20231

VAT – DEFAULT SURCHARGE – REASONABLE EXCUSE – Appellant subject to  payments on account scheme – relied on confirmation from the Respondents National Advice Helpline that it had an extra seven days to make on-line payments – did not disclose to the Helpline that it was subject to the payments on account scheme – Appellant knew or should have known not entitled to the seven day concession – no misdirection on the part of the Respondents – not the actions of a diligent business person to rely on the advice given by the Helpline – no reasonable excuse – Appeal dismissed

LONDON TRIBUNAL CENTRE

	PREMIER DESPATCH LIMITED	Appellant

	- and -

	HER MAJESTY’S REVENUE and CUSTOMS	Respondents

			Tribunal: MICHAEL TILDESLEY OBE	 (Chairman)
				      ELIZABETH MACLEOD JP CIPM (Member)	  

Sitting in public in London on 13 June 2007

Steve Bracey Finance Director for the Appellant 

Gloria Orimoloye, Advocate for HM Revenue & Customs, for the Respondents

© CROWN COPYRIGHT 2007

DECISION
The Appeal
1.	The Appellant was appealing against the imposition of a default surcharge issued on the 27 November 2006 in the sum of £9,819 for the VAT period ending 7 October 2006.
The Dispute
2.	The Appellant traded in the competitive business environment of courier services and supplies of hired executive cars and connected services. The Appellant’s annual turnover was in the region of £22 million, employing 180 staff, and engaging 400 to 500 drivers on a self employed basis. At the relevant time the Appellant was a “large payer” and liable to make payments on account (hereinafter known as POA) in respect of its VAT liability.
3.	On 7 November 2006 the Appellant was due to make its balancing  payment  for the quarter ending 7 October 2006. However, on 6 November 2006 Mr Bracey, Finance Director for the Appellant company, contacted the Respondents’ National Advice Helpline to enquire whether the Appellant had an extra seven days for on-line payments, which was confirmed by the Helpline member of staff.  The Appellant duly paid the outstanding VAT balance on 14 November 2006.
4.	The Respondents’ concession of an extra seven days in which to make on-line payments was not available to tax payers subject to the POA scheme. The Respondents informed the Appellant about the unavailability of the concession on several occasions prior to the 6 November 2006.  Further they told the Appellant to contact the Large Payers Unit in Liverpool if it had difficulties with its return or payments. The Appellant did not inform the National Advice Helpline that it was a large payer and subject to the POA scheme. Since the concession of the extra seven days did not apply, the Appellant was liable to make its balancing payment on 7 November 2006. The payment was made on 14 November 2006, seven days after the due date. The Respondents, therefore, imposed a default surcharge at the rate of five per cent in view of previous defaults.
5.	The Appellant submitted that it was entitled to rely on the advice given by the Helpline member of staff, and, therefore had a reasonable excuse for not making the payment on time. At the hearing Mr Bracey confirmed that the Appellant was not putting forward cash flow difficulties as a reason for failing to pay the VAT on time. The Respondents contended that the Appellant was aware that it was ineligible for the seven day concession, and knew that enquiries about payments should be made to the Large Payers Unit in Liverpool not the National Advice Helpline. In the Respondents’ view the Appellant could not rely on the advice given by the Helpline member of staff because it did not disclose that it was subject to the POA scheme. In those circumstances the Appellant did not have a reasonable excuse, and was liable to pay the default surcharge.
6.	The issue in dispute concerned whether the Appellant’s reliance upon the advice given by the helpline member of staff constituted a reasonable excuse.
The Evidence
7.	We heard evidence from Mr Bracey for the Appellant. The Respondents supplied a bundle of documents.
8.	We announced our decision at the end of the hearing of 13 June 2007. The Respondents requested a full decision setting out the facts and our reasons.
Findings of Fact
9.	We make the following findings of fact:
(1)	The Appellant was late by seven days with its balancing payment for the quarter ending 7 October 2006.
(2)	The Appellant was within the default surcharge regime.
(3)	In 2006 the Appellant was subject to the POA regime.
(4)	 The Appellant received POA notices dated 14 February 2005 and 31 January 2006 and Notice 700/60 which clearly stated that it was not entitled to the seven day extension to the due date for payments by credit transfer. Further the notices advised the Appellant that if it had queries regarding the POA scheme it should contact the Large Payers Unit at Queens Dock, Liverpool.
(5)	The Appellant received surcharge liability notices dated 31 August 2005 and 23 November 2005 which stated in bold that if it had difficulties with its VAT return or payment it should contact the Large Payers Unit on the telephone number given in the notice. 
(6)	 On 6 November 2006 the Mr Bracey telephoned the Respondents’ National Advice Helpline to enquire whether the Appellant had an additional seven days to pay the outstanding VAT, if made on-line, which was confirmed by the Helpline member of staff. Mr Bracey, however, failed to disclose to the Helpline that the Appellant was subject to the POA scheme. 
