DEFAULT SURCHARGE – Reasonable excuse – Cheque wrongly made out – Genuine mistake – Not a reasonable excuse – VATA 1994 s71(1)(b) – Appeal dismissed

LONDON TRIBUNAL CENTRE

	M K DRISCOLLS LTD	Appellant

-	and –

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	THEODORE WALLACE   (Chairman)

Sitting in public in London on 5 May 2004

The Appellant did not appear and was not represented

Philip Webb, senior office advocate, for the Respondents

© CROWN COPYRIGHT 2004

DECISION

1.	The appeal, which was against a default surcharge for the period ending 31 August 2003, was considered in the Appellant’s absence under Rule 26(2).

2.	The surcharge arose out of late payment of the VAT the Appellant having sent a cheque dated 29 September 2002 (a Sunday) made out not to the Commissioners but to the Inland Revenue.  The return and payment were recorded as received on 2 October; the cheque was returned on that day to be validated or corrected.  The corrected cheque was received on 23 October 2002.

3.	The notice of appeal stated as follows,

“A mistake was made on the cheque, with payee as ‘Inland Revenue’.  When this was pointed out we then corrected the cheque and returned it to HMC&E.  The cheque cleared our bank on 25 October 2002.  We do not mind paying interest on slight late payment.  However we did send our return and original cheque in on time and feel it unfair for a surcharge of £452 on a genuine mistake.”

4.	In a letter the Appellant stated that the return was sent by first class post.  No explanation or reason was genuine for the mistake as to the payee.

5.	A cheque made out to the wrong payee is clearly not payment.  The Appellant was therefore in default regardless of when and where it was posted.

6.	Mr Wood accepted that there was a genuine mistake as to the payee but submitted that this was not a reasonable excuse.

7.	This submission is clearly correct.  A company relies on its officers or agents to make returns and payments.  Section 71(1)(b) of the VAT Act 1994 provides,

“(b)	Where reliance is placed on any other person to perform any task, neither the fact of that reliance nor any dilatoriness or inaccuracy on the part of the person relied on is a reasonable excuse.”

Making a cheque out to the wrong person is a form of inaccuracy.

8.	The correspondence contains no suggestion of any underlying reason for the mistake which might be a reasonable excuse.  I find therefore that there was no reasonable excuse.

9.	A surcharge of 15 per cent was imposed because of prior defaults.  This is a relatively heavy penalty for a genuine mistake.  It is however the penalty laid down by Act of Parliament and the Tribunal has no power to reduce it.

10.	The appeal must therefore be dismissed.

11.	There was no application for costs.

THEODORE WALLACE
CHAIRMAN

RELEASED:

LON/03/1164