[2012] UKFTT 286
TC01974
Appeal number:
TC/2011/09683
VAT – late payment –
surcharge – time to pay arrangement with HMRC – Appellant believed that the
time to pay arrangement lasted throughout the four VAT periods during which
late payments were made – HMRC accepted that arrangement was in place but that
it only related to an earlier period – appeal allowed
FIRST-TIER TRIBUNAL
TAX CHAMBER
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THE COPPERFIELDS
RESTAURANT
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Appellant
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- and -
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THE
COMMISSIONERS FOR HER MAJESTY’S
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Respondents
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REVENUE &
CUSTOMS
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TRIBUNAL:
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JUDGE J. BLEWITT
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Sitting in public at Manchester on 11 April 2012
Mr Howard for the Appellant
Mr O’Grady, instructed by the
General Counsel and Solicitor to HM Revenue and Customs, for the Respondents
© CROWN COPYRIGHT
2012
DECISION
1.
This is an appeal by the Appellant Company, no longer trading, through
Mr Howard, a former partner in the Company.
2.
By Notice of Appeal dated 7 November 2011 the Appellant appealed against
surcharges totalling £4,539.84, comprised as follows:
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VAT PERIOD
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SURCHARGE %
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AMOUNT (£)
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02/09
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10
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1,086.74
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05/09
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15
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1,238.77
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08/09
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15
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1,009.04
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11/09
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15
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1,205.29
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Undisputed background facts
3.
The Appellant first defaulted in VAT period 05/07; no surcharge was
imposed as this was the first default. A further default occurred in VAT period
02/08 for which a surcharge liability notice was issued however no charge
incurred by the Appellant as, at 2%, the surcharge fell below the de minimus
limit of £250. A surcharge at 5% was imposed in respect of a default for the
VAT period 05/08.
4.
HMRC initially, and incorrectly, imposed a surcharge at 10% for the VAT
period 11/08. However it was accepted by HMRC that prior to the payment date
for that VAT period, the Appellant had made a time to pay arrangement with HMRC
and consequently the surcharge was subsequently withdrawn.
5.
As a result, the surcharge imposed for the default in VAT period 02/09
was reduced from the initially imposed 15% to 10%, and the surcharges imposed
thereafter for the defaults in VAT period 05/09, 08/09 and 11/09 at 15%.
6.
Mr Howard accepted that the defaults occurred as set out in HMRC’s
schedule contained within the bundle presented at the hearing and did not
dispute that the surcharges were imposed in accordance with legislation.
Legislation
7.
As there was no dispute between the parties as to the legislation
applicable in this case, it is unnecessary to set it out in any detail. The VAT
default surcharge is provided for by Section 59 of the Value Added Tax Act
1994.
8.
Relevant to this appeal are the provisions found in Section 108 of the
Finance Act 2009 which relate to time to pay agreements:
(1) This section applies
if—
(a) a person (“P”) fails to
pay an amount of tax falling within the Table in subsection (5) when it becomes
due and payable,
(b) P makes a request to an
officer of Revenue and Customs that payment of the amount of tax be deferred,
and
(c) an officer of Revenue
and Customs agrees that payment of that amount may be deferred for a period
(“the deferral period”).
(2) P is not liable to a
penalty for failing to pay the amount mentioned in subsection (1) if—
(a) the penalty falls within
the Table, and
(b) P would (apart from this
subsection) become liable to it between the date on which P makes the request
and the end of the deferral period.
(3) But if—
(a) P breaks the agreement
(see subsection (4)), and
(b) an officer of Revenue
and Customs serves on P a notice specifying any penalty to which P would become
liable apart from subsection (2),
P becomes liable, at the
date of the notice, to that penalty.
(4) P breaks an agreement
if—
(a) P fails to pay the
amount of tax in question when the deferral period ends, or
(b) the deferral is subject
to P complying with a condition (including a condition that part of the amount
be paid during the deferral period) and P fails to comply with it.
9.
It was accepted by HMRC that a time to pay agreement, which satisfied
the conditions of S 108 of the 2009 Act, existed prior to the default in the
VAT period 11/08.
Appeal
10.
The grounds of appeal relied upon by the Appellant as set out in the
Notice of Appeal dated 7 November 2011 and can be summarised as follows: HMRC’s
decision is wrong as the Appellant was never made aware when the Time To Pay
arrangement was made that it was only applicable to the first VAT period and
that new agreements were required for subsequent periods. The Appellant
contacted HMRC on a number of separate occasions as cash flow problems
continued, ultimately resulting in the closure of the business and the
redundancies of 17 employees.
11.
A letter from the Appellant to HMRC dated 17 June 2011 reiterated the
grounds of appeal set out in the Notice of Appeal and added that, on each
occasion subsequent to the Time To Pay arrangement being agreed, when the
Appellant had telephoned HMRC they had been informed that surcharges would not
be incurred under the arrangement. The Appellant acted on the advice given by
HMRC representatives and feel misled that surcharges were subsequently imposed
in the sum of £4,539.84.
Evidence and Submissions
12.
