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	United Kingdom VAT & Duties Tribunals Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> Mowbray (t/a Maypole Self Service Station) v Revenue & Customs [2008] UKVAT V20620 (17 March 2008) URL: http://www.bailii.org/uk/cases/UKVAT/2008/V20620.html Cite as: [2008] UKVAT V20620

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VOLUNTARY DISCLOSURE – three year cap – submission of estimated returns over long period – does behaviour of Commissioners serve to extend the time limit for repayment – no – appeal dismissed

MANCHESTER TRIBUNAL CENTRE

KEITH MOWBRAY Appellants

T/A MAYPOLE SELF SERVICE STATION

- and -

THE COMMISSIONERS FOR

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: LADY MITTING (Chairman)

JOHN LAPTHORNE (Member)

Sitting in public in Birmingham on 18 February 2008

The Appellant appeared in person

Richard Chapman, counsel, instructed by the Acting Solicitor for HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2008


 


DECISION
2. The Appellant appeals against the decision of the Commissioners to refuse a voluntary disclosure made by the Appellant and dated 4 March 2007 for a refund of tax in the sum of £13,443 for accounting periods 01/01 to 01/03. He also appeals against an assessment to interest in the sum of £1,046.24 included in an assessment to tax dated 5 June 2006, the assessment itself not being in dispute.
3. The Appellant, Mr. Mowbray, represented himself and gave oral evidence. For the Commissioners we heard oral evidence from Mr. Allan Sheppard.
4. The facts were not in dispute and we find to be as follows. Mr. Mowbray was at all material times the sole proprietor of the Maypole Self Service Station which is a petrol filling station situated in Maypole Lane, Kings Heath, Birmingham. Mr. Mowbray was registered for VAT with effect from 10 January 1978 and until the end of the year 2000, we understand he completed his returns correctly and on time throughout and his compliance record until then appears to have been unblemished. Things began to go wrong for Mr. Mowbray in 1997 when he was the victim of a particularly nasty armed robbery which unnerved him. His health began to deteriorate and continued to do so. In 2002 a car was stolen from his forecourt. Over these years, each of his petrol pumps in turn was hit, which although not major disasters in themselves, were additional pressures all adding to the stress of running the business.
5. In February 2001, when the VAT return for period 01/01 was due, Mr. Mowbray was too ill to attend to it and he put in, for the first time, an estimated return. The return was not submitted on the form itself but on a black and white photocopy thereof. It was headed "estimate due to ill health see attached". It was accompanied by a letter which we did not see but were told that it explained that due to ill health he was unable to complete the return and requested authorisation to submit an estimate. No response was received to the letter. Every entry on the return submitted was in a round figure. Sales were put at £235,000; VAT due on sales at £40,000; VAT reclaimed at £36,000 and net VAT payable at £4,000. The return was submitted, accompanied by the letter and payment. The following quarter, Mr. Mowbray again put in an estimated return. He accidentally inserted the period 01/01 in the top right-hand corner but, in top left-hand corner he had inserted "01.02.01 to 30.04.01, estimate due to backlog emanating from ill health". Again every entry was in round figures, sales were put at £220,000; purchases at £200,000; VAT on sales at £38,000; VAT reclaimed on purchases at £34,000 and VAT due to the Commissioners at £4,000. It was submitted in time, accompanied by payment. This then continued period by period right up until the end of 2005. In total, twenty returns were submitted. They were all submitted on time; were all on photocopy paper; were all marked "estimate"; were all accompanied by a payment and were all in complete, round figures. The amounts returned each month varied and had been estimated by Mr. Mowbray using a mark-up calculation based on the profit made on fuel and the number of car washes carried out.
6. Mr. Mowbray had had VAT inspections in 1981, 1985, 1989 and 1996 but none since then until Mr. Sheppard visited in February 2006. The only explanation which Mr. Sheppard could give for the nine un-inspected years was that, during the inspections which had taken place, Mr. Mowbray's compliance record appeared to be so good and he was a credible trader that further inspections were not deemed necessary. On Mr. Sheppard's visit, it was immediately apparent, and indeed pointed out to him by Mr. Mowbray, that the returns had been and still were being estimated. All the necessary paperwork and records were made available to him, but he found them totally unsorted. He was given every assistance by Mr. Mowbray who was cooperative throughout. Mr. Sheppard uplifted the records, spent a substantial amount of time analysing them and was able, eventually, to calculate the figures which he believed should have been returned. He wrote to Mr. Mowbray on 10 February 2006 advising him of his calculations and informing him that an assessment would be raised for £17,908.96 to covers periods 01/03 to 10/05. He then asked Mr. Mowbray to consider the calculations before the assessment was raised. Mr. Mowbray made representations by letter dated 23 February which resulted in a lower assessed figure of £16,542.52. Mr. Mowbray, in his letter of 23 February 2006 to Mr. Sheppard, also raised the question of a repayment for overpayments which he had made in the estimated years of 2001-2003. Mr. Sheppard, quoting the statutory provisions, explained the three year cap and therefore refused to make any repayment for these earlier years. An assessment was duly raised in June 2006 in the sum of £16,542.52 plus interest of £1,046.24. The assessments covered periods 04/03 to 10/05. We pointed out to Mr. Sheppard that by the time of the assessment the period 04/03 would have been out of time but we were told that because this was a repayment quarter, in fairness to the trader, Mr. Mowbray included it.
