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	First-tier Tribunal (Tax)
You are here: BAILII >> Databases >> First-tier Tribunal (Tax) >> Lemon Consulting Ltd v Her Majesty's Revenue & Customs [2009] UKFTT 35 (TC) (27 March 2009) URL: http://www.bailii.org/uk/cases/UKFTT/TC/2009/TC00013.html Cite as: [2009] UKFTT 00013 (TC), [2009] UKFTT 35 (TC)

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TC00013

Default surcharge - VAT payment received by HMRC 1 day late – computer problem – lack of confirmation from bank - appeal allowed

LONDON TRIBUNAL CENTRE

LEMON CONSULTING LTD. Appellant

- and -

THE COMMISSIONERS FOR

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: Elsie Gilliland (Chairman)

Caroline de Albuquerque (Member)

Sitting in public in London on 28 January 2009

Martin Pilling, director, for the Appellant

Jonathan Hall, Counsel, instructed by the General Counsel and Solicitor to Her Majesty's Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2009
 


DECISION

1. The appeal before the tribunal was that of Lemon Consulting Ltd. (the Appellant) against a default surcharge in the sum of £5828.00 assessed by the Respondents as payable by the Appellant in respect of the accounting period 12/07.
2. Martin Pilling, a Chartered Engineer, at the relevant time a non-executive director of the Appellant, presented its case and answered questions put by Counsel for the Respondents. Mr Pilling had no direct evidence to give as the matter had been dealt with by Stephen Lemon, a director who had since left. Mr. Pilling said that Mr. Lemon would have attended as a witness had he not now been in Australia but he had been helpful. We were told also that the Appellant had since changed its name to AMCL Systems Engineering Ltd.; Mr. Pilling is a director. No witness gave evidence for the Respondents.
3. It was not in dispute that payment of the VAT due for 12/07 had been received by the Respondents 1 day late on 8 February 2008. Mr. Pilling submitted that there had been a reasonable excuse for this and that every attempt had been made to get the money to the Respondents on time.
4. The Appellant for some time had paid its VAT electronically which gave a 7 calendar day extension the sum therefore being due and payable on 7 February 2008. What appears from the correspondence before us was that Mr. Lemon sought to make a BACS payment on 5 February 2008. He had had confirmation from his bankers The Co-operative Bank that a BACS payment made on the morning of 5 February would clear in the Respondents' account on 7 February 2008. He had thought the payment had gone through but did not have confirmation on screen. In a letter to the Respondents dated 22 January 2009 Mr. Pilling (who wrote the letter) quoted Mr. Lemon as having responded to him: " I thought it had gone through, but my online banking screen crashed (not my browser) just as the confirmation was supposed to come up. In the past this had happened and the payment had still gone through." Continuing his response he went on to say that he phoned the bank on the 5^th but was told that it might not show up immediately on their system and that he should try again on the 6th. On the 6^th it did not appear to have done so and he phoned the bank again to ask if they could confirm whether it had gone through but was told that they could not confirm but did not think it had. The quotation in the letter continues: " I then waited until the following morning,7th, when I was sure it hadn't gone through and instigated a same day CHAPS payment....However, the CHAPS request missed the lunchtime deadline on 7^th and was not processed by the bank until 8^th, resulting in payment one day late".
5. There is no correspondence before us from the bank. In the response in the letter of 22 January 2009 Mr. Lemon stated that he had been in touch with the bank and "... they confirmed that they do not keep the information that would be able to prove that the problem had occurred as described". There is an indistinct copy bank sheet which shows that the Appellant's Business Directplus account was overdrawn with the CHAPS payment out though it was in credit on 5 February. In a letter dated 12 August 2008 Mr. Lemon stated that there was an agreed overdraft facility and accordingly that an insufficiency of funds was not a factor.
6. We are satisfied and find that Mr. Lemon on 5 February 2008 attempted to make a BACS payment which would normally have arrived with the Commissioners on time. Mr. Lemon pressed the confirmation button but the system then crashed. Although there is no evidence from the bank we see no reason to disbelieve Mr. Lemon's explanation. We accept that the system crashed and that the fault was not with his browser. We also accept that when this had happened on previous occasions the payment had in fact gone through.
7. We are satisfied that on both the 5^th and 6^th February he made attempts to check with the bank whether in fact the payment had gone through but the bank was unable to give a definite answer.
8. We are satisfied that there was a reasonable excuse for the failure of the BACS payment which was due to a computer failure for which the Appellant was not responsible.
9. It is clear that Mr. Lemon was too late in giving instructions on 7 February to the bank for a same-day CHAPS payment. The issue is whether this failure to make the CHAPS payment on 7 February negates the reasonable excuse. This was however merely an attempt to remedy a situation which we have already indicated was not Mr. Lemon's fault. It was not unreasonable in our view for him to wait until he had confirmation that the payment had not gone through before initiating payment of a substantial sum for a second time. In all the circumstances we consider that Mr. Lemon acted reasonably and that the Appellant has a reasonable excuse.
10. Accordingly the appeal is allowed.
11. We make no direction on costs.

MAN/08/2006

ELSIE GILLILAND

CHAIRMAN
Release Date: 27 March 2009