[2009] UKFTT 72 (TC)

TC00040
Appeal number LON/2007/2029

Value Added Tax – Requirement for security – para. 4(2),(4), Sch. 11, VATA 1994 – connection of control, trade and website address established between the Appellant company and other companies with a history of VAT default and insolvency in the local area – held, requirement for security had not been shown to be unreasonable – appeal dismissed 

FIRST-TIER TRIBUNAL

TAX 

	CARDINAL ENTERTAINMENTS LIMITED	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS (Value Added Tax)	Respondents

				TRIBUNAL: 	JOHN WALTERS QC
						MRS. L.M. SALISBURY

Sitting in public (as the VAT and Duties Tribunal) in London on 26 January 2009

The Appellant did not appear and was not represented

Mrs. Gloria Orimoloye, Advocate, for the Respondents

© CROWN COPYRIGHT 2009

DECISION

1.	This is an appeal by Cardinal Entertainments Limited (“the Appellant”) against a decision of the Respondent Commissioners (“HMRC”) to require the Appellant, as a condition of its supplying goods or services under a taxable supply to give HMRC security.  The decision was communicated to the Appellant in a letter dated 6 September 2007 and the security required was £24,800, or alternatively £16,500 if monthly returns were submitted.
2.	When the appeal was called on for hearing the Appellant was not present or represented.  Mrs. Orimoloye, for HMRC, informed the Tribunal that HMRC’s posted correspondence to the Appellant had been returned.  The Tribunal’s posted correspondence to the Appellant had also been returned.
3.	HMRC had applied to the Tribunal by Notice dated 6 October 2008 to dismiss the appeal under rule 18 of the VAT Tribunals Rules 1986 (“the Rules”) for want of prosecution. Mrs. Orimoloye made an alternative application that the Tribunal hear the appeal in the absence of the Appellant under rule 26(2) of the Rules.
4.	The Tribunal refused the application to dismiss the appeal under rule 18 of the Rules and, in the circumstances summarised in the next paragraph (5), allowed the application to hear the appeal in the absence of the Appellant under rule 26(2) of the Rules.
5.	Mrs. Orimoloye told the Tribunal that the last contact received from the Appellant had been dated 20 March 2008.  A Mr. W. Lindley, who had been appointed a director of the Appellant on 1 October 2007 had advised that the Appellant had ceased to trade with liabilities and that the “liquidator/receiver appointed” would be notified to HMRC “in due course”.  There had been no such notification.  Mr. Lindley had also commented “As the business has ceased to trade I assume that the security deposit is no longer a requirement”.  HMRC had not, however, withdrawn the requirement.
6.	 The Tribunal heard oral evidence from Clare Louise Bell, who as a Higher Officer of HMRC made the requirement for security and was the writer of the letter dated 6 September 2007.
7.	From her evidence the Tribunal finds the following facts.
8.	The Appellant, trading as “Dusk til Dawn” took over a business (as a transfer of a going concern) from Splitmay Limited on 1 March 2007. (This was recorded in the Appellant’s application for registration for VAT.) The Appellant carried on a business of licensed night club and bar from premises at 205 Old Christchurch Road, Bournemouth.
9.	At the time the decision to require security was taken (6 September 2007) the Appellant’s first VAT return (due to be received on 31 August 2007) was late and a VAT assessment had been raised.
10.	Companies House records produced to the Tribunal show that Stephen Darcy Tingle was appointed sole director of the Appellant on 16 December 2006, and on the same day Ashley Ryan Lockett was appointed secretary of the Appellant.
11.	PAYE records indicated that Mr. Tingle had previously been an employee of Ufford Limited (see below).
12.	Splitmay Limited, which had also traded as “Dusk til Dawn”, had not been compliant in submitting returns or paying VAT. Its return for the period 07/06 had been received 7 days after the due date and the full amount of VAT declared (£2,284.40) had been paid.  But the return for the period 10/06 had been received 120 days later and the VAT declared (£12,407.79) had been paid, apparently, only to the extent of £2,246, leaving £10,161.79 outstanding.  There had been no returns for either of the periods 01/07 or 04/07 submitted, and the central assessments raised for those periods in the amounts, respectively, of £946 and £970, had not been paid. Splitmay Limited had carried on business as a nightclub from premises at 39 Poole Hill, Bournemouth.
13.	HMRC had made a requirement for security against Splitmay Limited on 4 August 2006, and no security was received.
14.	At the time the security requirement was made against the Appellant, Isi Tuivai  was a director of Splitmay Limited and James Peter Bronson  was both director and secretary of Splitmay Limited.  
15.	Companies House records produced to the Tribunal also show that Stephen Darcy Tingle was appointed sole director of Cowboy Leisure Limited on 18 December 2006, and Ashley Ryan Lockett was appointed secretary of that company on the same day. 
16.	Cowboy Leisure Limited had traded as Klute.  Cowboy Leisure had carried on business as a licensed bar and restaurant from premises at 20 Exeter Road, Bournemouth.  HMRC were taking security action against Cowboy Leisure Limited
17.	Companies House records produced to the Tribunal also show that Ryan Wrigley was appointed sole director of Jedbarn Limited on 6 January 2006, and Isi Tuivai was appointed secretary of that company on the same day.  Jedbarn Limited, trading as Klute, had outstanding VAT liabilities totalling £74,649.31 for the VAT periods 07/06 through to 10/07 in respect of which period an insolvency assessment was made.  Jedbarn Limited had carried on business as a licensed bar and restaurant from premises at 39 Poole Hill, Bournemouth – the same address as that from which the business of Splitmay Limited had been carried on.
