20213
VAT — PENALTIES — default surcharge — payment of tax by electronic transfer — payment made too late to ensure receipt by Customs by due date — no reasonable excuse apparent for late payment — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

 
 	
					ICONEYEWEAR DISTRIBUTION LTD	Appellant

- and -

THE COMMISSIONERS FOR
				HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

Tribunal:   Michael Johnson (Chairman)
					Roland Presho FCMA

Sitting in public in North Shields, Tyne & Wear on 5 June 2007

The Appellant was not represented

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

© CROWN COPYRIGHT 2007

DECISION

1.	This is an appeal against the imposition of a default surcharge in respect of the Appellant’s trading period 09/06.  H M Revenue and Customs (“Customs”) received the Appellant’s quarterly VAT return by the due date, 31 October 2006, but only £25,000 of the total tax due was paid in time; the balance of £6,924.79 was late.  This has attracted a default surcharge calculated at 15 per cent of that amount, namely £1,038.71.

2.	The Appellant has not sent a representative to the hearing.  We have however had the benefit of a bundle of relevant documents, passed to us by Bernard Haley, representing Customs.  Being of the opinion that these documents sufficiently enabled us to understand the basis of the appeal, we decided to proceed with the hearing in the absence of the Appellant, as we are empowered to do pursuant to rule 26(2) of the Value Added Tax Tribunals Rules 1986 (as amended).

3.	The Appellant paid its tax due in respect of period 09/06 by electronic transfer.  With that method of payment, Customs are prepared to allow an additional seven days for receipt of the tax.  In other words, the tax due by 31 October 2006 would be accepted as having been paid in time if it reached Customs by 7 November 2006.

4.	The documents available to us show that £25,000 was paid electronically by the Appellant to Customs by an instruction given on 3 November 2006.  That amount is accepted by Customs to have reached their account by 7 November 2006 and was therefore in time.  The balance due of £6,924.79 was paid electronically by the Appellant to Customs by a further instruction given on 6 November 2006.  Customs say that that amount only reached their account on 8 November 2006, ie one day late.

5.	The Appellant has brought its appeal on the basis that it has a reasonable excuse for the balance of tax not having been paid in time.  That would, however, only apply if the instruction given on 6 November 2006 was such that it could reasonably expect that the amount that was instructed to be paid on that date would reach Customs by the following day.   

6.	Not all electronic transfers are transfers that take effect on the same day or on the following day.  It is within our knowledge that some electronic transfers take as much as three days to be completed.

7.	As Mr Haley submitted, it seems to us that the transfer instructed in this case on 6 November 2006 was most likely one of those that would take two to three days to be effected.  That would explain non-receipt of the money by Customs until 8 November 2006.  There is nothing from the papers before us to indicate that receipt of the payment, as distinct from the making of the payment, was to take place immediately.  If, as we surmise, the electronic transfer would take effect in two to three days, it was not reasonably to be expected that the money would definitely be in the hands of Customs by 7 November 2006 as required.

8.	We therefore indicated at the conclusion of the hearing that we had decided to dismiss the appeal.  This written decision provides the record of our reasons for having done so.

MICHAEL JOHNSON
CHAIRMAN
Release Date: 19 June 2007
MAN/2007/0229