[2009] UKFTT 130 (TC)

TC00098
Appeal numbers:  EDN/08/183 & EDN/08/184

Default Surcharge:  Delay in payment.  Letter from Bank of Scotland about new “prompt payment” system being applied to BACS payment.  Believed it applied.  Reasonable excuse.  Appeals Allowed.

FIRST-TIER TRIBUNAL

TAX 

	NIGEL LOWE CONSULTING LTD
	NIGEL LOWE HOLDINGS LTD	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS (VAT)	Respondents

				TRIBUNAL JUDGE: 	Mrs G Pritchard, BL., MBA., WS

Sitting in public in Edinburgh on Thursday 4 June 2009

Mr David Grant – for the Appellant

Mr Russell Harrison – instructed by the General Counsel and Solicitor to HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2009

DECISION

1.	These are appeals against default surcharges applied to both companies in respect of quarter 04/08 having a due date of payment of 07/06/08 which fell on a Saturday.  This meant the due date of payment was Friday 06/06/08.  Payment was by arrangement by BACS transfer.
2.	Mr David Grant appeared for the Appellants.  Mr Russell Harrison appeared for HMRC.
3.	Mr Grant explained the company Nigel Lowe Consulting Ltd (the consulting company) is a company providing consultancy services in the construction industry when problems and disputes arise between the developer and builder.  Nigel Lowe Holding Ltd (the holding company) employs the Consultants.
4.	In May 2008 the companies, which had had trading and payment problems in the past were in funds to pay the VAT due on 06/06/08.  The companies use internet banking with Bank of Scotland.  They were on the last quarter of a Surcharge Liability Extension Notice and anticipated clearing their problems with HMRC which had been a testing lesson for them over the previous two years.
5.	Bank of Scotland had previously written to Mr Grant advising that BACS payments from internet instructions would be in a new scheme where same day payment or one day past instruction payment would be standard.  This was referred to in the letter as the new “prompt payment” system.  Mr Grant assumed this applied from the time he received the letter and therefore instructed the VAT payments for both companies on 05/06/08 believing payment would reach HMRC on 06/06/08.
6.	When he discovered it had not he made enquiry of his bank branch in Forfar as to why it had not happened.  He was told that the new scheme was not yet in place.  He was upset as the consequences were severe.  He was most apologetic at the Tribunal about what he had done.
7.	Even since then, once the prompt payment scheme was introduced, he was surprised to find that it could not be effected by internet instruction to pay Government Departments.  In order to pay VAT he must make a telephone call to effect a BACS transfer.  He submitted what he had done was reasonable and that he had a reasonable excuse for the particular late payments in June 2008.
8.	Mr Harrison submitted that despite Mr Grant’s protestations he ought to have allowed more time for his transfer to be completed.  He had all the necessary paperwork and was aware of the consequences.

Decision
9.	In the current climate of increasing burdens and difficulties faced by traders whose attention must be principally focussed on seeking and retaining business which these particular companies are attempting to do, I find it reasonable to have believed that the Bank of Scotland intended their BACS service to be an improved service which it now is except for payments to Government Departments, and for Mr Grant to have considered it reasonable to instruct payment on 5/6/08.
Reasons
10.	In my opinion Mr Grant as Finance Director knew and recognised his responsibilities.  He was on the last quarter of a previous SLNE and wanted to be free of the liability that entailed.  He was very upset by what had happened.  He was even more upset when he discovered later the “prompt payment” system could not apply to payments to Government Departments.  Though that fact is not relevant to this appeal it is another reflection of the difficulties traders face.  What should be a simpler more straightforward system becomes ever more complex in this electronic system.
11.	I therefore find there is a reasonable excuse for the very short delay in payments which occurred on the quarter 04/08 by Nigel Lowe Consulting Ltd and Nigel Lowe Holdings Ltd.

MRS G PRITCHARD, BL., MBA., WS
TRIBUNAL JUDGE

RELEASE DATE:  16 JUNE 2009