18788
DEFAULT SURCHARGE – Electronic payment – 7 day extension allowed by Notice 700 – Payment not received within 7 days because of bank holiday – No reasonable excuse – Appeal dismissed
LONDON TRIBUNAL CENTRE
ACL ENGINEERING LTD Appellant
THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents
Tribunal: THEODORE WALLACE (Chairman)
MRS E M MACLEOD
Sitting in public in London on 11 June 2003
Peter Mitchell, accounts manager, for the Appellant
Jonathan Holl, advocate, for the Respondents
© CROWN COPYRIGHT 2004
DECISION
- This was an appeal against a surcharge of £787.73 for the period to 31 March 2001.
- Mr Mitchell for the Appellant accepted that the payments for that period and the previous period which gave rise to the surcharge liability notice were late.
- The appeal concerned payments by BACS under which additional time is allowed for payment.
- Regulation 25 of the VAT Regulations 1995 requires returns to be made by the last day of the month following the end of the period. Regulation 40(2) requires payment to be made by the due date for the return. Regulation 40(3) however provides that regulation 40(2) does not apply where the Commissioners allow or direct otherwise.
- The Commissioners have allowed otherwise. VAT Notes No.3 2000, published in March 2000 and sent to all registered traders included the following:
3. Electronic payments – get an extra week to pay your VAT
If you choose to pay your VAT return by one of the payment methods listed below, you may receive up to 7 extra calendar days for the return and payment to reach us. Here are some important facts you need to know if you want to benefit from this concession:
- The 7 day extension to due date will be applied automatically every time you pay your VAT return using BACS Direct Credit or Bank Giro Credit Transfer. You may also pay by CHAPS but please note that this may be the most expensive payment method for you. Payment cannot be made via Girobank.
- Payment must be in Customs' bank account on or before the 7th calendar day. If the 7th day falls on a weekend we must receive payment by the Friday. When the 7th day falls on a bank holiday, payment must be in our bank account by the last working day beforehand. If your return or payment is received late, you will be in default and may be surcharged.
- The automatic application of the concession on a return-by-return basis gives you the freedom to change the payment method without having to inform us.
- If you do not pay by one of the above methods, your VAT return and payment must reach us by the due date shown on the return or you may be surcharged.
- Your bank may charge you for using any of these payment methods – check with them for details.
- If you are in the Payment on Account or Annual Accounting Schemes you will not get the 7 day extension.
- Please quote your VAT number with all payments.
You can find further details in VAT leaflet Electronic Payment : Get an extra week to pay your VAT.
A similar statement appears at paragraph 21.3 of The VAT guide (Notice 700) as amended.
- Mr Mitchell said that he joined the Appellant in April 2000. There were 30 employees and a turnover of £2.5 million. It was always hectic towards the end of the month. He was told to have the payments in by the ninth day of the month. He said that the BACS payment was recorded by the bank on the date specified. Two working days were needed. He produced a bank statement showing a debit on 9 February 2000 for VAT. No complaint had come from Customs and no surcharge liability notice was issued.
- The payment for 12/00 was debited on 8 February 2001. This was followed by the surcharge liability notice so he knew that he did not have nine days.
- He prepared an instruction for the next payment on 2 May 2001 and gave instructions to HSBC using the Hexagon BACS payment system by computer with a dedicated line to the bank's computer. Unfortunately he specified 7 May as the payment date not realising that 7 May was a Bank Holiday. If he had realised this, he could have specified 4 May. He forget that it was the Bank Holiday week.
- Mr Holl said that Mr Mitchell had made a mistake which was an "inaccuracy" within VAT Act 1994 s.71(1)(b) and the company could not therefore rely on it as a reasonable excuse. He cited Profile Security Services Ltd v Customs and Excise Commissioners [1996] STC 808.
- Since it was not clear at the hearing what form the published statement allowing further time for electronic payments took, the Tribunal adjourned the appeal for Customs to produce a copy of the relevant notice to the Appellant and the Tribunal within 28 days. The Notice was not served on the Tribunal until a specific written direction was given on 21 July 2004. Neither party asked for a further hearing in the light of the VAT Notes No.3 and accordingly we give our decision.
- The requirement for the payment to reach Customs within 7 days is quite specific as is the statement that it must arrive before a Bank Holiday if the seventh day falls on a Bank Holiday.
- The situation here was thus expressly covered. It was an unfortunate mistake which does not constitute a reasonable excuse.
- The appeal must be dismissed.
- We add finally that we can see no satisfactory reason why the provision for extra days for payment by electronic means is not properly covered by a statutory instrument amending the 1995 Regulations instead of being included in Notice 700 and the Notes as a form of tertiary legislation. Although expressed as a concession it is clearly binding on Customs.
THEODORE WALLACE
CHAIRMAN
RELEASED: 8 October 2004
LON/01/1016
