Elite QS Ltd v Customs & Excise [2003] UKVAT V18400 (21 November 2003)

	SECURITY  — rule 26(2) VAT Tribunals Rules 1986 — director’s involvement in earlier deregistered company — returns and VAT outstanding — reasonableness of the Commissioners’ decision — appeal dismissed.

MANCHESTER TRIBUNAL CENTRE

 
 	
	ELITE QS LIMITED	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	Lady Mitting (Chairman)
						Mr R Grice (Member)	

Sitting in public in Birmingham on Monday 20 October 2003

The Appellant did not appear and was not represented

Mr B Haley of the Solicitor’s Office of HM Customs and Excise for the Respondents

	© CROWN COPYRIGHT 2003

DECISION

1.	 The decision under appeal is that of the Commissioners dated 6 November 2002 to require security from the Appellant company under Schedule 11 paragraph 4(2) Valu Added Tax Act 1994.

2.	There was no attendance on behalf of the Appellant and, having satisfied ourselves that the notice of hearing had been properly served, we proceeded to hear the appeal under rule 26(2) Value Added Tax Tribunals Rules 1986.  We heard oral evidence from Mrs A McArthur on behalf of the Commissioners.

3.	The Appellant company was brought to the attention of Mrs McArthur by a fellow officer who had been attempting to visit the premises of a company called Herbert Quality Services Limited (“HQSL”) of 103 Wyken Way, Coventry.  The officer found that this company had ceased to trade but a new company, Elite QS Limited had begun trading in a similar business from the same address.

4.	Mrs McArthur investigated both the Appellant and HQSL.  She found that Patrick Joseph Herbert had been a director of HQSL and was now company secretary of the Appellant.  HQSL had ceased to trade and deregistered on 29 September 2001 and the Appellant had begun trading and registered from 17 September 2001.  On cessation, HQSL had owed the Commissioners £81,880.

5.	Mrs McArthur then studied the compliance record of both companies.  HQSL had registered for VAT from 1 July 1999.  Its first four quarterly returns had all been submitted late but payment had been made, albeit late.  No returns were submitted for 11/00, 02/01 or 05/01 and centrally issued assessments were raised in respect of all three periods.  These assessments went unpaid.  A visiting officer managed to obtain unsigned returns for these periods which showed a greater amount of tax due than that centrally assessed and a further balancing assessment was therefore raised.  Again this went unpaid.  The company submitted its return for 08/01 but it was not accompanied by any payment.  Finally, the Commissioners raised a centrally issued assessment for the final period of trading which again went unpaid.  In summary therefore, apart from paying, albeit late, the tax due for its first four quarters of trading, HQSL paid no further VAT, finally ceasing to trade with the debt mentioned above of £81,880.

6.	The Appellant began trading on 17 September 2001 but never submitted its first return due for the period 12/01.  A centrally issued assessment was therefore raised.  The Appellant did lodge its return for 03/02 albeit 55 days late and paid the tax due on that return.  When Mrs McArthur made her decision to require security (date of decision 25 October 2002) the return for 06/02 had not been received but a centrally issued assessment had been raised.  By the time Mrs McArthur’s notice was served on 6 November, in fact the 06/02 and 09/02 returns had been received but without payment.  The Appellant company had made some four part payments towards repayment of its indebtedness but still remained heavily indebted to the Commissioners.  On the date the decision was taken, Mrs McArthur believed the amount owed to be £7,800 but when the further returns were received and analysed it was apparent that in actual fact at the date the notice was served, the Appellant’s true indebtedness was £29,809.

7.	Having decided that, for the protection of the revenue, security was required, Mrs McArthur calculated it on the basis of the only return which she had before her when the decision was made namely the 03.02 return.  She required £31,300 if quarterly returns were issued and £20,800 if monthly returns were issued.  If Mrs McArthur had had in her possession the returns for 06/02 and 09/02, the amounts required would in fact have been greater.  

8.	In it’s notice of appeal the Appellant gives as its grounds:
“with this demand I am likely to go out of business if I have to pay this security of £31,300.  I am paying this bill off at a rate of £8,000 a month at the moment.  If you insist on this payment, I will have to put 20 or more people out of work as I am not in any position to pay all this amount.”
We believe that “this bill” refers to the total indebtedness to the Commissioners and not in any way to the requirement for security.

9.	The role of the tribunal is to consider the reasonableness of the Commissioners’ decision.  Provided we are satisfied that this was not a decision which no reasonable panel of Commissioners could have taken then the appeal will fail.  Mrs McArthur took into account the poor compliance records of both companies, the link between Mr Herbert with each and the fact that both companies were carrying on a similar business from the same trading premises and indeed the one began within days of the cessation of the other.  These were all matters which were fully relevant to the decision and we can think of no other factors which Mrs McArthur should have considered but did not.  We find that the decision was perfectly reasonable.

10.	The appeal is dismissed.  The Commissioners made no application for costs and we make no order.

LADY MITTING
CHAIRMAN
Release Date:

MAN/03/112