19868

DEFAULT SURCHARGE – 7 day extension falling on a non-business day – appeal dismissed

LONDON TRIBUNAL CENTRE

	TECFACS LIMITED	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

			Tribunal:	DR JOHN F AVERY JONES CBE (Chairman)
					MOHAMMAD HOSSAIN FCA FCIB

Sitting in public in London on 1 November 2006

Frank Carstairs, managing director, for the Appellant 

Jonathan Holl, Senior Officer of HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2006

DECISION

1.	This is an appeal against a default surcharge for the period 11/05.
2.	We find the following facts 
(1)	The due date for the return for period 11/05 was 31 December 2005.  The Appellant paid its VAT by bank giro.  Mr Carstairs presented the paying-in slip at his bank on Thursday 5 January 2006.  The money was received by Customs on Monday 9 January 2006, which is after the 7 days extension allowed for electronic payments.  As a result on 13 January 2006 a notice of assessment to surcharge was issued for £481.75, against which the Appellant appealed.
(2)	The grounds of appeal were “(1) This is 100% the same as the appeal which the company won previously LON/010484 [which should be LON/2001/484]—correspondence attached.  (2) [a ground relating to the Bill of Rights that he abandoned at the hearing].”
(3)	The record of appeal LON/2001/484 is a short-form decision that “This Tribunal finds that the Appellant has a reasonable excuse for the failure to pay the tax by the due date in both periods.”
(4)	Mr Carstairs told us (and we accept) that at that hearing Mr Bettoney, for Customs, was asked by the Chairman a question about payments that were due at a weekend.  He requested an adjournment to take advice.  Subsequently he returned and withdrew the surcharge, as a result of which the Tribunal allowed the appeal.
3.	The conditions for paying by bank giro published by Customs (we take this from their website) say:
“When paying by Bank Giro you may receive up to 7 extra calendar days from the standard due date for your return and payment to reach us. 
You must ensure that your payments are in our bank account (cleared funds) by the 7th calendar day after the standard due date, or you will be in default and may be liable to a surcharge for late payment. If the 7th day falls on a weekend, or bank holiday, your payment must be in our bank account by the previous bank working day.”
We understand that at least the first paragraph is printed on the paying-in slips.
4.	Mr Cartstairs contended that the law provides that if the due date for a banking transaction fell on a week-end it was payable on the next business day.  It follows that the payment was not late.
5.	Mr Holl contended that the Appellant had not complied with the conditions for extending the due date until 7 January 2006 and was accordingly liable for the surcharge.  The previous tribunal decision could not constitute a reasonable excuse because it did not create any precedent, and in any case no reasons were recorded in the decision.  If Mr Bettoney did withdraw the surcharge, the decision to allow the appeal followed automatically and was not a decision on the merits of the appeal.
6.	We fully accept Mr Carstairs’ proposition of law.  As Halsbury’s Laws says under Bills of Exchange at para 338: “Where a bill [of exchange] is not payable on demand, it is due and payable in all cases on the last day of the time of payment as fixed by the bill or, if that is a non-business day, on the succeeding business day.”  A footnote gives s 14 of the Bills of Exchange Act 1882 as the authority.  It is also common ground that a Saturday is a non-business day.  We also accept that if a bank is instructed to make a payment, such as a standing order, on a date which is a non-business day, it is liable to pay it on the next business day.
7.	We do not, however, accept that this leads to the result for which Mr Carstairs contends.  The normal payment date would have been 31 December 2005.  However, reg 40 of the VAT Regulations 1995 provides:
“(3) The requirements of paragraphs (1) or (2) [which provides for payment on the due date for the return] above shall not apply where the Commissioners allow or direct otherwise.
(4) A direction under paragraph (3) may in particular allow additional time for a payment mentioned in paragraph (2) that is made by means of electronic communications.
The direction may allow different times for different means of payment.
(5) Later payment so allowed does not of itself constitute a default for the purposes of section 59 of the Act (default surcharge).”
The terms on which Customs vary the normal payment date for payment by bank giro pursuant to reg 40(3) allow “7 extra calendar days from the standard due date for your return and payment to reach us” (our italics).  Those terms also go on to spell out:
You must ensure that your payments are in our bank account (cleared funds) by the 7th calendar day after the standard due date, or you will be in default and may be liable to a surcharge for late payment. If the 7th day falls on a weekend, or bank holiday, your payment must be in our bank account by the previous bank working day.”
These terms leave no doubt that in this case, where the seventh day fell on a Saturday, the requirement was that the payment had to be received by the previous Friday.  It is only a later payment complying with those terms that is excluded from constituting a default for surcharge purposes.  Those are express terms available to those who want to gain the extra seven days.  Whatever banking law might have otherwise provided in the absence of those terms is irrelevant.  The Appellant has not complied with those terms, and so the due date was 31 December 2005.  Accordingly the Appellant was correctly surcharged.
8.	We do not consider that the previous tribunal decision creates a reasonable excuse.  We have accepted Mr Carstairs’s version of the events, that Customs withdrew the surcharge and the tribunal automatically allowed the appeal without deciding it on its merits.  We do not know any of the facts, such as whether the payment was made by bank giro, what led Customs to withdraw the surcharge, or whether they were correct in doing so.  If the Tribunal had decided the appeal on its merits with a record of its reasons we would be inclined to say that the Appellant did have a reasonable excuse even if we disagreed with the reasons.  But that is not the case here. 
9.	Accordingly we dismiss the appeal.

JOHN F AVERY JONES

CHAIRMAN
RELEASE DATE: 8 November 2006 

LON/2006/766