First-tier Tribunal (Tax)

[2011] UKFTT 176 (TC)

TC01045

Appeal number TC/2010/01965

VAT – late payment – internet transfer - default surcharge – reasonable excuse – proportionality – appeal dismissed

FIRST-TIER TRIBUNAL

TAX

AUKO LIMITED Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

TRIBUNAL: RICHARD J MANUELL

Mrs LESLEY STALKER

Sitting in public at Holborn Bars, 138-142 High Holborn, London EC1N 2NQ on 9 March 2011

Mrs Nathalie Rozencwajg, company director, for the Appellant

Mrs Lynne Ratnett, Presenting Officer, for the Respondents

© CROWN COPYRIGHT 2011

DECISION

1.       This is the Appellant’s appeal against a VAT penalty surcharge notice issued against it on 16 October 2009 in the sum of £800.27, at the 5% rate.  It was accepted by the Appellant that VAT of £16,005.59 due to be paid on 30 September 2009 (plus 7 days if paid by internet transfer) was paid late.  It was paid as to £10,000.00 on 8 October 2009 and as to the balance of £6,005.59 on 9 October 2009.

2.       Mrs Nathalie Rozencwajg ("Mrs Rozencwajg"), one of the directors of the Appellant, gave evidence and was cross-examined.  The Tribunal has kept a full note of her evidence. Mrs Rozencwajg’s evidence was not challenged and the Tribunal accepts that she was a reliable witness. 

3.       In summary, Mrs Rozencwajg accepted that the Appellant had entered the 5% surcharge regime as the result of two previous defaults which had not attracted a financial penalty as the amount on the second default was below the threshold of £400.00.  The Appellant used the internet payment system.  Mrs Rozencwajg had received the VAT figures from the company’s bookkeeper on 5 October 2009.  Mrs Rozencwajg, who commutes from Paris where she lives, and also teaches in London as well as working for the Appellant, was not at her office on 6 October 2009 and so could not authorise a transfer by the usual means of a secure internet connection.  She telephoned the company’s bank who informed her that the company could only make payments of £10,000 per day by way of internet transfer.  Mrs Rozencwajg therefore authorised payments in two tranches, as noted above at paragraph 1.  She produced a bank statement from the Appellant showing that funds had been transferred to enable the payments and that sufficient funds were available to cover the whole sum due.  Mrs Rozencwajg emphasised that there had been no intention to delay payment.  She had been aware of the deadline but had been unwilling to make a protective or provisional payment.  The bank had not offered the facility of a CHAPS payment.  The Appellant had now moved from accruals payments to cash invoicing which would avoid similar difficulties in the future.

4.       Mrs Ratnett for the Respondents submitted that no reasonable excuse had been disclosed by the facts presented.  This was the third default.  The Appellant was in the 5% penalty regime and was aware of the consequences of non compliance.  The penalty was geared to the tax payable and was proportionate.

5.       Mrs Rozencwajg reiterated that there had been no intentional delay and that the Appellant considered that the penalty was out of all proportion to the extent of the default, effectively one day.  Had the company paid a month later the penalty would have been the same.

6.       The Tribunal found that the undisputed facts failed to disclose any reasonable excuse in law.  Mrs Ratnett’s submissions were sound and were adopted.  While the Tribunal accepted that the Appellant had not paid late deliberately, the Appellant was on clear notice of its position and of the consequences of further default, which were fully explained in the information given by the Respondents when the first and second surcharge notices were served.  The Appellant had in fact enjoyed one month plus 7 days to arrange the VAT payment due from the relevant quarter’s trading.  The foreseeable consequences of the last minute rush were the risk which the Appellant took.  The penalty in the Tribunal’s view was not disproportionate, because, inter alia, of the strong public interest in the efficient operation of the VAT collection system.  The vast majority of VAT registered entities comply with the relevant legislation.  

7.       This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.