19812

VAT – PENALTIES  -  default surcharge  -  payment of VAT by cheque on assumption that loan monies would have been credited to account  -  assumption incorrect  -  cheque in consequence dishonoured  -  duty upon taxpayers to ensure that cheque will be met  -  no reasonable excuse for late payment shown  -  appeal dismissed  

MANCHESTER TRIBUNAL CENTRE		

			HYMAS SITE SERVICES LTD  			Appellant								
                                                     and 

                                      THE COMMISSIONERS FOR
                        HER MAJESTY’S REVENUE AND CUSTOMS             Respondents                           

Tribunal:  Michael Johnson (Chairman)
                 Roland Presho (Member) 

 
Sitting in public in North Shields, Tyne and Wear on 21 September 2006

The Appellant was not represented

Bernard Haley, of the Solicitor’s office of H M Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2006 

DECISION

1.	The Appellant has appealed against a default surcharge for £2,250 imposed in respect of its VAT accounting period ending on 31 March 2006.  The surcharge was imposed because the Appellant failed to pay all the VAT due from it in respect of that period by the due date.

2.	The contention in this appeal is that the Appellant has a reasonable excuse for its failure, within the meaning of section 59(7)(b) of the Value Added Tax Act 1994.  Accordingly, it is said, the Appellant should not be liable for the surcharge.

3.	The reasons for the contention are set out in a letter dated 18 May 2006 written by the Appellant to the Default Surcharge Appeals Team of H M Revenue and Customs (“HMRC”).

4.	Although no-one attended on behalf of the Appellant to present the appeal, we decided, having read the letter referred to, that we had a sufficient grasp of the circumstances of the appeal to proceed with the hearing in the absence of the Appellant.  We are empowered to do that by rule 26 of the Value Added Tax Tribunals Rules 1986 (as amended).

5.	It is clear to us that the Appellant intended to pay all its tax in time.  As the Appellant was short of funds, its director Mr Anderson applied for a personal Barclaycard loan of £15,000 to make up the difference between the amount that the Appellant could afford to pay towards the tax due (£1,532.89) and the amount of the tax due (£16,532.89).

6.	Having made the loan application “on-line”, Mr Anderson drew a cheque for £15,000, sent it to HMRC, and went on holiday.  On his return, he found that the cheque had been dishonoured.  He then contacted Barclays, finalized the loan, and remitted the £15,000 to HMRC by BACS.  However by that time, the due date for payment of the VAT had passed.  In consequence only £1,532.89 of the tax due was received by HMRC by the due date.  The surcharge in dispute was imposed at the rate of 15 per cent in respect of the balance.

7.	The Appellant’s case is that Mr Anderson was led by Barclays to believe that the £15,000 would be in his account within 4 working days of Monday, 24 April 2006.   The due date was Sunday, 30 April 2006, so that would have allowed time for the tax to have been paid.  However, on Saturday, 29 April, before he went on holiday, Mr Anderson received a loan application form from Barclays through the post, which he signed and returned immediately.  He then went on holiday.  

8.	We take the view that, whatever he may previously have thought, the receipt of that form should have been an indication to Mr Anderson that the signature and return of that form was a pre-condition of the loan being made available.  Barclays would not have sent him the form unless they required its completion before lending him the money.

9.	We do not therefore accept Mr Anderson’s argument that he was justified in believing that the money would be in his account that week, so that the cheque that he had drawn ought to have been met.  He may have thought that until 29 April; in our view, he could no longer properly believe that having received the form.

10.	Monday, 1 May was a Bank Holiday.  It follows that the earliest moment at which the formalities for the loan could have been completed by Barclays was 2 May, ie after the due date.

11.	We sympathize with Mr Anderson, because we accept that he must initially have believed that the money would be available to him the week before he went on holiday.  However, that was an assumption that he made, which, however initially justified, turned out to be wrong.  By the time he went on holiday, he must as we see it have realized that such assumption was wrong.

12.	We have not therefore felt that we can allow this appeal.  There is a heavy duty on taxpayers to make sure that, when they pay their tax due by cheque, the cheque will be met.  The only way to be sure of that is to check that funds are in the relevant account at the time that the cheque is drawn.

13.	We accordingly indicated at the conclusion of the hearing that this appeal would be dismissed.  This decision records our reasons for the dismissal.

MICHAEL JOHNSON
CHAIRMAN
Release Date:  6 October 2006

MAN/2006/0378