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	United Kingdom VAT & Duties Tribunals Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> Skelton Transport Group Plc v Revenue and Customs [2005] UKVAT V19239 (20 July 2005) URL: http://www.bailii.org/uk/cases/UKVAT/2005/V19239.html Cite as: [2005] UKVAT V19239

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19239

VAT — PENALTIES —default surcharges — agreement by taxpayer with Customs for payment of arrears of VAT on terms that taxpayer would pay future tax on time and be liable for pre-existing and future default surcharges — held that in consequence no reasonable excuse existed for avoiding liability for surcharges under appeal — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

SKELTON TRANSPORT GROUP PLC Appellant

- and -

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: Michael Johnson (Chairman)

Sitting in public in York on 14 July 2005

Andrew Skelton, managing director of the Appellant, for the Appellant

Chris Owen of the Acting Solicitor for HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2005


 


DECISION

1. The Appellant is appealing against 2 default surcharges, one for £7,330 and the other for £19,417, imposed in relation to its VAT accounting periods 04/04 and 07/04 respectively. The surcharges have come about because of the lateness of the Appellant in paying its VAT due in respect of those periods. I record that the Appellant was not late in submitting its VAT return in respect of either of those periods.
2. The Appellant's case is that it has a reasonable excuse for the late payments of tax within the meaning of section 59(7)(b) of the Value Added Tax Act 1994, and should not therefore be liable for the surcharges under appeal.
3. The tribunal has had the opportunity of hearing at some length from the managing director of the Appellant, Mr Skelton, whose evidence has been of great assistance.
4. The background to this appeal has been the effect on the Appellant's business of the UK Foot & Mouth Disease epidemic in or about 2002. That long drawn-out crisis damaged the Appellant's ability to transport goods in rural areas, and I am satisfied that this state of affairs is at the foundation of the Appellant's cash-flow difficulties, which have continued to some degree at every material stage.
5. In consequence of the crisis the Appellant incurred substantial tax debts to H M Customs and Excise ("Customs"), which it has had to clear by payment of instalments. The Appellant's overall financial position was further hindered by the placing into administration in 2003 of an important customer, EXi Limited.
6. I am pleased to say that, despite its difficulties, the Appellant has continued to trade with considerable success. This has not however obviated the need for the Appellant to reach more than one agreement with Customs for the clearing of its arrears of VAT.
7. In particular, on 23 June 2004, Customs offered the Appellant written terms of agreement for payment of its outstanding debts for VAT. This proposed agreement was intended to discharge the entire amount owing in June 2004 by November 2004. I find that the Appellant accepted the terms offered, with a view to making instalment payments of tax as envisaged by the agreement.
8. The agreement was expressed to be conditional upon a number of matters. One was that the agreement did not operate to cancel liability to default surcharges where applicable. Another was that the whole of the arrears outstanding was to become due if any default surcharges issued were not paid as they fell due. The Appellant moreover agreed to pay its future VAT by the due dates.
9. Mr Skelton told the tribunal that the consequences of the provisions just mentioned were not spelt out to or explained to the Appellant by Customs at the time of the agreement or at all. However it does appear that they are clearly expressed terms, constituting part of the package for payment of VAT by instalments offered to the Appellant in June 2004.
10. Mr Skelton also made the point that the Appellant really had no option but to go along with the terms offered by Customs at that point. However Chris Owen, appearing for her Majesty's Revenue and Customs, as they now are, submitted that the figures contained in the agreement for the size and frequency of instalment payments must have taken account of the Appellant's ability to pay its tax, not only in relation to the arrears, but also in relation to VAT falling due from time to time.
11. I think that that must be right. When the agreement was offered, it was open to the Appellant to go back to Customs and say: "We cannot fulfil these proposed terms, because in order to find the amount of the instalments to defray our arrears, we will inevitably have to default on our current VAT due". Having listened to Mr Skelton, I am sure in my own mind that a director of his acumen and experience would realize that, for the agreement to be workable, the instalments needed to be capable of being met without "robbing Peter to pay Paul", ie without using current funds, which should be earmarked for current VAT, to fund the arrears.
12. I do not construe the agreement as placing a moratorium on the Appellant's liability to pay default surcharges which preceded or which might be incurred during the currency of the agreement. On the contrary: the agreement makes it very clear that the continued operation of the agreement is dependent upon the Appellant honouring any existing obligations to pay default surcharges, plus its fulfilling the continuing obligation to pay its tax on time from quarter to quarter in future, so as not to incur further surcharges.
13. I therefore feel that, despite what Mr Skelton says, there exists no reasonable excuse attributable to either of the surcharges under appeal. Each of the surcharges reflects the fact that VAT was not paid in time, and each of the surcharges is covered by the agreement in such a way that the Appellant has accepted its liability to meet them.
14. For the above reasons this appeal is dismissed.
15. No application was made for costs, and none are awarded.

MICHAEL JOHNSON

CHAIRMAN
Release Date: 20 July 2005