Mr Howard confirmed in evidence to the Tribunal that he had kept in
regular touch with HMRC over the default periods and that once the Time To Pay
arrangement had been agreed with HMRC, the Appellant had adhered to it. Mr
Howard stated that he had always spoken to the same department at HMRC (albeit
different representatives) and had never been referred to the local debt
management unit, consequently when he had called on 5 or 6 occasions, HMRC were
aware of the agreement in place and had never advised him that the arrangement
had expired.
13.
HMRC submitted that the partners/directors of the Appellant Company had
the ultimate responsibility for the timely submission of VAT returns and
payments, which was not disputed by Mr Howard.
14.
HMRC accepted that a Time To Pay agreement was put in place for the
period 11/08, however for the four subsequent periods under appeal, namely
02/09, 05/09, 08/09 and 11/09, no Time To Pay agreements were executed prior to
the due date for each respective period.
15.
HMRC included within its bundle logs of telephone calls between HMRC and
the Appellant. It was submitted that there is a reference to the arrangement
relating to the period 11/08 but nothing else within the logs to suggest that
further agreements were executed. It was also submitted that an HMRC VAT
Officer in Belfast, Mr John McCabe, had confirmed that the only arrangement in
place was that relating to the period 11/08. As the arrangements are a
concession relevant to specific periods and are not “rolling agreements”, the
Appellant should have made new agreements with HMRC for each default period.
Furthermore surcharge liability notices were issued for the default periods and
the Appellant should have questioned why this was the case if the Time To Pay
arrangement was in place.
Discussion
16.
It is helpful at this point to refer to some of the telephone logs
produced by HMRC which assisted me in reaching a decision in this case.
17.
On 8 January 2009 reference is made to “TTP AGREED” which, it was
agreed by all parties, referred to the arrangement made prior to the 11/08
period.
18.
Thereafter there was a call on 6 February 2009 which states “trdr
called to advise that he has rec’d dnip when has a TTP, adv ttp has been agreed
with the BPS but if a debt on file sometimes dnips do get passed through the
system, trdr was not happy but he understood and that he will continue paying
as agreed.”
19.
A call on 22 May 2009 was logged as follows: “As above trader has
received dnip but ttp agreed. Explained so long as ttp adhered to he can ignore
the dnip”.
20.
On 13 November 2009 the log states “General Enquiry...I advised that
due to the fact there are three periods of debt pymt must be prompt.”
21.
On 18 January 2010 the log reads “Spoke to Peter Howard...I pointed out
that someone else had intervened and had sent out a demand and that they were
the ones who would have to deal with his time to pay...”.
22.
Mr Howard presented as a genuine and credible witness and I accepted
without hesitation that he had regularly been in contact with HMRC throughout
the period during which the Company experienced financial difficulties in order
to meet his liabilities in a timely manner.
23.
It was accepted by HMRC that a Time To Pay arrangement had been agreed
with HMRC prior to the payment date for the period 08/11 but it was submitted
that the Appellant should have renewed any such arrangement in order to avoid
further defaults.
24.
In my view, the logs of the telephone calls between the Appellant and
HMRC were misleading to the Appellant; he had dealt with the same department on
numerous occasions and at no point was he informed that the arrangement was no
longer in place; to the contrary the logs indicate that the Time To Pay
arrangement (“TTP”) was recorded on HMRC’s system and continued throughout the
periods of default. Neither party could assist as to what a “dnip” referred to,
although Mr Howard believed it was likely to be the surcharge liability notices,
which it appeared from the logs prompted the Appellant to call HMRC out of
concern. He was advised that as long as the Time To Pay arrangement was adhered
to, he could ignore the notice which reinforces my view that HMRC accepted (or
misled the Appellant by failing to advise him otherwise) that the arrangement
was still in place.
25.
Mr Howard was unable to recall the exact details of the Time To Pay
arrangement and examining the record of payment dates did not assist. HMRC
produced no evidence as to what the arrangement was and therefore no evidence
that it had been breached which would have rendered the Appellant liable to
surcharges.
26.
The onus is on HMRC to prove the defaults, which in this case would have
arisen by the Appellant breaking the agreement of failing to pay the tax due
before the expiry of the deferral period. I found as a fact that the Time To
Pay agreement continued throughout the periods of default and that there was no
evidence before me upon which I could be satisfied that the Appellant had
broken the agreement. In those circumstances I could not be satisfied that HMRC
has discharged the onus of proof upon it.
27.
Alternatively, I found as a fact that HMRC had misled the Appellant by
indicating that a Time To Pay arrangement remained in place throughout the
periods of default and therefore the Appellant had a reasonable excuse for the
defaults.
Decision
28.
The appeal is allowed and the surcharges totalling £4,539.84 are
discharged.
29.
This document contains full findings of fact and reasons for the
decision. Any party dissatisfied with this decision has a right to apply for
permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure
(First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be
received by this Tribunal not later than 56 days after this decision is sent to
that party. The parties are referred to “Guidance to accompany a Decision from
the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this
decision notice.
TRIBUNAL JUDGE
RELEASE DATE: 20 April 2012
