[2009] UKFTT 145 (TC)

TC00113

Appeal Number:  MAN/2008/1480 

FIRST TIER TRIBUNAL TAX

VAT – SECURITY REQUIREMENT

DECISION NOTICE 
Rule 35(2) The Tribunal Procedure (First Tier Tribunal) (Tax Chamber) Rules 2009 

	ASHBY CONTRACTING LIMITED	Appellant

	- and -

         THE COMMISSIONERS FOR
	HER MAJESTY’S REVENUE and CUSTOMS	Respondents

			Tribunal: MICHAEL TILDESLEY OBE	 (Chairman)
				      SUSAN STOTT FCA CTA          (Member)	  

Sitting in public at Leeds on 16 June 2009

The Appellant did not appear

Bernard Hayley of the Solicitor’s office of HM Revenue & Customs, for the Respondents

© CROWN COPYRIGHT 2009

DECISION
The Appeal
1.	The Appellant was appealing against a Notice of Requirement dated 16 October 2008 to give security in the sum of £26,300 (quarterly returns) or £17,500 (monthly returns)
2.	The Appellant did not appear. The Tribunal contacted Mr Burbidge, a director, who stated that he had forgotten about the hearing. Mr Burbidge raised no objections to the Appeal being heard in his absence. The Tribunal proceeded to hear the Appeal.
3.	The Tribunal heard evidence from Mr Pumfrey, HMRC Higher Officer, who issued the Notice of Security. A bundle of documents was presented in evidence. The bundle included the Appellant’s representations which were considered by the Tribunal.
The Issue
4.	The issue for the Tribunal was whether Mr Pumfrey had acted reasonably in imposing the security for the protection of the revenue. Thus the Tribunal has to decide whether Mr Pumfrey acted in a way in which no reasonable panel of Commissioners for HM Revenue and Customs could have acted, or whether he took into account some irrelevant matter, or disregarded something to which weight should have been given when imposing the security requirement. In exercising this jurisdiction the Tribunal must limit itself to considering facts and matters which existed at the time the challenged decision to require a security was taken.
Summary of the Facts Found
5.	Mr Pumfrey, HMRC Higher Officer, took into account the following facts when issuing the Notice of Security:
(1)	Mr Burbidge, the director of the Appellant, had been a director of two other companies, G Burbidge Tiling Limited, and Eastern Tile and Mosaic Limited, which had gone into liquidation owing debts to HMRC of £115,200 and £127,700 respectively.
(2)	The VAT compliance record of the two companies was poor. Eastern Tile and Mosaic Limited had made only one VAT payment on time throughout its existence.
(3)	The three companies carried on the same business of floor and tile contractor. The Appellant traded from the same business address as Eastern Tile and Mosaic Limited.
(4)	The involvement of Mr Burbidge with the Appellant posed a significant risk to the protection of the revenue.
6.	Mr Pumfrey derived the amount required for the security by estimating the notional output and input tax due on a projected annual turnover of £750,000 for the Appellant as declared in its VAT registration which produced an estimated annual net VAT figure for the Appellant. The notional input tax figure was based on the industrial sector average for the Appellant’s business. The net VAT due was then divided by two and three respectively to give the amount of security required for quarterly and monthly returns.
7.	The Appellant informed HMRC that it was unable to arrange a bank guarantee for the security because Mr Burbidge was not in a position to provide security as his assets were being held to support other liabilities. In those circumstances the Appellant requested that it be allowed to continue trading and submit monthly returns. Since the issue of the security the Appellant had submitted monthly returns on time. 
8.	The Appellant pointed out that Eastern Tile and Mosaic Limited had got into difficulties because two customers went into liquidation owing significant sums of money. 
9.	The Tribunal considered that the Appellant’s inability to arrange a bank guarantee supported Mr Pumfrey’s conclusion that the financial arrangements for the Appellant were vulnerable. The bad VAT compliance record throughout the existence of Eastern Tile and Mosaic could not be explained away by two customers going into liquidation. The Appellant’s compliance with its VAT responsibilities since the issue of the security was not relevant because it represented the state of affairs after the issue of the security.

Decision
10.	The Tribunal considers that Mr Pumfrey was correct in giving weight to the facts regarding Mr Burbidge’s involvement with two other companies carrying on the same business as the Appellant when imposing the security. In the Tribunal’s view they were relevant in assessing the Appellant’s risk to the protection of the revenue.  We find no evidence that Mr Pumfrey took into account some irrelevant matter or disregarded something to which he should have given weight in coming to his decision on the 16 October 2008. Mr Pumfrey applied sound rational principles in determining the amount of security required. 
11.	The Tribunal decides that the issue of the Notice of Security dated 16 October 2008 was reasonable. The Tribunal dismisses the Appeal.

MICHAEL TILDESLEY OBE
        TRIBUNAL JUDGE
          RELEASE DATE: 24 June 2009

MAN/

Notes

12.	A party may apply for full written findings and reasons, and must do so before making an application for permission to Appeal, provided the application is made in writing and received within 28 days after the date that the Tribunal released the decision notice.
13.	A party wishing to Appeal this decision to the Upper Tribunal must seek permission by making   an application in writing to the Tribunal within 56 days of being provided with full written reasons for the decision. An application for permission must identify the alleged error(s) in the decision and state the result the party making the application is seeking.