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	United Kingdom VAT & Duties Tribunals Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> Fitzgerald v Customs and Excise [2004] UKVAT V18662 (21 June 2004) URL: http://www.bailii.org/uk/cases/UKVAT/2004/V18662.html Cite as: [2004] UKVAT V18662

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18662

LONDON TRIBUNAL CENTRE Reference No: LON/2003/1206

Copy sent to:

Appellant/Applicant

Respondents

STEPHEN FITZGERALD Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: THEODORE WALLACE (Chairman)

MRS SHAHWAR SADEQUE

Sitting in public in London on 12 May 2004

The Appellant in person

Mrs Crinnion, Senior Officer, for the Respondents

DECISION

1. This appeal was against default surcharges going back to 1997.
2. On 6 May 2004 Customs agreed to remove a surcharge liability notice for period. 11/96. The result of this was that the surcharge for 11/97 was replaced by a surcharge liability notice and the next two surcharges at 2 per cent and 5 per cent were withdrawn in accordance with the published extra-statutory taxation for small surcharge assessments.
3. The surcharges remaining under appeal are for periods 02/99 to 02/01 inclusive.
4. The Appellant's case is that he had a reasonable excuse arising from depression, following the breakdown of his relationship with his girlfriend who originally did the books, ankylosing spondylitis diagnosed in 1996 and trouble with his hip culminating in replacement of both hips, all of which were combined with financial difficulties.
5. We find the following facts.
6. The Appellant bought "The Horns Lodge", a public house at Chailey, near Gatwick, in April 1998. Previously he had been tenant of a public house in Bristol.
7. His first VAT returns for The Horns lodge were on time. These were for 05/98 and 08/98. His girlfriend helped.
8. The return for 11/98 which was due by 31 December was received late by Customs with the £2104.60 VAT on 12 January 1999. By this time he was having rows with his girlfriend who was coming and going. They split up in March 1999. He was doing the everyday running of the pub; his ankylosing spondylitis and hip were painful.
9. The return for 02/99 was prepared by the due date showing £3026.45 VAT but the return and payment were not made until 29 June 1999. He obtained the help of a company. He accepted that he did not have a reasonable excuse for this default.
10. The return for 05/99 was received by Customs without the £4596.82 VAT shown as due. The Appellant said that he was having the start of ongoing financial difficulties, the bank would not agree to re-finance the property on which it held a mortgage. The break-up of his relationship caused his depression to get worse. He was on his own running the pub. Outputs including VAT were up from £38,739 to £ 47,819 so that business had not suffered. He accepted that he did not have the money to pay the VAT.
11. The return for 08/99 was ready on time showing a further increase in sales and £5033.94 VAT as due. No VAT payment was made until 2001. The bank mortgage payments were phenomenal and suppliers to the pub required cash on delivery.
12. The return for 11/99 was ready on time but the Appellant had the same problem with cash.
13. The return for 02/00 was ready on time but again no payment was made.
14. The return for 05/00 was not received until 12 January 2001 when is was sent without cash together with those for 08/00 and 11/00. The return for 02/01 was ready on time but payment was late.
15. The Appellant had a hernia operation as a day patient on 1 September 2000 probably caused by lifting barrels. He told us that he had varying degrees of depression but had to keep going. Business was still good but the problems with the bank and suppliers continued and he had to pay his staff. PAYE was a problem.
16. Customs instituted bankruptcy proceedings and a hearing was fixed for 21 September 2000. Following a report by Levy Gee the Appellant agreed into an Individual Voluntary Arrangement. They agreed to pay off Customs at £1300 a month. Having had hip replacement operations, the Appellant told us that he has overcome his problems and now only owes the surcharges.
17. He said that he had never told customers about his depression.
18. We readily accept that the Appellant had a very difficult time for three or four years with financial pressures combined with personal and health problems. The medical history which he produced recorded mild reactive depression in 1995. He did not however consult a doctor about depression in the period relevant to this appeal and there is no evidence that it had an adverse effect on his sales.
19. Although he had previously relied on his girlfriend for help with the accounts the return for 02/99 was ready on time.
20. In our judgement the real cause of the defaults was shortage of funds, no doubt attributable to a considerable extent to the cost of financing the mortgage on the property.
21. We accept that the Appellant's problems caused him to be depressed but we are not persuaded that the depression caused the defaults. The fact is that sales held up well. The Appellant did not grant credit to his customers so that he received the cash needed to pay the VAT. Section 71(1)(a) of the VAT Act 1994 provides in terms "an insufficiency of funds to pay any VAT due is not a reasonable excuse." He did not identify any unforeseen event which deprived him of the means to pay.
22. Neither the Tribunal or Customs has any power to mitigate default surcharges.
23. The appeal must therefore be dismissed.
24. Surcharges for periods 05/01 to 08/01 were originally imposed but then withdrawn on account of the impact of foot and mouth disease and September 11 on the Appellant's business.
25. We close with the observation that the Appellant has clearly made a real effort to overcome his problems and we hope that he will be given time to pay the surcharges which total £6,241.54.

THEODORE WALLACE

Chairman

Release Date: 21/06/2004