7. Over the following months, Mr. Mowbray worked enormously hard to bring all his VAT and tax records up to date and carried out a reconstruction of his records. Examining the figures, Mr. Sheppard was able to reduce the assessment to £12,773.34. As the original assessment had already been paid, an adjusting assessment was raised and the difference repaid. Unfortunately, and this was not appreciated by Mr. Sheppard until pointed out to him during the hearing by Mr. Mowbray, although the assessment had been reduced the computer did not reduce the interest which still stood as calculated in the original assessment. Mr. Sheppard readily accepted the error and undertook to make the necessary adjustment. The quantum of the assessment itself was not challenged by Mr. Mowbray and was not in issue before us.
8. Further correspondence ensued between Mr. Sheppard and Mr. Mowbray over a repayment for the earlier years. Mr. Sheppard maintained his position and the correspondence culminated in a form of Voluntary Disclosure being submitted by Mr. Mowbray on 6 March 2007 in the sum of £13,433 and covering periods 01/01 to 01/03. It is against the refusal of the Commissioners to make that repayment that Mr. Mowbray now appeals.
9. Mr. Sheppard was cross-examined by Mr. Mowbray at some length, much of the questioning revolving round the procedures when returns were submitted and why it had not been picked up that estimated returns in round figures on photocopy sheets were being submitted. Mr. Sheppard explained that round figure returns were not necessarily suspicious as, for example, rent payments were often in round figures. Equally, the Commissioners did accept returns on photocopy forms so that would not necessarily be picked up and the computer system itself would not pick up that a return was marked "estimate". When a return was received, it goes to a "keyer" who merely types in the figures onto the computer. It is not the keyer's job to analyse the return or to make any judgment on the figures contained. As Mr. Sheppard pointed out, Mr. Mowbray's return would be only one of the many hundred processed every day by the keyers. There was no mechanism for the returns themselves to be manually analysed.
10. Mr. Mowbray's main contention throughout had been that the three year cap should not apply to him. He had, in correspondence, relied on the case of Condé Nast Publications Ltd v. HMRC and Fleming (trading as Bodycraft) v. HMRC (2008 UKHL 2). The House of Lords judgment was released only a matter of days before our tribunal hearing and Mr. Mowbray was relying on what we have to say was a very misleading press report of their decision. The press report implied that the House of Lords had rejected the whole concept of the three year cap. Mr. Chapman obtained a copy of the judgment which he then analysed for us and it was made clear to Mr. Mowbray that the cap itself had not been rejected, but that the case referred only to the lack of transitional arrangements. The three year cap was not unlawful, had not been rejected and this case therefore was of no assistance to Mr. Mowbray and as submitted by Mr. Chapman, the time limit for making repayment claims remained at three years as set out in Section 80 VAT Act 1994 and Regulation 29 Value Added Tax Regulation 1995. We have to accept Mr. Chapman's contention, based on the legislation, that the three year cap does apply to Mr. Mowbray and, in the absence of any other matter, the Commissioners were correct in rejecting the voluntary disclosure.
11. However, this was not the end of Mr. Mowbray's case as he made a number of further submissions maintaining that the Commissioners were relying on what he still believed to be defective legislation to hide their negligence. First, he submitted that because his returns had been put in on photocopy paper and not the original forms they were not valid returns and could not therefore be covered by the three year cap. Secondly, he had throughout acted honourably and in good faith. His returns had always been estimated generously to the Commissioners and over the entire period he had in fact returned and paid an amount in excess of his true liability. Thirdly, the Commissioners had been negligent and culpable in failing to pick up the fact that the returns were all estimated. It was, he pointed out, quite clear on the face of them that the figures could not have been accurate but were merely rounded and they were also clearly marked as estimates. Fourth, Mr. Mowbray referred us to the April 2002 edition of Notice 700. Paragraph 2.2 told tax payers that they would periodically be visited by officers who would be there to ensure that the correct tax was accounted for at the right time. It was pointed out that officers would advise of overpayments as well as underpayments so that the tax payer paid no more and no less than was due. It was Mr. Mowbray's contention that the Commissioners were under a duty of care to the tax payer and that having breached their duty, in failing to visit and failing to spot the estimated returns, they were liable to Mr. Mowbray for their negligence and maladministration. Finally, Mr. Mowbray referred us to paragraph 2.6 of Notice 700 which refers to the ability of the Commissioners to allow a repayment by way of extra statutory concession. That ought to have been done in this case. Underlying Mr. Mowbray's contentions was his view that the Commissioners had, by their default and inaction, impliedly authorised the submission of estimated returns and they should now be estopped from refusing to accept the voluntary disclosure. Mr. Mowbray had acted throughout in good faith and had believed, in the absence of anything from the Commissioners, that he would have no problem in rectifying matters as and when.

