19295
COMPULSORY REGISTRATION – Appellant supplying services – Whether, on the evidence, Appellant an employee or self-employed
COMPULSORY REGISTRATION – Calculation of value of supplies included large error, correction of which reduced value below registration threshold – Decision to register based on admissions not on erroneous calculation – On evidence, Appellant's receipts substantially in excess of threshold – Whether registration valid – Yes – VATA 1994, Sch 1, para 1(1)(a)
ASSESSMENT – Quantum – Appellant stated that he repaid substantial proportion of money received by him from "employer" – Appellant stated that he incurred expenses – No evidence of amount of either repayments or expenses – Whether allowance should be made, in calculating quantum of assessment, for repayments and expenses - No
LONDON TRIBUNAL CENTRE
TARIQ BASHIR Appellant
THE COMMISSIONERS FOR HER MAJESTY'S REVENUE & CUSTOMS Respondents
Tribunal: ANGUS NICOL (Chairman)
MRS R S JOHNSON
Sitting in public in London on 18 and 19 April and 6 July 2005
Jeremy Gordon, counsel, instructed by H K H Kenwood & Cox, solicitors, for the Appellant
Caroline Neenan, counsel, instructed by the Solicitor for the Revenue and Customs, for the Respondents
© CROWN COPYRIGHT 2005
DECISION
- This appeal arises out of a notice of compulsory registration of the Appellant, Mr Tariq Bashir, for value added tax dated 20 January 2004. Registration under that notice took effect from 1 July 2000. This was accompanied by a notice of assessment in the sum of £61,063 in respect of the period from 1 July 2000 to 3 December 2003. The Appellant served a notice of appeal dated 14 June 2004. He was described in that notice of appeal as an importer of drinks. The notice of appeal was settled by his solicitor, and the grounds of appeal given were: "Mr Bashir was at all relevant times from 1st July 2000 to 3rd December 2003, an employee of DMT Capital/Silvernet. He was not self-employed. He was not a director of any company. He was not in business himself. As an employee he should not have been registered for VAT." His registration was cancelled as from the close of business on 3 December 2003.
- The statement of case disclosed that the compulsory registration was imposed for the following reasons. On a visit to DMT Capital Ltd ("DMT") in December 2003, Customs officers noted that several large payments had been made to the Appellant. In an interview of Mr Mohet Mehta, a director of DMT, in January 2004, the Commissioners learnt that the Appellant had been paid substantial sums as fees for introducing missing traders to DMT. When interviewed, the Appellant said first that he was self-employed, then that he was an employee of DMT until it went into liquidation, after which he was again self-employed; he had conducted market research for DMT and had been paid £2,000 a month plus commission, and had received a total of some £120,000 a year. He denied receiving the larger sums. He said that some of the sums were repaid to DMT. He could not understand why he was not on the books of DMT as an employee. The Commissioners formed the view that the Appellant was not employed by DMT, but had acted as a sole proprietor of the business of introducing missing traders to DMT, and was therefore liable to be registered for VAT.
- The issue to be determined, therefore, is whether, as a matter of law and fact, the Appellant was a taxable person for the purposes of section 3 of the Value Added Tax Act 1994 ("the 1994 Act"), or, alternatively, as the Appellant himself contends, whether he was an employee of DMT or of some other company and his receipts were remuneration within that employment?
The legislation
- Section 3 of the 1994 Act provides:
"(1) A person is a taxable person for the purposes of this Act while he is, or is required to be, registered under this Act."
The section provides that Schedule 1 to the Act shall have effect as to registration. The relevant parts of that schedule are as follows:
"1–(1) Subject to paragraphs (3) to (7) below, a person who makes taxable supplies but is not registered under this Act becomes liable to be registered under this Schedule—
(a) at the end of any month, if the value of his taxable supplies in the period of one year then ending has exceeded £52,000;
. . ."
Sub-paragraphs (3) to (7) deal with the valuation of the supplies made by a person, and are not relevant in this appeal.
"5–(1) A person who becomes liable to be registered by virtue of paragraph 1(1)(a) above shall notify the Commissioners of the liability within 30 days of the end of the relevant month.
(2) The Commissioners shall register any such person (whether or not he so notifies them) with effect from the end of the month following the relevant month or from such earlier date as may be agreed between them and him."
The assessment was the natural consequence of the registration, since the Appellant had rendered no returns.
The evidence
- The evidence was contained in a number of statements made, between December 2003 and September 2004, in connexion with bankruptcy proceedings against the Appellant in which the Commissioners were the petitioners, statements of officers of Customs and Excise, who also gave oral evidence at the hearing, and a witness statement by the Appellant for the purposes of this appeal. There was also a substantial amount of documentary evidence, including bank statements produced by the Appellant after an adjournment, to 6 July 2005, for that purpose.
