19643

DEFAULT SURCHARGE – Reasonable excuse – Late payment – Cheque for tax dishonoured – Appellant failed to get cheque signed by two signatories – Appeal dismissed

LONDON TRIBUNAL CENTRE

	LTE NETWORK COMMUNICATIONS LTD	           Appellant

-	and –

	THE COMMISSIONERS FOR HER MAJESTY’S REVENUE & CUSTOMS 	 Respondents

				Tribunal:	STEPHEN OLIVER QC (Chairman)
						MISS D M WILSON					

Sitting in public in London on 28 June 2006

No appearance for Appellant 

Paul Chambers for the Respondents

© CROWN COPYRIGHT 2006

DECISION

1.	The Appellant appeals against a default surcharge for the three month period 11/05.  The amount of the surcharge is £5,692.66 and is imposed at the 5% rate.

2.	The tax return was received on 4 January 2006. A “cheque” was received by the Customs on the same date but was presented for payment and dishonoured on 10 January 2006. It was dishonoured because, being drawn for an amount in excess of £100,000, there should have been two signatories.

3.	The Tribunal notified the Appellant of the hearing. On 26 June 2006 the Appellant wrote advising the Tribunal that he would not be represented at the hearing.  The Tribunal decided to go ahead with the hearing in the absence of the Appellant.  Rule 26 of the Tribunals Rules permits this, but provides that an absent party may apply in writing within 14 days to have the decision set aside on such grounds as are just in all the circumstances. 

4.	The grounds of appeal, lodged on 27 March 2006, are as follows:

“The company was having cashflow problems due to a large debtor being slow in releasing funds to us. We issued the cheque on 29 December with only one signatory signing, as the other was on holiday and asked the bank to honour the cheque. Because our account manager was also on holiday the bank did not comply.  The re-issued cheque was cleared without delay.”

5.	According to a letter from the Appellant dated 9 January 2006, the cheque was drawn on 29 December 2005 in the sum of £113,853.31.  This was returned by the Appellant’s bank for representation, due to a signatory error. A further letter of 16 January 2006 explains that the cheque was posted to the Customs on 29 December 2005.  

6.	The VAT return showing £113,853.31 was signed by Audrey Horton and dated 30 December 2005. It is recorded as received by the Customs on 4 January 2006.  

7.	The 16 January 2006 letter from the Appellant to the Customs states that because of the Christmas period one of the required signatories of a cheque in excess of £100,000 was on the Christmas break. The Appellant had written to the bank authorizing the bank to accept the cheque as presented with one signature. The manager concerned was on holiday and did not receive the Appellant’s instructions until after the cheque had been referred for re-presentation. Our reaction to this explanation is that the fault cannot be said to lie with the bank. The fact that people are absent for Christmas holidays must be a foreseeable eventuality and the Appellant should have anticipated this. In any event there should have been two signatories on the cheque.

8.	On 16 June 2006 the Customs wrote to the Appellant asking to see a copy of the letter that had been sent to the bank authorizing it to accept the one signature cheque. It appears from the Appellant’s response of 21 June that there had been no letter to the bank. Mr Giambrone, the financial director of the Appellant, had, the letter said, contacted the bank by telephone. The 21 June letter went on to explain that it had been Mr Giambrone who had written out the cheque and dated it with the date on which he had written it, i.e. 29 December. Why, we ask ourselves, did not Audrey Horton signed the cheque at the same time as she signed the VAT return? There would then have been two signatories, i.e. Mr Giambrone and her available to sign and countersign the cheque.

9.	We recognize that there were sufficient funds in the bank at the relevant time to meet the VAT cheque. We also recognize that a possible course would have been for two cheques to have been prepared, each of less than the amount of £100,000.  However, taking all the relevant factors into account, we do not think that the Appellant has shown a reasonable excuse for its failure to pay the tax shown due in the 11/05 return on time. The Appellant should have had arrangements in place to ensure that payment was duly made.

10.	For those reasons we dismiss the appeal.

STEPHEN OLIVER QC
CHAIRMAN

RELEASED: 3 July 2006

LON/06/374
££LTE Network Communications Ltd v  Revenue & Customs [2006] UKVAT V19643 (03 July 2006)