19408
DEFAULT SURCHARGE – Reasonable excuse – Late payment – BACS payment arrangements activated one day late – Illness of partner – Whether reasonable excuse – No – Appeal dismissed 

LONDON TRIBUNAL CENTRE

	M E & N E WELLS	           Appellants

-	and –

	THE COMMISSIONERS FOR HER MAJESTY’S REVENUE & CUSTOMS 	 Respondents

				Tribunal:	STEPHEN OLIVER QC (Chairman)
						SHEILA WONG CHONG FRICS

Sitting in public in London on 14 December 2005 

No representation for the Appellants 

Phillip Webb for the Respondents

© CROWN COPYRIGHT 2005

DECISION

1.	Nicholas Wells and Maurice Wells who are trading in partnership appeal against a default surcharge for the 10/04 period.  The amount of the surcharge (15%) is £1,514.95.  The last date for receipt of payment by the BACS system was 7 December 2004.  In the events the return was made on time but payment did not reach the Commissioners until 8 December 2004.  

2.	On 13 December at 9.45pm, Mr Nicholas Wells e-mailed the Tribunal Centre to inform it that he would not be present at the hearing.  This, he said, was due to personal circumstances.  

3.	The appeal has already been stood over following an adjournment on 17 August 2005.  We could see no apparent reason for standing it over again.  We therefore decided to go ahead and hear it.  The partners, Messrs Maurice and Nicholas Wells, should take into account that the Tribunal is permitted to hear cases in the absence of one of the parties.  But, according to rule 26 of the Tribunals Rules, the unsuccessful party is entitled to apply, within fourteen days of the release of the decision, to have the decision set aside by the Tribunal.  If, however, Messrs Maurice and Nicholas Wells decide to take this course, they must attend the application to have this decision set aside and make their submissions in person.

4.	We now turn to the grounds for appeal set out in the Notice of Appeal.  Referring to the surcharge of £1,514.95, Mr Nicholas Wells has written as follows:

“The above sum was demanded in a Notice of Assessment of Surcharge notifying a default in payment.  The full payment of the liability for this period (10/04) in the sum of £10,099.69 was made by us in a BACS payment issued on the 6 December 2005.  With two days bank clearing, this means the payment would arrive with HM Customs and Excise on 8 December 2005 – one day late.

The payment was due to be made on Friday 4 December but I was away from the office with illness that day.

Whilst accepting that we took an additional eight days as opposed to the allowed seven days on the electronic payments, I believe the refusal to remove the surcharge and the surcharge period extension are an excessive penalty to place on a business that makes every effort to comply with legislation in a difficult trading environment. We are a small family business whose successful trading rests with two family members, of which I undertake the main share of the administration, to penalize me for one day’s illness in this way is not correct.”

5.	It is a fact that the payment was received by the Customs one day late.  Apart from Mr Nicholas Wells’ statement that he was ill on 4 December, no further information has been made available about why he was not able to make some alternative arrangement.

6.	Mr Phillip Webb for the Customs drew our attention to the fact that the partners had been late in making a BACs payment in the year 2000.  A letter from Mr Nicholas Wells of 25 October 2000 explains that illness was the cause of the late payment.  A later letter of 15 November 2000 explained that he had now taken steps to ensure that late payment through the BACs system could not happen again.  Mr Webb observes that a similar situation has arisen again.  Consequently, it appears, the arrangements proposed in the year 2000, if made, had not been carried forward.  The case for the Customs is that the arrangements then put in place should have coped with the present problem, i.e. Mr Nicholas Wells’ illness on 4 December 2005.  We note that Mr Maurice Wells has been suffering from ill-health.  It may be that he was not available to activate the BACS arrangements in time.  But no reliance has been placed on his illness.  No steps had been taken by Mr Nicholas Wells to explain to the Customs the extent of the problem at the start of December 2004.  In particular no explanation has been given of the extent of his illness on 4 December or the way in which that prevented payment from being made on 4 December.  Finally, it appears from the notice of appeal, Mr Nicholas Wells was aware of the obligation to make the VAT payment in time.

7.	All in all, our conclusion is that a substitute arrangement to deal with the problem caused by Mr Nicholas Wells’ illness on 4 December should have been in place.  In our view the reasonable competent businessman would have had such an arrangement to ensure that the VAT payment was made in time.

8.	The further point raised in the Notice of Appeal is that the default surcharge of £1,514.95 is excessive having regard to the fact that payment was made only one day late.  All we can say on this point is that the law leaves no margin for error.  Even if a payment is a day late, the Customs are required to raise a penalty.  The decision of the tribunal in Greengate Furniture Ltd [2003] VATDR 178 (VAT Dec 18280) explains that the legislation has been made deliberately severe and without any room for mitigation in order to secure compliance so far as payment of VAT is concerned.  The decision also  makes the point that, in circumstances such as those of the Wells, the penalty is not disproportionate.  

9.	For all those reasons we are driven to dismiss the appeal.  We remind Mr Nicholas Wells of his right to apply to have the decision set aside.

STEPHEN OLIVER QC
CHAIRMAN

RELEASED: 19 December 2005

LON/05/474
££M E & N E Wells v Her Majesty’s Revenue and Customs [2005] UKVAT V19408 (19 December 2005)