DEFAULT SURCHARGE – Reasonable excuse – Reliance on any other person – S.71(1)(b) VATA 1994 Proportionality – Appeal dismissed

LONDON TRIBUNAL CENTRE

	MARKET AND OPINION RESEARCH 	Appellant
INTERNATIONAL LIMITED

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	DR KAMEEL KHAN   (Chairman)
						MRS E M MacLEOD CIPM

Sitting in public in London on 24 September 2003

Mr W Hancock, company secretary, for the Appellant

Mr C Wright, senior officer of HM Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2003

DECISION

1.	This is an appeal against a Default Surcharge (2%) arising out of a late payment of tax for the period ending 28.02.03.   The surcharge amount was £10,104.

2.	The payment instruction was raised within the Appellant on 31.03.03 (the due date for the payment) but the payment was not made until 01.04.03.  The Appellant explained that while the bank instruction was drawn up internally on time it was not sent to the bank with adequate time to allot the tax to be paid on the due date.  This was due to the fact that a member of staff to whom the task was delegated had failed to properly carry out their duties in a timely manner and the requisite signatories required for authorizing the payment were not obtained.

3.	The Appellant further explained that they considered the size of the surcharge disproportionate to the delay time, which was only one day.  To show a good payment record, the Appellant said that they had only once before been late in making payment in the past 20 years. Their previous late payment was due to authorised signatures for the payment instruction not being available due to staff holidays and bank holidays.  In that case they were two days late.

4.	The Respondent’s case rested on the simple point that where reliance is placed on another person to perform tasks, the dilatoriness of that person was not a reasonable excuse under Section 71(1)(b) VATA 1994. They explained that dilatoriness for the purposes of that Section would involve, inter alia, where a person had not given themselves sufficient time to complete the delegated task and a deadline was not met.

5.	It is well established that for the purpose of Section 71(1)(b) VATA 1994, if reliance was placed on a trusted employee to perform tasks, then such reliance would be a reliance on “any other person” for the purposes of the law (see Profile Security Services Limited v Customs and Excise Commissioners 1996 STC 808).  There was nothing to indicate that the employee concerned was new or unfamiliar with the task which had been delegated to be performed.

6.	On the second point raised by the Appellant concerning the amount of the surcharge, the principle of proportionality needs to be considered.  It is established in Greengate Furniture v Customs and Excise Commissioners Case 2002 VAT Decisions, 17976 that a Default Surcharge would not appear to be incompatible with the requirements of European law. Member States have power to create their own penalty regime in matters relating to VAT.  The Default Surcharge applied in this case was in keeping with English law and therefore was not disproportionate as a penalty for one single day late payment.

7.	For completeness, it should be noted that the Customs and Excise allows seven days grace for acceptable electronic payment of VAT (such as where payment is made by bank giro transfers, bankers automated clearing system (BACS), or clearing house automated systems (CHAPS) but this does not apply to the Appellant, who makes payments of VAT on account (see SI 1995/2518 Reg.40(2A).

8.	In my judgment, the Appellant does not have a reasonable excuse for late payment, due to their reliance on an employee who was dilatory (s.71(1)(b) VATA 1994).  There were also no valid grounds given in the reason for the dilatoriness to suggest a reasonable excuse. 

DR KAMEEL KHAN
CHAIRMAN

RELEASED:

LON/03/569