19555
	DEFAULT SURCHARGE — rule 26(2) — payment by Appellant dependent upon receipt of funds from customer — date of receipt of those funds — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

 
 	
	MYCOTT ENGINEERING LIMITED	Appellant

	- and -

THE COMMISSIONERS FOR
	HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

				Tribunal:	Lady Mitting (Chairman)

Sitting in public in Birmingham on 4 April 2006

The Appellant did not appear and was not represented

Richard Mansell of the Solicitor’s office for HM Revenue and Customs for the Respondents 

	© CROWN COPYRIGHT 2006

DECISION

1.	The Appellant was appealing against a default surcharge for the period 04/05.  The surcharge had been levied at 15 per cent, was notified on 17 June 2005 and was in the sum of £3,573.30.  When the case was called on for hearing, there was no representation on behalf of the Appellant.  I satisfied myself from the tribunal’s file that notice of the hearing had been properly given.  I also noted from the Respondents’ bundle of documents that the Respondents had written to the Appellant on 10 February 2006 and had referred to the hearing date on 4 April 2006.  I was therefore satisfied that the Appellant was aware of the hearing and in the absence of any explanation as to its failure to be represented, I determined to proceed with the appeal, hearing it under rule 26(2) of the Value Added Tax Tribunals Rules 1986.  I would refer the Appellant to its rights under rule 26(3) to apply, if appropriate, to have this decision set aside.
2.	The Notice of Appeal referred, as grounds for the appeal, to a letter written by the Appellant to the Respondents dated 23 June 2005 which reads, in relevant parts, as follows:
“In anticipation of making the VAT payment, we had agreed with a major customer that they would transfer payment of their account in time for us to make payment of the April quarter VAT.  The Customer has always been reliable and we had no reason to believe it would be any different on this occasion.  However, the Customer had an internal problem, which was not notified to us until after we should have received payment.  We telephoned you on 10th June to advise that payment to you had been actioned immediately direct into your account but because of the banking system it would take 48 hours to reach you.
When we posted the VAT return it was our every intention to pay the due amount, but because of the above our payment was delayed by 5 days”.
3.	On receipt of the appeal, the Respondents wrote to the Appellant on 13 January 2006 asking for additional information.  In response, the Appellant sent in a copy bank statement and an Age Analysis for Venture Finance Plc.  These were not accompanied by any commentary or further representations and I therefore interpret them as best I can.
4.	The return was dated 27 May 2005 and was received by the Respondents on 1 June 2005.  It showed tax due of £23,822.02.   Payment was received by the Respondents on Tuesday, 14 June 2005.  
5.	It is clear from the bank statement that the customer from whom payment was awaited was Venture Finance.  Before receiving that payment, the Appellant had a credit balance of some £3,000 but then received a payment of £25,393.49 from Venture Finance, giving a credit balance in the account of £27,023.16.  
6.	I have no information as to when the Appellant expected to receive the payment from Venture Finance but the statement shows that it was credited to the Appellant’s account on 3 June 2005 (a Friday).  If, therefore, the Appellant had acted promptly, payment could have been received by the Respondents in time.  A CHAPS payment could have been made at any time on Friday 3 June, Monday 6 June, or even Tuesday 7 June.  The statement shows there was no other major call on the funds and I see no reason, from the statement, why payment should not have been made before 10 June, the date on which the payment left the Appellant’s account. 
7.	For this reason, I cannot accept the Appellant’s contention that it had a reasonable excuse for the late payment.  The bank statement supplied does not bear out the reason for delay given by the Appellant in its letter of 23 June 2006.  
8.	In its letter, the Appellant also added that it was a small company in a difficult sector and was expecting the Rover closure to have an impact in the forthcoming months as some of its work was carried out for the motor industry.  It said that to pay a surcharge of this magnitude could lead to the ultimate closure of the company.  This unfortunately is not a matter which the tribunal is entitled to take into account in establishing whether or not there was a reasonable excuse for non payment. 
9.	In summary, therefore, the appeal is dismissed.  The Respondents made no application for costs and no order is made.

LADY MITTING
CHAIRMAN
Release Date: 21 April 2006
MAN/05/0743