19551
	DEFAULT SURCHARGE - receipt of Surcharge Liability Notices -  timing of electronic payments - appeal dismissed

MANCHESTER TRIBUNAL CENTRE

 
 	
	BETTERWEIGH LEICESTER	Appellants

	- and -

THE COMMISSIONERS FOR
	HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

				Tribunal:	Lady Mitting (Chairman)

						

Sitting in public in Birmingham on 16 January 2006 and 8 March 2006

Mr Michael Hill for the Appellants 

Richard Mansell, counsel, instructed by the Acting Solicitor for HM Revenue and Customs for the Respondents 

	© CROWN COPYRIGHT 2006

DECISION

1.	The Appellants, a partnership, were appealing against a default surcharge in the sum of £717.06 issued on 17 December 2004 and being in respect of the quarter ended 31 October 2004. The Appellants were represented by one of the partners, Mr Michael Hill, who gave oral evidence.
2.	In circumstances which I describe below, the hearing was adjourned part way through to allow additional evidence to be obtained.  There had been three previous defaults before the one in question. The first default was for the period ended 31 January 2002 for which the usual Surcharge Liability Notice was issued on 15 March 2002.  There were then two further defaults for the periods ended 31 January 2003 and 31 January 2004.  For neither of these periods was there a monetary surcharge in view of the small amounts involved.  However Surcharge Liability Notice Extensions were issued on 14 March 2003 and 12 March 2004.
3.	At the first hearing, Mr Hill denied having received either the original Notice or either of the Extensions.  It was his practice, he told us, when the post came in to open it, look at it and then process it as necessary.  All correspondence relating to VAT, he would give to his wife.  The partnership kept a VAT file on which correspondence and documentation relating to VAT matters were kept.  Mr Hill had not brought the file to court with him and I asked if he wished to have an adjournment to enable him to search the file to see whether or not the Notices had been received.  Mr Hill, very fairly, declined saying that although he did not think he had received the Notices, he could not guarantee that the fact that they were not on the file meant that they had not been received. The mere fact therefore that the Notices were not on the VAT file would not be conclusive evidence that they had not been received. The bundle of documents before me contained copies of all the Notices. They were all properly addressed and I advised Mr Hill that I could not accept on the basis of the very limited evidence I heard that the notices had not been received.  The case would therefore proceed on the basis that the notices had been properly served and now whether or not there was a reasonable excuse for the default in 10/04.
4.	The partnership paid its VAT electronically and had done for a number of years.  Mr Hill had believed that he had a seven-day extension of time to make any such payments and there had never been any problem with the previous payments.   The due date for payment on this return was 30 November 2004 and with the seven-day extension for electronic payments, payment should have been received by the commissioners by 7 December 2004.  The return was submitted on time, being received on 17 November 2004.  Mr Hill had taken the cheque for payment to his bank in the afternoon of Friday 3 December 2004 and this was evidenced by a copy of the receipted counterfoil.  The payment was debited to the Appellants’ account on 6 December 2004 but was not credited to the Respondents’ account until 8 December 2004, i.e. one day late.  Mr Hill accepted that he had probably taken the payment into the bank too late on the Friday for it to be processed on that day and the chances were that it was not going to be processed until the following Monday (6 December) which, on the evidence, it clearly was.
5.	On 16 January 2006, it was Mr Hill’s case that he had always been led to believe that provided he paid out the money within seven days then that would be sufficient to constitute payment.  It had not been his understanding that payment had to be in the hands of the Commissioners within that period.   Mr Mansell referred Mr Hill to the VAT Notes which Mr Mansell said had been sent to all traders in approximately 2002 and which had outlined in clear terms the timetable for electronic payments.  Mr Hill said that he could not remember ever having seen this leaflet although he conceded that it might have been received and he had not read it.  I asked Mr Mansell to show me a copy of it so that I could be certain of the instructions given and how clear it would be to a trader that payment had to be received within seven days.  Unfortunately Mr Mansell did not have a copy and an attempt to get one faxed to the tribunal proved unsuccessful.  The hearing was therefore adjourned at this stage to allow Mr Mansell to obtain a copy of the Notes and to send a highlighted copy to Mr Hill.  This was done and we reconvened on 8 March 2006. 
6.	On the resumed hearing, Mr Hill made a series of submissions. 
7.	First, he maintained that the Commissioners had produced no evidence that the payment was not received until 8 December.  Secondly, it was established in the Law of Contract that “acceptance is complete on posting” and that the delivery of his cheque to the bank, and their acceptance of it, on Friday 3 December represented “posting”.  Thirdly, by giving the cheque to his bank on 3 December, he had dispatched payment at such a time and in such a manor as it was reasonable to expect it would be received by the Commissioners within the appropriate time limit.  Fourth, there was no legal basis upon which the Commissioners were entitled to stipulate that the payment had to be within their hands by the seventh day. 
8.	In response, Mr Mansell produced the Appellants’ ledger account which clearly showed receipt on 8 December.  This, to me, is sufficient evidence to find that the payment was not received by the Respondents until 8 December.  Payment of VAT is not governed by the Law of Contract alone but by express and specific statutory provision.  Paragraph 25(1)(c) VAT Regulations 1995 gives the Commissioners the power to vary payment dates. This the Commissioners did when they made provision for electronic payment. They were perfectly entitled to set down a timetable for such payments, which again they did and they published a timetable in the VAT Notes circulated to every trader.  I was told by Mr Mansell that the VAT Notes would have accompanied one of the Appellants’ Returns.  There was no evidence that the Appellants failed to receive any returns and I therefore find that the Appellants were sent a copy of the relevant VAT Notes, received it, and must therefore be deemed to have been aware of its contents.  
9.	The seven-day extension allowed for electronic payment is a concession offered by the Commissioners.  The terms of the concession are made completely clear in the notes and to take advantage of the concession it is incumbent upon a trader to abide by those terms and conditions.  In this case, unfortunately, by making the payment too late on the afternoon of Friday 3 December, the Appellants failed to ensure that the payment would be processed in time to reach the Commissioners by 7 December.  In other words the Appellants did not take all reasonable steps to ensure that payment was received within the specified time.  There was no evidence that the bank had led Mr Hill to believe that the payment could be processed that day.  Mr Hill knew that the weekend would intervene and that unless the payment was therefore made early enough on the Friday it would have little chance of being with the Commissioners by the Tuesday.  
10.	I therefore find that the Appellants do not have a reasonable excuse for the default and the appeal is dismissed.   The Respondents made no application for costs and I make no direction. 

LADY MITTING
CHAIRMAN
Release Date: 12 April 2006
MAN/05/705