[2009] UKFTT 348 (TC)

TC00286

Appeal Number: MAN/2007/1215 

FIRST TIER TRIBUNAL TAX

 VAT – INPUT TAX – the invoices produced by the Appellant to evidence   input tax claims were invalid –  no evidence of the supplies taking –Appeal dismissed  

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

	INAYAT GULAM HUSSEIN	Appellant

	- and -

         THE COMMISSIONERS FOR
	HER MAJESTY’S REVENUE and CUSTOMS	Respondents

			Tribunal: MICHAEL TILDESLEY OBE	 (Chairman)
				      JOHN LAPTHORNE

Sitting in public at Birmingham on  23 November 2009

Appellant did not appear

Richard Chapman counsel instructed by the Solicitor’s office of HM Revenue & Customs, for HMRC

© CROWN COPYRIGHT 2009

DECISION
The Appeal
1.	The Appellant was appealing against HMRC decision dated 28 March 2007 refusing a claim for input tax in the sum of £72,225 representing the VAT for the periods 12/04 to 06/06 inclusive.
2.	The dispute concerned whether the Appellant held valid VAT invoices evidencing the purported supplies of goods upon which the VAT claims were made. The Appellant contended that he had evidence of the disputed supplies and held valid VAT invoices. Further he paid cash for the supplies which he alleged was pocketed by bogus employees of the suppliers who issued false invoices.   HMRC, on the other hand, contended that there were no valid VAT invoices and no supplies made. 
The Hearing
3.	The Appellant and his representative did not attend the hearing. His representative sent a letter to the Tribunal explaining that his client was unable to attend the hearing because he was suffering from back pain. The representative provided a copy of a  certificate from a doctor who signed off the Appellant from work for eight weeks as result of a bad back. 
4.	The Tribunal granted HMRC’s application to proceed in the absence of the Appellant in accordance with rule 33 of the Tribunal Rules 2009. The Tribunal found the following  facts:
(1)	The Appeal was now two years old.
(2)	The hearing of the Appeal had been adjourned on two previous occasions at the request of the Appellant.
(3)	HMRC had called five witnesses who were present to give their evidence.
(4)	The Appellant’s request was made at the last moment with no notice given to HMRC.
(5)	 There was no evidence that the Appellant was prevented by his bad back from attending the Tribunal.
(6)	The Appellant had provided no evidence of the disputed supplies other than the invoices which were the subject of the Appeal.
5.	The Tribunal was satisfied that it was in the interests of justice to proceed in the absence of the Appellant. The Tribunal is under a duty to act justly and fairly in the exercise of its powers. This duty, however, involves consideration of the interests of both parties not just those of the Appellant. The Appellant has had three opportunities to present his case. His failure to take advantage of those opportunities has resulted in unnecessary delay in the proceedings. His request for the latest adjournment was made at the last minute which questioned the credibility of   his unfitness to attend the Tribunal. HMRC, on the other hand, was ready to proceed with their five witnesses. 
6.	The Tribunal heard evidence from five HMRC Officers, Mr Golightly, Mr Owens, Mr Bailey, Mr Holden and Mrs Quirke. Mr Golightly carried out the verification of the Appellant’s VAT returns and made the decision to refuse the Appellant’s input tax claims. The other four Officers investigated the suppliers named in the invoices produced by the Appellant in support of his input tax claims. A bundle of documents was received in evidence.
Facts Found
7.	The Appellant under the name of Slick Services carried on the business of car body and mechanical repairs and trading in various commodities including mobile phone accessories. 
8.	In the VAT quarterly periods starting 12/04 and ending 06/06 the Appellant claimed a repayment of VAT in the sum of £72,225 in respect of various supplies of goods from five named suppliers. The Appellant supported his repayment claim with invoices purportedly issued by ADM Building and Engineering Solutions, Claymore Trading Company, Superdeal Wholesale Limited, K2 Kommunications Limited and DK Wholesale Limited.
