20082

DEFAULT SURCHARGE — Payment to bank by internet — Appellant advised if payment made by 7 of the month no penalty — payment made accordingly but by BACs — appeal allowed

MANCHESTER TRIBUNAL CENTRE

LEONARD BUCK - IDEALOGICAppellant

- and -

THE COMMISSIONERS FOR

HER MAJESTY’S REVENUE AND CUSTOMSRespondents

Tribunal: DAVID PORTER LLB

Sitting in public in Manchester on 2 March 2007

Appellant appeared in person

Mrs Kim Tilling, instructed by the Acting Solicitor for HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2007

DECISION

The Issue

  1. Leonard Buck trading as “Idealogic” (“the Appellant”) appeals against a surcharge liability in the sum £809.69 for the period 08/06. The Commissioners say that although the return was received on time the value added tax of £8096.93 due on the 31 August 2006 was not received until 11 September 2006. The Appellant paid on the last day of the 7 additional days allowed for payment electronically by BACs and the payment was late. The Appellant says that he was told that if he paid electronically the payment would be on time.

The Evidence

  1. Mr Leonard Buck appeared in person, and called Miss Amy Butterfield his office manager to give evidence. They both gave evidence under oath. Mr Buck produced a bundle of documents to the tribunal. Mrs Kim Tilling appeared for the Commissioners and produced a bundle of documents for the tribunal

The Legislation

  1. Section 59A of the Value Added Tax Act 1994 provides:

(1)for the purposes of this section a taxable person shall be regarded as in default in respect of any prescribed accounting period if the period is one in respect of which he is required, by virtue of an order under section 28,to make any payments on account of VAT and either:-

(a)a payment which he is so required to make in respect of that period has not been received in full by the Commissioners by the day in which it became due or

he would, but for section 59(1A) , be in default in respect of that period for the purposes of section 59.

…

8. If a person who, apart from this subsection, would be liable to a surcharge under …(section 59) … satisfies the Commissioners or, on appeal, the tribunal -

(a)in the case of a default that is material for the purposes of the surcharge and falls within subsection (1) (a) above-

(i)that the payment on account of VAT was dispatched at such a time and in such a manner that it was reasonable to expect that it would be received by the Commissioners by the day on which it became due , or

(ii)that there is a reasonable excuse for the payment not having been so dispatched

or (b) …

he shall not be liable to the surcharge and for the purposes of the preceding provisions of this section he shall be treated as not having been in default in respect of the prescribed accounting period in question (and accordingly, any surcharge liability notice the service of which depended upon that default shall be deemed not to have been served).

The Facts
  1. I found the following facts. The Appellant runs a software business, providing log-in facilities to the National Health Service, Social Services and others. In the past he has generally paid his VAT by cheque. His Accountant provides the appropriate information and the Appellant completes the return and pays the VAT. He is familiar with the different forms of payment as he has used Chaps and BACs payments in the past. He understands that a Chaps payment is immediate and a BACs payment can take three days to clear.
  1. Amy Butterfield was concerned that the Appellant may not be able to pay the VAT due on the 31 August on time and she spoke to Mr Ball at the local VAT office. I was shown a record of that telephone call which stated:

“Amy rang trader away until Wednesday she can send return today but he is not here to sign the cheque advised to make a BACs or Chaps to reach us by 07/09/06 she will do this advised of bank details”

6. As the Appellant could pay by internet he had sufficient cleared funds to pay the VAT due by 7 September. Amy Butterfield rang the local VAT office again and spoke to Mr Nash. I was shown a record of the call which states:

“Amy rang said she had made payment by BACs today, will fax through confirmation of payment, Amy asked if would incur default surcharges, said she would but she could appeal, faxing down proof of payment”

7. Amy Butterfield realised that a BACs payment would not be received for three days but she had understood that if she paid electronically and produced evidence by way of a fax confirming the payment there would be no penalty. As a result she faxed through to the local VAT office a detail of the internet request to the bank which stated:

“Pay Bills and Invoices Step 4 of 4

The account you’re paying from20-45-14 80446971

Who you’re payingHMCE VAT

Their account details10-00-00 52055000

Your reference 852780702

How much£8,096.93

Date the payment leaves your accountImmediately”

  1. Mr Buck had not used the electronic system before but he had appreciated that if the payment had been made by Chaps then cleared funds would have reached the Commissioners on time. He had understood that if evidence of the payment was given by fax then that would be sufficient to make the payment on time.

The Submissions

  1. Mrs Tilling submitted that the Appellant knew that BACs payments took three days and that it was clear from the call to Mr Nash that if a payment was made by BACs a penalty would be incurred. Mr Nash had done no more than indicated that they might be able to appeal to the tribunal but he had not said that the Appellant would be successful. The Appellant did not have a reasonable excuse for the late payment and the appeal should be dismissed.
  1. Mr Buck submitted that Amy Butterfield had understood that if the payment was made electronically, and she produced evidence of the payment, then no penalty would be incurred. In the light of that advice he had a reasonable excuse for the late payment and the appeal should be allowed.

The Decision

  1. I have considered the facts and the law in this case and I have decided that the Appellant does have a reasonable excuse. I accept that the Appellant was aware that a BACs payment would not normally be received by the Commissioners on the same day. He has after all used both the Chaps and BACs systems before. I also accept that Mr Nash had not said that no penalty would be incurred. Amy Butterfield had, however, understood, as a result of the conversations with the VAT office that if she paid electronically that the payment would be received by the Commissioners by the day on which it became due. The internet request to the bank showed that the payment had been made immediately. It was for that reason that Amy Butterfield sent the fax as evidence that the payment was made on time. If she had not understood that to be the case she would not have needed to send the Fax. I therefore allow the appeal but make no award as to costs.

DAVID PORTER

CHAIRMAN
RELEASWE DATE : 19 MARCH 2007