18187

Default Surcharge: Date of cheque & date of posting critical to surcharge.  Not shown to have been carried out timeously.  Refused.  2 signatures required on cheque.  On director on holiday, not reasonable excuse.  Appeals Refused.

EDINBURGH TRIBUNAL CENTRE

	FIREPOINT SCOTLAND LTD	Appellants

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	       Respondents

			Tribunal:	 (Chairman)   Mrs G Pritchard, BL., MBA., WS

Sitting in Edinburgh on Wednesday 28 May 2003

for the Appellants		Mr J Walters

for the Respondents	Mr A McCue

© CROWN COPYRIGHT 2003.

DECISION

These are two appeals against the imposition of default surcharges in respect of the quarters 06/02 and 09/02 amounting respectively to £539.09 and £1460.68.

The Appellant was represented by John Walters who was the person responsible for VAT returns in the business; and who also gave evidence.  The Respondents were represented by Mr A McCue, Miss F Cook gave evidence.

There was also written evidence lodged by both parties.  Where reference is made to any page in either bundle it will be deemed to be repeated here.  The Appellants bundle will be prefaced A, and the Respondents R.

Evidence and Findings
Mr Walters submitted that the first default for the quarter 06/02 was not due, as the cheque had been posted timeously.  The cheque stub was dated 27/07 the due date of payment being 31/07.

The return for the quarter 06/02 was incorrect.  Firstly it was a return for an associated company recently purchased by the Appellant.  This had been missed by Mr Walters who had completed it.  When posted to Customs and Excise, they had credited funds on 05/08/02 to the associated company.  The cheque had been presented for payment on 05/08/02 to the Appellant’s bank on which it was drawn.  The Respondents issued an estimated amount of return for the quarter 06/02, no return having been received, and an estimated default surcharge in the absence of either the appropriate return or payment on the due date.

It took some time to unravel the fault which had occurred with the return but eventually the figures in the first return were applied to the Appellant.  In addition the correct associated company return was done.  It was late.  There is not as a matter of practice only, a default notice sent in respect of a first return.  The payment which had accompanied the first return was a cheque drawn on the Appellant’s bank, so was drawn from the correct funds so far as the Appellant was aware, and was much later correctly applied by the Respondents to the Appellants’ account.  The cashment date was always 05/08/02.

Mr Walters gave clear evidence that he had written, dated and arranged for the cheque and return to be posted on 27/07/02.  He explained the postal system of the junior leaving the office at 4.15 and returning before the office closed.  He was absolutely certain he had not waited until 29/07/02 and that the actual date of posting was 27/07/02.

However, when it was put to him in cross examination that 27/07/02 was a Saturday, he confirmed the business was closed on Saturdays.  He believed he may have done all the work on the Friday 26/07/02 as his computer system had to be set to Saturday to do all the Friday totals.  The figures for the return were ready on 25/07/02 as can be seen from the company accounts produced in evidence (A4).  Mr Walters tried to explain in cross examination that the hand written note that the cheque had been raised on 29/07/02 had been written much later than the date on A4, and was probably a wrong deduction.  He contended that whether it was Friday 26/07 or Monday 29/07 either was plenty of time for the Respondents to receive the money and return (albeit the wrong return) to avoid a default surcharge.

Had Mr Walters given clear evidence of posting on 29/07 all the way through, I would have believed him and found that was sufficient time for payment to be received and I would have disregarded the use of the wrong form for the return.  However it appeared to me that although I was sympathetic to the irritation which Mr Walters suffered following the careless use of the wrong return and the trials of the duplicate forms, bank transfers, and all the other consequences of that action whatever day it all happened in July, I could not ignore the Appellant’s unawareness of his own routines in respect of the Appellant’s liability to account for and pay VAT timeously, in respect of the Appellant’s business.

In that respect I find:

1.	The wrong return was used for the VAT due for quarter 06/02 in respect of the Appellant.
2.	Although the cheque accompanying it was drawn on the Appellant’s bank, the Respondents cannot be expected to credit Appellant’s VAT ledger as any legitimate source may be used to pay VAT due, for any VAT trader.
3.	Mr Walters’ evidence pointed clearly to mistakes on his part on dates, dating of cheques and returns.  He demonstrated keen determination to fulfil his obligations and impressed me with the efforts he made to be timeous.  He rightly pointed out how long a letter took to come from the Commissioners to him.  All that would have held him in good stead if 27/07 had not been a Saturday.  It was clear from his evidence that no particular day could be identified as the date of posting, which was critical in this case.

On the appeal against the second imposition of the surcharge for the quarter 09/02 with a due date of payment of 31/10/02, Mr Walters advised that there required to be the signature of two Directors on every cheque.  One Director was on holiday and there were insufficient pre-signed cheques to cover the VAT payment due.  Mr McCue submitted holidays are not a reasonable excuse for failure to pay VAT.

I find as fact holidays are not a reasonable excuse.

From the above findings, the appeals both fail, and are refused.

No expenses are found due to or by either party.

MRS G PRITCHARD, BL., MBA., WS

CHAIRMAN

RELEASE:  12 JUNE 2003 

EDN/02/192