9.	The invoices of the five traders held by the Appellant were very similar in appearance with black print on white photocopying paper, and not folded. The Appellant held no other records and documents supporting the alleged purchases recorded on the invoices.  The cash book simply recorded the alleged transactions as cash sales with no details of the purchases.
10.	HMRC enquiries of the five named traders revealed that
(1)	The VAT registration number recited on the invoice held by the Appellant in respect of ADM Building and Engineering Solutions belonged to another business, Huws Gray Limited, which had not issued any purchase invoices to  the Appellant.
(2)	The inspection of the business records of Superdeal Wholesale Limited, Claymore Trading Company and DK (Wholesale) Ltd showed that the companies had issued no invoices to the Appellant, and the style of their invoices was different from that held by the Appellant.
(3)	The accountant for K2 Kommunications Ltd confirmed that the company had never dealt with the Appellant trading as Slick Services. Although its invoices were similar in appearance to the ones held by the Appellant, K2 Kommunications Ltd only issued invoices from  pre-printed consecutively numbered duplicate invoice books. The invoices bearing the name of K2 Kommunications Ltd held by the Appellant were not numbered and recited a different telephone number from that recorded on the invoices of K2 Kommunications Ltd    
Consideration
11.	The Tribunal was satisfied on the facts found that the invoices held by the Appellant to support the disputed  input tax claims were not issued by the traders named on  those invoices, and  the  traders made no supplies of the goods described in those invoices. The Tribunal, therefore, finds that the invoices were invalid, and that there was no evidence of the supplies ever taking place upon which the Appellant claimed a VAT repayment.
12.	Under section 25 of the VAT Act 1994 a taxable person is entitled at the end of each accounting period to credit for input tax paid on taxable supplies of goods or services made by a taxable person. Section 24(6) (a) of the 1994 Act enables regulations to be made which provide for VAT to be treated as input tax only if and to the extent that the charge to VAT is evidenced and quantified by reference to such documents or other information as may be specified in the regulations. Regulation 29(2)(a) of the VAT Regulations 1995 requires a taxable person to hold a VAT invoice for the supply from another taxable person, in respect of which a claim for input tax is made. 
13.	 The following conditions must, therefore, be met for input tax credit to be available:
(1)	a supply must have taken place;
(2)	the input tax credit must be claimed by the taxable person to whom the supply is made,
(3)	the supply must be chargeable to tax at the rate claimed;
(4)	the claimant must hold satisfactory evidence of his entitlement to input tax credit.
14.	 The Appellant adduced no evidence of the supplies from the five traders other than the invalid invoices. The Appellant has not met the legal requirements to claim a repayment of VAT in the sum of £72,225 in respect of the supplies from the five named suppliers in the VAT quarterly periods starting 12/04 and ending  06/06. The Appellant did not hold valid VAT invoices for the disputed supplies and there was no evidence that the supplies ever took place.
15.	In a fax dated 1 November 2007 to Mr Golightly, the Appellant suggested that he received the invalid invoices from bogus employees of the five named suppliers, who pocketed the Appellant’s cash. There was no evidence to back up the Appellant’s allegations. Further the chances of the same event happening involving bogus employees in five different companies were extremely remote. In the Tribunal’s view, the Appellant’s explanation verged on the incredible.
Decision
16.	For the reasons given above, the Appellant was not entitled to claim input tax in the sum of £72,225 representing the VAT for the periods 12/04 to 06/06 inclusive. The Appeal is dismissed with no order for costs.

                                

                                 MICHAEL TILDESLEY OBE
TRIBUNAL JUDGE
RELEASE DATE: 3 December 2009

MAN/

Notes
1.	A party who was not present at the hearing may apply for the decision to be set aside provided an application is made in writing to the Tribunal not later than 28 days from release of the decision. The decision to set aside will be at the discretion of the Tribunal.
2.	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.