19164
	VAT — PENALTIES — default surcharge — extra days allowed for payment of VAT for electronic means — payment by bank giro credit transfer — notes on reverse of Form VAT 100 found to be misleading — reasonable excuse held to exist for late payment of tax in reliance upon wording of notes — appeal allowed

MANCHESTER TRIBUNAL CENTRE

 
 	
	BENJAMIN CLOWES 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 against a default surcharge of £875.55 imposed in respect of the Appellant’s VAT accounting period 10/04.

2.	On 29 June 2005 the Manchester Tribunal Centre received by “fax” a letter from Mr Clowes of the Appellant indicating that he would not be able to attend the hearing of the appeal and inviting the tribunal to hear the appeal in his absence.  The tribunal has therefore gone ahead with the hearing of the appeal pursuant to rule 26(2) of the Value Added Tax Tribunals Rules 1986 (as amended).

3.	Page 2 of VAT Form 100, the form of VAT return completed and sent in by the Appellant in respect of its period 10/04, contains instructions for paying the VAT due, under the heading “Notes”.

4.	Two methods are indicated for payment, viz “Electronically via your bank”, and “By post”.  One of the electronic methods described is “By Bank Giro”.  Taxpayers are informed that, if they intend to pay by Bank Giro, they may ring certain specified telephone numbers to obtain a book of paying-in slips and counterfoils, which will be pre-printed with the taxpayer’s VAT registration number and the bank account details of the payee.

5.	The “Notes” then state:

“If you pay by one of these electronic methods you may receive up to 7 extra calendar days for the return and payment to reach us.  Notice 700 gives further information or you can telephone the National Advice Service on [a specified telephone number]”.

6.	I have had a chance to read copies of the correspondence exchanged between the parties about the default surcharge under appeal, and in particular two letters from Mr Clowes dated 11 January and 10 March 2005 respectively.

7.	The Appellant despatched its VAT return in respect of its period 10/04 to arrive by the due date, but it appears that it decided to pay the VAT due by Bank Giro, relying on the extra 7 days allowed.  The due date for payment by non-electronic means was 30 November 1994, so using one of the electronic means specified in the “Notes”, the tax needed to have reached the agency then called H M Customs and Excise (“Customs”) by 7 December 1994.

8.	It seems that the Appellant followed the “Notes” on the back of Form VAT 100 to the letter.  Mr Clowes telephoned and obtained a book of paying-in slips and he then paid the VAT by completing and handing in a bank giro credit transfer for processing by the Appellant’s bank on 6 December 1994, ie within the 7 extra calendar days.  He was surprised to find that he was made liable for a default surcharge because the tax only reached the account of Customs on 8 December 1994.

9.	It is within the experience of this tribunal that taxpayers registered for VAT who pay their tax by post commonly send in their tax returns and cheques for the VAT due at almost the last minute, that is to say, a day or so before the due date.  So long as those cheques are met when presented, no point is ever taken that, under the bank clearing system, a cheque still takes some three working days to be cleared and the money collected.

10.	Mr Owen, appearing in this case for Her Majesty’s Revenue and Customs, as they now are, submits that Mr Clowes must or should have known that payments by Bank Giro are not instantaneous payments but require to be processed over some three working days.  I think that Mr Owen may be right – I have no evidence as to Mr Clowes’ state of knowledge, but seeing that he practises as a taxation consultant, it would perhaps be surprising if Mr Clowes was indeed unaware of that feature of banking practice.

11.	However I also think that Mr Clowes, like any other taxpayer, was entitled to count on Customs accepting the money as being in time, if paid in by Bank Giro by 7 December 1994.  It is true that the “Notes” on the reverse of Form VAT 100 talk about an extra 7 calendar days “for the [VAT] return and payment to reach us”.  Payments by Bank Giro will not be received for some three days.  But cheques sent by post are, as I say, treated as having reached Customs in time if sent the day before the due date.  Why should this not also be true if the money is paid by Bank Giro the day before the money is due, even though the money will not reach Customs’ account until some two days later?

12.	In view of this, I find the “Notes” on the reverse of Form VAT 100 to be misleading, and I recommend that they be rewritten to make clear that, in reality, taxpayers have only about an extra 4 calendar days to make payment if by Bank Giro.  It is unhelpful, I feel, for the “Notes” to bracket Bank Giro payments under the same “bullet-point” as automated payment methods such as BACS and CHAPS which result in paperless transfers to Customs’ account.  Indeed there is a difference between the speed of these other two methods, in that I understand that whilst BACS can take three days, CHAPS is a same-day transfer method.  Bank Giro, for its part, is an old-fashioned method that normally involves the use of cheques and so is not a fully electronic method.

13.	In my view the Appellant has therefore made out a reasonable excuse for its conduct and it is unjust for the default surcharge under appeal to stand.  I declare that the Appellant is not in default in respect of its accounting period 10/04 and is not liable to the surcharge.  This appeal is accordingly allowed under section 59(7) of the Value Added Tax Act 1994.

14.	I encourage Mr Clowes to take up this point with Her Majesty’s Revenue and Customs to ensure that the “Notes” on the reverse of Form VAT 100 are redrafted.

MICHAEL JOHNSON
CHAIRMAN
Release Date: 13 July 2005

MAN/05/0169