- The Appellant's witness statement was put in as part of his evidence-in-chief. In it he set out briefly the circumstances of the notice of compulsory registration being issued and the assessment in the sum of £61,063. The Appellant said that on receipt of the notice he telephoned the Contact Centre and through it told the Commissioners that he was an employee and therefore should not have been registered. He produced a copy of a record of his inquiry, dated 27 January 2004. This also reveals the nature of the inquiry: "Can you tell me why I have been sent details of a VAT registration. Confirmed with caller that he was not in business and not self employed." His statement goes on to say that he had been advised that he had good grounds of appeal against the compulsory registration if he could shew that he was an employee.
- The Appellant gave details of the employment upon which he relied. He said that he was employed by DMT, a drinks importer, and his function was to assess the drinks market and advise DMT on purchases of stocks of drink for sale in Essex and East London. He said that he was not paid a regular wage, but received a commission on the basis of whether DMT made a sale after he had advised it. He said,
"The purpose of my role within the company was to allow for a flexible purchase policy from suppliers. I have in my possession bank accounts which show money paid by DMT Capital. Throughout my employment with DMT Capital (formerly Silvernet) I earned in the region of £100,000. I was told by my employers that income tax and national Insurance were deducted at source....
I was not made a formal offer of employment. My immediate boss was Mr Mohet Mehta. I understand that DMT Capital itself is now in liquidation. I cannot say whether there will be any documents with DMT Capital which will support this statement."
(In fact the Appellant had no bank statements in his possession. At the end of the second day of the hearing of the appeal we adjourned the matter so that he should have an opportunity to produce such statements.)
He concluded that statement by saying that in spite of numerous demands for an explanation of why he had been registered for VAT, and for a detailed breakdown of the amount of £61,063, none had been forthcoming. The statement was signed and dated 13 July 2004.
- On 3 December 2003 an order was made in the Chancery Division appointing a provisional liquidator of DMT, in proceedings brought by the Commissioners for that company's winding up.
- The other part of the Appellant's evidence-in-chief was contained in a statement made by him in response to the evidence put in by the Commissioners. The statement was signed as a true statement by the Appellant and dated 12 October 2004. The Appellant begins by referring to a transcript of an interview of Mr Mehta by Mr Alan Duxbury of Customs and Excise, and a statement made by Mr Mehta with which, he says, he disagrees entirely. We were invited by counsel, Mr Jeremy Gordon, on the Appellant's behalf to read that transcript, and also a transcript of an interview of the Appellant. In order to make sense of the Appellant's statement we refer to the relevant parts of Mr Mehta's interview first.
- That interview took place on 15 January 2004, a few days before the notice of compulsory registration was issued to the Appellant. (We should mention that the quality of both the interview and of the transcript were not particularly good, and the following précis contains all that definitely refers to the Appellant.) Mr Mehta said that at some point DMT effectively became Silvernet, and a Mr Kamaljit Singh Sood, who was prominent in Silvernet, was going to shew him everything including certain things which would ensure that funds were not subject to corporation tax. He said that Sood had introduced him to the Appellant who bought agents for setting up missing traders. He said that the Appellant was paid a monthly fee irrespective of what agent or how many he introduced. Mr Mehta admitted that DMT had produced purchase orders and sales invoices for missing traders, that he had no knowledge of that but had been guided by Sood, the Appellant and another. The nature of the Appellant's part in the matter was described by Mr Mehta as follows:
[After reference to a document, neither identified nor defined, relating to "the use of company agent":]
"That was prepared between myself and Tariq Bashir. Mr Bashir was stated ... Had an operation that he claimed was a warehouse in the east end of London. He wanted to use that warehousing operation to start a business and Mr Bashir was interested in doing ... setting up that business with me. I for one didn't really trust Mr Bashir - I say trust with a view that he didn't come across as a particularly fine and upstanding gentleman - and I for one didn't want to invest monies or whatever else, but negotiations that we had went down the line of well, what is involved, how does that compare to what I'm doing now, what Sud's doing and everything else. And between the two of us we traded the sense to see the implications of what we're doing and how we're going to do it.
. . .
He only told me that it was a warehouse, he didn't tell me the location or the name of the business but he certainly said that he was serious in terms of buying the loads and then distributing it...."
- Later in the interview, Mr Mehta stated that it was the Appellant who had introduced DMT to the missing traders. Mr Mehta said that he had been introduced to the Appellant by Mr Sood in about the autumn of 2002. He continued describing the Appellant's position:
"... Once it was organised, once it was arranged for Silvernet's operation to be ... to DMT, obviously we'd had to have a different structure to do such deals and that's when Mr Sood introduced Tariq Bashir. Mr Bashir would always meet me in lets say neutral locations such as coffee shops or bars."
He said that the Appellant did not visit the office premises of DMT except once or twice where other members of staff could have seen him. He named a few missing traders which were introduced by the Appellant. The Appellant had not told him with whom else he was doing business.
