20329

VAT DEFAULT SURCHARGE:  VAT received one day late - Appellant paid VAT by same day bank transfer (CHAPS) – Appellant had reasonable expectation that VAT payment would be received by due date– Appeal allowed.

MANCHESTER TRIBUNAL CENTRE

MAGMA BARS LIMITED 	Appellant

- and -

HER MAJESTY’S REVENUE and CUSTOMS	Respondents

Tribunal: MICHAEL TILDESLEY OBE	 (Chairman)
ROLAND PRESHO FCMA        (Member)

Sitting in public in York on 23 August 2007

Peter Del Grosso, director, for the Appellant 

Kim Tilling of the Solicitor’s Office for HM Revenue & Customs, for the Respondents

© CROWN COPYRIGHT 2007

DECISION
The Appeal
1.	The Appellant was appealing against the imposition of a default surcharge in the sum of £1,310.30 for the period 1 July 2006 to 30 September 2006.
2.	The Appellant operated a bar in Hull City Centre, employing 15-20 members of staff with an annual turnover of £700,000 net.
3.	We heard evidence upon oath from Mr Del Grosso, the director of the Appellant company. The Respondents supplied a bundle of documents which included several letters from the Appellant’s bank, Barclays.
The Facts
4.	At 1529 hours on 7 November 2006 in the Hull City centre branch of Barclays Bank, Mr Del Grosso made a CHAPS payment of £13,103.06 to the Respondents for the VAT due for the quarter ending 30 September 2006.
5.	The form used by Mr Del Grosso to make the payment was headed “Making a Same Day Domestic Payment”.  The form did not state that there was a “cut-off” time by which payments had to be made to ensure same day receipt by the payee.
6.	The bank teller receiving the CHAPS payment from Mr Del Grosso did not advise him that payment would not be made the same day.
7.	Mr Del Grosso paid a fee for the use of the CHAPS facility
8.	Mr Del Grosso was not aware of a “cut-off” time for making same day payments. He assumed that “making a same day domestic payment” meant exactly what it said. 
9.	Barclays Bank had not informed Mr Del Grosso of its terms and conditions for using CHAPS.
10.	Barclays Bank officials supplied the Respondents with contradictory information about the “cut-off” time. The correct “cut off” for the type of transaction undertaken by the Appellant was 1430 hours which conflicted with the time of 1400 hours specified on the bank’s website.
11.	The Respondents received the Appellant’s VAT return for the period ending 30 September on 31 October 2006, and the VAT payment of £13,103.06 on 8 November 2006.
Decision
12.	Regulation 25 of the VAT Regulations 1995 required the Appellant to submit its VAT returns and payments in time to ensure that they were received by the Respondents no later than the last day of the month next following the end of the VAT period in question. The Respondents extend this period for making the VAT payment by seven calendar days in respect of electronic and automated payments. Thus the Appellant’s VAT payment for the disputed quarter should have been received by the Respondents no later than the 7 November 2006, if it wished to avoid a default surcharge.
13.	The Appellant is not liable for a default surcharge if it can establish on the balance of probabilities that the payment was despatched at such time and in such a manner that it was reasonable to expect that it would have been received by the Respondents by the due date.
14.	We find that the Appellant was entitled to assume that the Respondents would receive the VAT on the 7 November 2006. The Appellant made a same day payment for which it paid a fee. The same day payment was processed and accepted by a bank official who gave no warning that the payment may not be completed on that day.  We are satisfied from the facts found that it was reasonable for the Appellant to expect that the VAT payment of £1,310.30 would have been received by the Respondents on the due date of 7 November 2006.  We, therefore, allow the Appeal. 
15.	The Appellant did not wish to pursue its costs. We make no order for costs.

                                

                                 MICHAEL TILDESLEY OBE
CHAIRMAN
RELEASE DATE: 30 August 2007

MAN/07/0196