18.	 It appears that Keylane Limited had formerly traded as Klute.  Companies House records produced to the Tribunal showed that Duncan Geoffrey Frank Moss had been appointed sole director of Keylane Limited on 2 February 2001 and James Peter Bronson had been appointed secretary of that company on the same day.  Keylane Limited had outstanding VAT liabilities totalling £39,363.76 for the VAT periods 09/04 through to 03/05 in respect of which period an insolvency assessment was made.  Keylane Limited had carried on business as a public house from premises at 20 Exeter Road, Bournemouth – the same address as that from which the business of Cowboy Leisure Limited had been carried on. 
19.	It appears that Ufford Limited traded as Klute after Keylane Limited had ceased to do so and before Jedbarn Limited began to do so.  Companies House records produced to the Tribunal showed that James Peter Bronson had been appointed sole director of Ufford Limited on 20 August 2004 and on the same day Duncan Geoffrey Frank Moss had been appointed secretary of that company.  Mr. Bronson resigned as director of Ufford Limited on 10 December 2005.  In the meantime, on 7 March 2005 Isi Tuivai had been appointed a director of Ufford Limited, and, on 4 November 2005, James Peter Bronson had also been re-appointed a director of Ufford Limited.  Ufford Limited had carried on business as a public house from premises at 20, Exeter Road, Bournemouth – the same address as that from which the businesses of Cowboy Leisure Limited and Keylane Limited had been carried on.
20.	Companies House records produced to the Tribunal show that James Peter Bronson had been appointed a director Roxyhill Limited, which had traded as Funki Sushi, on 10 May 2002.  On 14 May 2002 Duncan Geoffrey Frank Moss was appointed secretary of Roxyhill Limited.  On 20 October 2003 Isi Tuvai was appointed a director of Roxyhill Limited.  Roxyhill Limited had outstanding VAT liabilities totalling £21,300 for the VAT periods 01/05 and 04/05 in respect of which latter period an insolvency assessment was made.  Roxyhill Limited had carried on business as a Japanese restaurant from premises at 20 Exeter Road, Bournemouth – the same address from which the businesses of Cowboy Leisure Limited, Keylane Limited and Ufford Limited had been carried on.
21.	Companies House records produced to the Tribunal show that James Peter Bronson  had resigned as a director of Orchid Promotions Limited on 1 November 2006 and had been appointed secretary of that company on the same day.  A continuing director of that company was Isi Tuvai, who had been appointed on 1 September 2005.  Orchid Promotions Limited had outstanding VAT liabilities totalling £70,528.29 for the VAT periods 05/06 through to 05/07 in respect of which period an insolvency assessment was made.  Orchid Promotions Limited, which had traded as The Great Escape, had carried on business as a night club from premises at 176 Old Christchurch Road, Bournemouth. 
22.	Companies House records produced to the Tribunal show that Paul Gary Halcrow  had been appointed a director of Arena Events Limited on 11 October 1999, and that James Peter Bronson had been appointed both director and secretary of that company on the same date. Arena Events Limited had outstanding VAT liabilities totalling £18,963.15 for the VAT period 01/00.  Arena Events Limited had carried on business organising outside pop concerts from premises as 176 Old Christchurch Road, Bournemouth – the same premises from which the business of Orchid Promotions Limited had been carried on.
23.	A website (www.bournemouthnightlife.co.uk) had dealt with the businesses trading under the names of Klute, Funki Sushi, Dusk til Dawn and The Winchester.  
24.	From this evidence, the Tribunal found that the Appellant had been controlled by the same people (Messrs. Tingle and Lockett) who had controlled Cowboy Leisure Limited.  Cowboy Leisure Limited had traded as Klute, as had Jedbarn Limited, Keylane Limited and Ufford Limited.  The Appellant had traded as “Dusk til Dawn”, as had Splitmay Limited. Splitmay Limited had been under the control of Messrs Tuvai and Bronson.  Mr. Tuvai had been secretary of Jedbarn Limited.  Mr. Bronson had been secretary of Keylane Limited.  Messrs Tuvai and Bronson had been directors of Ufford Limited and also of Roxyhill Limited. Mr. Tuvai had been a director of Orchid Promotions Limited and Mr. Bronson had been a director and the secretary of Arena Events Limited.  All these companies had been trading in the leisure/catering/entertainment business in the Bournemouth area.  As noted above there had been several cases of trading from the same address. There was a thread of VAT default and insolvency connecting the companies.
25.	  In order to calculate the quantum of security required Officer Bell had used the information relative to Splitmay Limited whose business had been taken over by the Appellant as a going concern.
26.	The Appellant’s notice of appeal states as its grounds that the Appellant is “being discriminated against because of the history of the building we are leasing”.  The Appellant traded from 205 Old Christchurch Road, Bournemouth, and from the evidence received, the Tribunal cannot understand what the basis for this ground of appeal is.
27.	HMRC derive their power to require security from subparagraphs 4(2) and 4(4) of Schedule 11 to the VAT Act 1994.  Security (of such amount as HMRC may determine) may be required if HMRC “think it necessary for the protection of the revenue”.
28.	An appeal against a requirement to give security made under this power lies to the Tribunal under section 83(l) VAT Act 1994.  The Tribunal can only allow an appeal if it considers that the requirement is not one which HMRC could reasonably make.
29.	Having regard to the pattern of connection between the Appellant and other businesses involved in VAT default and insolvency, as established by the facts found above, there is no basis for the Tribunal to find that the requirement for security made in the Appellant’s case was unreasonably made, or of unreasonable amount.  The appeal is therefore dismissed.
 
JOHN WALTERS QC

TRIBUNAL JUDGE
RELEASE DATE: 24 April 2009