Anrich North West Ltd v Customs and Excise [2004] UKVAT V18996 (22 March 2005)

18996 
VAT – PENALTIES  -  Default Surcharge  -  additional seven days for payment of tax by electronic means  -  appellant found to have been aware that payment by BACS should be in Customs’ account by the seventh day  -  no reasonable excuse for late receipt of tax due  -  appeal dismissed

MANCHESTER TRIBUNAL CENTRE

 
 	
	ANRICH NORTH WEST LTD	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal: 	Michael Johnson	 (Chairman)

									
Sitting in public in Manchester on 1 March 2005

There was no attendance on behalf of the Appellant

Richard Mansell, of the Solicitor’s office of HM Customs and Excise, for the Respondents

	© CROWN COPYRIGHT 2005

DECISION
1.	This appeal, based on section 59(7) of the Value Added Tax Act 1994, is against a default surcharge of £950.79 imposed by the Commissioners of Customs and Excise (“Customs”) in respect of the Appellant’s VAT accounting period 07/04.  
2.	When the appeal was called on for hearing, it was apparent that no-one had attended on behalf of the Appellant.  However, having been provided by Mr Mansell, appearing for Customs, with a bundle of documents relevant to the appeal (“the tribunal bundle”), I was able to form a clear view of the merits of the appeal.  I therefore decided to proceed with the appeal in the absence of anyone from the Appellant, as I am empowered to do by rule 26(2) of the Value Added Tax Tribunals Rules 1986 (as amended).
3.	The tribunal bundle shows that the Appellant’s VAT return in respect of period 07/04 was not late.  The due date for receipt of the return was 31 August 2004, and the form was stamped “31 August 2004” by Customs to indicate that it was indeed received on that date.  
4.	Although that form showed VAT of £6,338.60 to be due to Customs, the form was not ticked to show that it was accompanied by a payment.  The tribunal bundle explains why this was.  It discloses that, on 21 September 2004, Mr Richard Weston of the Appellant wrote a letter to Customs to say that payment had been made by the BACS electronic payment system, by which the Appellant’s previous four payments had also been made.  Mr Weston wrote:
“I have received a penalty notice and do not know why.  The [VAT] return was sent in two weeks before the due date as will be noted by the postmark.  The payment was set [sent?] by BACS to be paid on 5 September [2004] to be in your account on 7 September as per requirements for bank payments”.
5.	This indicates that Mr Weston was aware of the mechanics of BACS payments, namely that they are not instantaneous but take a number of days to reach the payee’s account.  It also shows that Mr Weston knew that Customs allowed an additional seven days beyond the due date – in this case, until 7 September 2004 instead of 31 August 2004 – for electronic payments such as these to be received.  
6.	In their reply to that letter, dated 21 October 2004, Customs wrote that the payment had arrived one day late, hence the surcharge had been imposed.
7.	Mr Weston replied to that letter on 3 November 2004.  In that letter, he maintained that Customs allow seven working days beyond the due date for electronic payments to reach them.  Therefore, Mr Weston contended, the payment was in time if it reached Customs by 9 September 2004, which it had.
8.	However this contradicts Mr Weston’s earlier letter, which shows an awareness that the additional seven days would expire on 7 September.  How Mr Weston can have got the idea that an additional seven working days might be allowed is not clear, because that was not the case.  In light of his earlier letter, I find that, on the balance of probabilities, Mr Weston knew or ought to have known that seven additional days means just that, ie including Saturday and Sunday.  
9.	I am fortified in this conclusion by the fact that 5 September 2004 was a Sunday.  If, as Mr Weston stated in his letter dated 21 September 2004, the payment was made on that day, it would have been made on a non-working day, yet it was assumed that the money would reach Customs on the seventh calendar day, ie 7 September.   That did not happen, because 5 September happened to be too late, in the event, to initiate the BACS transfer process and to get the money to Customs by 7 September.  To be sure of the money reaching Customs’ account by the latter date, it appears that the Appellant would need to have initiated the BACS payment by Friday, 3 September at the latest.  That was not done.
10.	Accordingly the excuse put forward for late payment does not appear to me to be a reasonable one.  The appeal is therefore dismissed.

MICHAEL JOHNSON
CHAIRMAN
RELEASE DATE: 22 March 2005

MAN/2004/0758