19169
	VAT — PENALTIES — default surcharge — extra seven days allowed for payment of VAT by electronic means — intended same-day payment by CHAPS — written instruction given to bank for payment on seventh day by that means — unanticipated failure of bank to process instruction — held reasonable for taxpayer to have expected payment to be made in time — appeal allowed

MANCHESTER TRIBUNAL CENTRE

 
 	
	HHT LIMITED	Appellant

	- and -

	HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

				Tribunal:	Michael Johnson (Chairman)

Sitting in public in Birmingham on 30 June 2005

There was no appearance by or on behalf of the Appellant 

Chris Owen of the Acting Solicitor for HM Revenue and Customs for the Respondents 

	© CROWN COPYRIGHT 2005

DECISION

1.	This is an appeal under section 59(7) of the Value Added Tax Act 1994 against a default surcharge of £14,948 imposed in respect of the Appellant’s VAT accounting period 30/04.

2.	No representative of the Appellant attended the hearing of the appeal.  However the pertinent facts appear from the bundle of correspondence and other documents presented to the tribunal by Mr Owen, representing Her Majesty’s Revenue and Customs (“Customs”),  so I decided to proceed with the hearing pursuant to rule 26(2) of the Value Added Tax Tribunals Rules 1986 (as amended).

3.	It appears that the Appellant sent to Customs its value added tax return for the period 30/04 before Christmas 2004 and that this was received by Customs on Christmas Eve.  The due date was 31 December 2004, so the Appellant was not in default in this respect.

4.	The Appellant sought to make payment of the VAT due for that quarter by CHAPS.  That electronic method of payment is understood by Customs and the tribunal to be a same-day method of payment, ie the payment should reach the account of Customs on the very day that instructions are given to the taxpayer’s bank to effect payment.

5.	In the case of electronic payments, Customs allow an extra seven calendar days beyond the normal due date for payment to reach Customs.  In reliance upon this concession, the Appellant gave written instructions to its bank, Lloyds TSB, to make a CHAPS payment to Customs on 7 January 2005, confident that the tax would reach Customs on that seventh day.

6.	For reasons that are unclear, but which I am satisfied had to do with the bank and not the Appellant, payment was not made on that day as instructed.  Indeed the CHAPS instruction was not processed at all.  When this was realized by the Appellant, it sent a second CHAPS instruction, which was duly processed and payment was made.

7.	The result of this was that the tax did not reach Customs until after the concessionary period had ended, and the default surcharge under appeal was imposed for that reason.

8.	The tribunal observes, and Mr Owen accepts, that had the CHAPS instruction given on 7 January 2005 been fulfilled as anticipated by the Appellant, Customs would have received the tax in time, and the surcharge would have been avoided.

9.	As the Appellant was sincere in attempting to effect payment so that the money should reach Customs within the additional seven days allowed, and reasonably believed that the money would get to Customs in time, there is in my judgment a reasonable excuse in this case.  I therefore allow this appeal.

MICHAEL JOHNSON
CHAIRMAN
Release Date: 13 July 2005

MAN/05/0184