CONCLUSIONS

12. As already stated, there can be no doubt that on a reading of the legislation, and looking at the periods involved in this case, the three year cap had expired by the time Mr. Mowbray put in his voluntary disclosure. Indeed it had also expired when he very first raised the issue with Mr. Sheppard. We cannot accept Mr. Mowbray's contention that the returns he put in were not valid and therefore the three year cap would not bite. He put in a return every quarter. Tax payers are permitted to put in photocopy returns and they are also permitted to put in estimates. Mr. Mowbray cannot impose on the Commissioners the duty to pick up that they were estimates and their failure to pick this up does not give Mr. Mowbray an open ended time limit to rectify matters. Mr. Mowbray was the person who knew he was putting in estimates and the responsibility is his and his alone to ensure that the figures he is returning are correct or if, for some reason, they cannot be submitted as correct that they are corrected at the earliest opportunity. As submitted by Mr. Chapman, it cannot be said under any circumstances that the Commissioners had acted in such a way as to give Mr. Mowbray any additional rights over and above other tax payers. We should make it clear that we don't for one moment doubt that Mr. Mowbray throughout acted in good faith. He was not being dishonest and was not trying to defraud the Commissioners or indeed to reduce the amount of tax payable. He worked immensely hard to rectify matters once Mr. Sheppard had visited but the statutory time limits have to apply to him. There is nothing in what he told us that could negate these time limits or extend them for him alone. The period covered by the voluntary disclosure was outside the three year cap and as such the Commissioners were entitled to refuse it. The onus is on the taxpayer to ensure he submits correct returns on time – in effect to ensure he timeously accounts to the Commissioners for the correct amount of tax. That responsibility cannot be transferred to the Commissioners. The Commissioners do not have that duty and their failure to visit Mr. Mowbray or spot the estimated returns cannot impose it upon them.
13. Mr. Mowbray did not specifically mention the principle of his liability to interest in his submissions to us. In correspondence with the Commissioners he had implied that it should not be payable in view of the fact that the Commissioners had failed to repay him the overpayment which he had made to them. This cannot be a correct argument. The two are distinct. Mr. Mowbray's liability to interest arises out of the assessment, which is not challenged. He was quite right in his contention that it had been over-quantified and this is being rectified.
14. In summary, with the exception of the recalculation of the interest, the appeal fails in its entirety. The Commissioners made no application for costs and no order is made

MAN/2007/0608

Lady Mitting

CHAIRMAN
Release Date: 17 March 2008