into account insufficiency of funds, no loss of tax, or that the person, or someone acting on his behalf, has acted in good faith.  Although reliance on another is not mentioned here, as it is in s 71 in connection with whether there is a reasonable excuse, I consider that reliance on the former accountant is not something that I am entitled to take into account since it constitutes acting in good faith.  However, I consider that the 10 per cent part of the mitigation for seeking further advice is too low bearing in mind that it was an unprompted request for advice from Mr Coleman that led to the disclosure by the Appellant that he should be registered, which is the type of behaviour that should be encouraged by mitigation.  I therefore propose to increase the mitigation by a further 15 per cent to 40 per cent, so that I reduce the penalty to £1,372.

JOHN F AVERY JONES

CHAIRMAN
RELEASE DATE:  5  April  2007

LON/06/0977