20598

Value Added Tax – Default surcharge  -  Appeal dismissed

LONDON TRIBUNAL CENTRE

	ISIS TELECOMMUNICATIONS  MANAGEMENT (NORTH) LTD	           Appellant

-	and –

	THE COMMISSIONERS FOR HER MAJESTY’S REVENUE & CUSTOMS 	 Respondents

				Tribunal:	HOWARD M NOWLAN (Chairman)
						ROBERTA S JOHNSON

Sitting in public in London on 20 February 2008

Alex Whelan, Financial Controller of the parent company of the Appellant, for the Appellant

Pauline Crinnion of HMRC’s Solicitor’s Office, for the Respondents

© CROWN COPYRIGHT 2008

DECISION

1.    This was a default surcharge case involving some confusion when the Appellant's parent company effectively assumed the Appellant's customer base and started to service and bill those customers itself.  Failure to appreciate how the Appellant had actually paid its VAT liabilities in the past, and what banking arrangements had been put in place, and what banking changes had been neglected led to the Appellant's VAT payment for its three month period ending on 29 March 2007 being paid two days late by BACS transfer on 8 May, rather than 6 May, the last date for electronic payment. 

2.   The Appellant's parent company and the Appellant were both separately registered for VAT purposes, and to conform with their accounting date, their three monthly VAT periods ended on 29th of each relevant month. The parent company paid its VAT by direct debit, so that the parent had to see that the required funds were in its account by the 9th of the month after the ordinary due date for the payment of its VAT.

3.   In February 2007, the parent company initiated a process that led to the Appellant's business being absorbed by the parent, in that the customers were taken over, and subsequently billed and serviced by the parent company. Many of the personnel of the Appellant, including those who had been responsible for its VAT affairs, and the directors who were the authorised signatories on the company's bank account, then left the Appellant company. There was however no transfer of other assets and no transfer as a going concern and even at the date of the hearing the Appellant remained registered, albeit that it had rendered several nil returns. 

4.   It followed from the facts mentioned in 3 above that the Appellant remained liable for its own VAT for the period ending 29 March 2007. The Appellant's VAT return was duly filed on 2 May, and on 3 May, the finance department of the parent realised that unlike the parent, the Appellant was not paying its VAT by direct debit. It was said in evidence that although the Appellant's bank account had been used to make payments by on-line instructions, the passwords for which had been made available to personnel in the parent company, the people who had been authorised to sign cheques had all left the company and no new directors had dealt with the required formalities with the bank in order to be able to sign cheques. Since a CHAPS payment could only be made on 3 May by sending faxed instructions showing signatures of people accepted by the bank as authorised signatories, the Appellant was unable to make a CHAPS payment on 3 May which would have arrived in the hands of HMRC on 4 May if not 3 May. A BACS payment was thus made which was not received until 8 May, two days after the final due date for payment to be received electronically. 

5.   Late payment thus resulted from the general confusion surrounding the acquisition of business, the failure to appreciate that the Appellant's VAT was not to be collected by Direct Debit, and the failure to appreciate that it would not be possible, on 3 May, to initiate a CHAPS payment. 

6.   Our decision is that when the business was progressively being absorbed by the parent from February, and when the VAT records had been transferred down to the Appellant in February or shortly thereafter, and when the parent company itself had reasonably sophisticated finance and accounting personnel, there was no reasonable excuse for the parent having failed to appreciate the various points that led to the failure to pay the VAT on time. 

7.     We accordingly dismiss this appeal. 

HOWARD M NOWLAN
CHAIRMAN

RELEASED: 4 March 2008

LON 2007/1814