Reasons for Our Decision
10.	Section 59 of the VAT Act 1994 requires the Appellant to furnish VAT returns and pay the outstanding VAT within one month of the relevant accounting period. The Appellant failed to pay the VAT due within one month for the accounting period ending 7 October 2006 and was liable to pay a surcharge of five per cent of the tax due amounting to £9,819.
11.	The Appellant can avoid the default surcharge if it satisfies the Tribunal on a balance of probabilities that it has a reasonable excuse for not furnishing the VAT payment on time. The default surcharge regime, however, is a blunt instrument which only takes limited account of the blameworthiness of the trader. If the trader cannot establish a reasonable excuse, the legislation takes no account of the difference between the trader who has made a genuine effort to comply albeit without success and the trader who has made very little effort and it takes no account whatever of the extent of lateness. Either the trader is on time or he is not; either he exercises due diligence or he does not. No account is taken of the degree of culpability.
12.	Misleading advice on the part of HM Revenue and Customs if acted upon by the trader can constitute a reasonable excuse depending upon the circumstances of the individual case. In this Appeal the Appellant relied upon the confirmation from a member of the Respondents’ Helpline staff that it had an additional seven days for an on-line payment.  In deciding whether the confirmation amounted to a reasonable excuse, we posed two questions:
(1)	Did the confirmation constitute a misdirection by the Respondents?
(2)	Was it reasonable in all the circumstances for the Appellant to rely upon the confirmation from a member of the Helpline staff?
13.	Under the VAT regime the obligation is upon the tax payer to disclose to the Respondents the material facts known to him about his VAT liability. A misdirection  on the part of the Respondents occurs when they have given wrong advice on a set of circumstances where all the known material facts have been disclosed. In this Appeal the Appellant did not inform the Helpline that it was on the POA scheme when it requested advice about the extended seven day concession. The information about the POA scheme was a material fact in relation to the concession. The Appellant knew that it was within the POA scheme because it had made VAT payments on account since May 2005. The Helpline member of staff was not required to check whether the information given by the Appellant was correct or complete.  The member of staff was entitled to assume that the Appellant had supplied the material facts underlying its question about the seven day extension. The confirmation by the member of staff that the Appellant had a further seven days if it paid on-line did not constitute a misdirection because the Appellant failed to disclose that it was subject to the POA scheme.
14.	 Mr Bracey sought to persuade us that the Appellant was nevertheless entitled to rely upon the confirmation given by the Helpline member of staff despite the Appellant’s failure to disclose its liability under the POA scheme. Mr Bracey referred to his limited knowledge of the VAT rules. He was unaware of the Respondents’ notices about the POA scheme because they had been served upon the previous finance directors for the Appellant company. Mr Bracey had been in post for just 12 months during which time he concentrated his energies upon resolving the Appellant’s cash flow problems. 
15.	We were not persuaded by Mr Bracey’s submissions. We acknowledge Mr Bracey’s efforts in putting the Appellant’s finances in order. However, it was the actions and knowledge of the Appellant company that was the subject of the Appeal, not those of Mr Bracey. The fact that the Appellant’s officers and employees were not fully aware of the VAT regulations dealing with the POA scheme did not amount to a reasonable excuse. Ignorance of the law does not constitute a reasonable excuse. The Respondents informed the Appellant on at least two occasions prior to the quarter ending 7 October 2006 that it was not entitled to the concession of the extra seven days in which to make credit transfer payments. Further the Respondents advised the Appellant on no less than five occasions that queries regarding payments under the POA scheme should be directed to the Large Payers Unit at Liverpool.  The Appellant knew or should have known that the extended seven days concession did not apply and that payment enquiries should be made to the Large Payers Unit not the National Advice Helpline. In all the circumstances we consider that the Appellant’s reliance on the confirmation from the helpline member of staff was misconceived and not the actions of diligent business person apprised of the material facts.
Decision
16.	For the reasons given above we hold that the Appellant’s reliance on the advice given by the Respondents’ National Advice Helpline confirming that it had an extra seven days to make payments on-line did not amount to a reasonable excuse. We, therefore, dismiss the Appeal and make no order for costs. 

                          

                                MICHAEL TILDESLEY OBE
CHAIRMAN
RELEASE DATE: 2 July 2007

LON 2007/1301