[2009] UKTFF 60 (TC)

TC00039
Appeal number LON/2008/1654

VAT – Default surcharge – Electronic payment of tax received one day after the due date – whether the payment was made “at such a time and in such a manner that it was reasonable to expect that it would be received by the Commissioners” in time – held that it was – Appeal allowed

FIRST-TIER TRIBUNAL

TAX 

	FANTASTIC ILLUMINATIONS LIMITED	Appellant

	- and -
	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS (Value Added Tax)	Respondents

				TRIBUNAL: 	JOHN WALTERS QC
						MICHAEL JAMES

Sitting in public (as the VAT and Duties Tribunal) in Plymouth on 22 January 2009

Mr. Haygarth, Director, for the Appellant

Mr. Holl, Advocate, for the Respondents

© CROWN COPYRIGHT 2009

DECISION

1.	This was an appeal brought by Fantastic Illuminations Limited (“the Appellant”) against a default surcharge of £559.72 for the VAT period 03/08.  The surcharge was calculated at 15% of the tax due for the period.
2.	The Tribunal heard evidence from Mr. Haygarth, director of the Appellant, who conducted the appeal on behalf of the Appellant.
3.	The due date for receipt by electronic payment of VAT for the period 03/08 was Wednesday 7 May 2008.  The payment made by Mr. Haygarth was received by the Respondents (“HMRC”) on Thursday 8 May 2008.  Monday 5 May 2008 was a Bank Holiday.
4.	Mr. Haygarth had been away working in Holland for 9 or 10 days, returning on Friday 2 May 2008.  He was fully aware of the need for him to make payment of the VAT due for the period 03/08 and tried to do so on that day.  However he was unable to do so because he could not find the internet security device which he needed to operate his bank account.
5.	Mr. Haygarth found the device the next day in a shirt pocket in his laundry basket.  He initiated the payment of VAT on that day (Saturday 3 May 2008).  The payment left his bank account on Tuesday 6 May 2008 and was received by HMRC two days later.
6.	Mr. Haygarth said in evidence (and the Tribunal accepted) that the delay in transmitting bank payments was being reduced every month and that now 90%of payments are received by the payee on the same day as the payment is made out of the payer’s account.
7.	On this basis the Tribunal decided that the VAT was despatched in this case at such a time and in such a manner that it was reasonable to expect that it would be received by HMRC before close of business on Wednesday 7 May 2008 (section 59(7)(a) VAT Act 1994 refers).
8.	Mr. Holl submitted that a taxable person must have a “cast iron guarantee” from a service provider to the effect that the payment will be received by HMRC by the due date if he is to be able to show that he had acted reasonably for these purposes.  The Tribunal rejects this test as being too restrictive.
9.	It is clear that it was reasonable for Mr. Haygarth to expect that payment would be effected within the two working days (between Tuesday 6 May and Wednesday 7 May 2008) which remained after the payment had been initiated and before the payment would be received late.  As it was, the payment took three working days to reach HMRC with the result that it was one day late.
10.	
The Tribunal allowed the appeal.  Mr. Haygarth made no application for costs. Mr. Holl asked the Tribunal to provide a reasoned Decision, which we do herewith.

JOHN WALTERS QC

TRIBUNAL JUDGE
RELEASE DATE: 24 April 2009