boomshakalaka

Default surcharge—failure to despatch return or remittance by the due date—reasonable
excuse—illness

The taxpayer carried on a business of reconditioning gear boxes. He employed some eight
mechanics, a receptionist and a secretary who kept the books and prepared PAYE and VAT
returns. The taxpayer was a mechanic and did not consider himself sufficiently knowledgeable to
deal with VAT returns. His secretary became ill towards the end of 1986. By October or November
1986 she was suffering some pain and could attend work for only three days per week on average.
She was eventually found to be suffering from gallstones. Her irregular attendance continued
throughout 1987. The taxpayer did not want to give her notice as she had been with him for 11 years
and was ill. However, in May 1987, they both realised that she could no longer cope with her work
and the taxpayer advertised for a replacement. It was then the holiday period and the taxpayer was
unable to find a suitable replacement willing to start before 1 September 1987. The secretary’s
continued absences resulted in the taxpayer’s returns for the periods ended 31 October 1986, 31
January 1987, 30 April 1987 and 31 July 1987 being furnished late. He was served with a surcharge
liability notice on 23 April 1987 and was assessed to surcharge in respect of the two defaults
occurring thereafter. The taxpayer appealed contending that he had a reasonable excuse in each
case by virtue of his secretary’s illness. Held, (1) The taxpayer had a reasonable excuse for failing to
submit his return for the period ended 31 October 1986 by the due date by virtue of his former
secretary’s illness. As this was a default material to surcharge assessed for the period ended 30
April 1987, the assessment in respect of that period should be withdrawn. (2) The taxpayer should
have taken steps, by the end of January 1987, to engage a substitute for his former secretary. He did
not, therefore, have a reasonable excuse in respect of the periods ended 31 January 1987, 30 April
1987 and 31 July 1987. The rate of surcharge assessed for the period ended 31 July 1987 would be
reduced from 10 per cent to 5 per cent but the assessment would otherwise stand.

Per curiam. (1) FA 1985 s 33(2)(b) excludes the mere delegation of a task to another from being a
reasonable excuse. However, as it is necessarily implied that the person to whom the task has been
delegated has not performed it as he should have done to prevent the relevant penalty from being
imposed, the paragraph does not exclude all causes of the failure from being capable of amounting
to a reasonable excuse. The paragraph excludes dilatoriness and inaccuracy. Other causes, such as
accident or ill-health, are not excluded. (2) The Commissioners should, where further facts come to
their knowledge after they have issued a surcharge assessment, make a further assessment and not
substitute a new assessment in a larger amount.