- Referring to a document which related to a company called Magma, Mr Mehta said that that was a company which had been introduced by the Appellant. He said that when transfer agents were introduced he was asking the Appellant to provide the acceptances. But that took so long that he found it easier to prepare it on his own system. The Appellant would give him the address, telephone number or fax number, and the VAT certificate number. He would give contact details, and those had to correspond with a registered director who would shew up on a company search. The Appellant would hand over such details in person, at one of the neutral locations. Mr Mehta said that the Appellant would expect him to produce the information that he had supplied and produce the templates. Mr Mehta said that the Appellant was paid by a bank transfer from Panther, a company in Mauritius, to his own account in the United Kingdom with the Woolwich Building Society. By Atlantic Bridge the Appellant had been paid about £12,000 a month, but DMT had negotiated it down to about £7,000 or £8,000 a month. The Appellant frequently put pressure upon DMT to get these payments, by calling repeatedly at the office or telephoning several times in a day. Sometimes he met Mr Mehta in the ground floor foyer of the office building, otherwise in coffee shops in the St James's Square area. The payments would be authorised by Mr David Singh and instructions given by e-mail to the bank in Mauritius. The Appellant liked to be paid on the first day of each month, though this was not always possible.
- Returning to the Appellant's statement, he said that he disagreed entirely with all that Mr Mehta had said. He had always understood his role at DMT to have been that of an employee. He was not at any time aware of any VAT fraud being carried out by DMT, nor had he ever been used by that company to introduce missing traders. It was not until December 2003 that he learnt that VAT frauds had been carried out by DMT. His role with DMT had never involved making management decisions relating to the setting up of shell companies, and he had had no knowledge of any such thing. He was employed as a marketing assistant, for the purpose of enabling DMT to undercut market prices for canned drinks and enhance profits on sales. He was paid large sums of money by DMT because the information with which he provided it allowed the company to sell large stocks of canned drinks from the warehouse to the high street and thereby undercut competition. His statement said that he had submitted invoices for his services in the name of Panther Capital Ltd, because he had been instructed to do so by Mr Mehta. In his oral evidence, he said that he had submitted claims for expenses, not invoices; he had never submitted any invoices.
- The Appellant referred to the witness statement of Miss Helen Marston, an officer of Customs and Excise. She gave reasons for concluding that the Appellant was not an employee of DMT: that his name was not recorded in the reception book of DMT, he had no desk at DMT's premises, nor a PC, and there was no mention of his name in the company's books other than payments made out in his name. The Appellant maintained that in spite of those facts he was an employee. He said that he had been introduced to Mr Mehta by Mr Sood, who was a mutual acquaintance. He knew that DMT needed assistance in obtaining marketing information, and was aware of the Appellant's ability in this field. He said that Mr Mehta agreed verbally (we suppose that he meant orally) to engage him as a marketing assistant. He said that he had given his National Insurance number to Mr Mehta. He had no desk at the company's Sackville Street premises because his job did not involve working in the office. What he did was to check current retail and wholesale prices of canned drinks. These prices changed daily, and the information was very important to a supplier. A difference of one or two pence a can on a large consignment of drinks could mean a difference of thousands of pounds to the supplier. Mr Mehta would also ring him often to run errands for him.
- The Appellant said that he was told by Mr Mehta that he was being paid net of tax and of national insurance contributions. He was, he said again in his statement, asked to produce invoices for payments. He was paid large sums of money because he was receiving a share of the company's profits which were generated in part as a result of the information that he supplied.
- Maintaining that he was employed by DMT, the Appellant described the nature of his employment. He said that he worked under the orders of Mr Mehta at all times. Mr Mehta had the power to dismiss him at any time. He had no authority to delegate any part of the work he was instructed to do. He had agreed with Mr Mehta that he would be available on the telephone at any time between 9.30 a.m. and 6.0 p.m. Mr Mehta would ring him during those hours to tell him whom to see and where to go and to give him specific tasks to do. He said that he generally worked between three and four hours a day between three and four days a week if in London, not including week-ends, and up to 16 hours a day if travelling. The Appellant considered that without the information that he supplied DMT would not have been able to operate. He was paid on commission, not a salary. This was based upon sales of goods by DMT. He was paid monthly. Occasionally he received bonus payments if good sales were achieved at busy times of the year, such as the summer months and Christmas time. He said that he had a verbal contract with DMT under which he was obliged to provide marketing information. He was unable to explain why his name did not appear in the company's books. He agreed to act on the orders of his employer, who took all decisions relating to pay and to whether the Appellant continued to work for DMT. Mr Mehta had told him that he would deal with all tax matters arising out of his employment.
- That was the sum total of the Appellant's evidence-in-chief. He was cross-examined by Miss Neenan, for the Commissioners, and on the adjourned hearing, in July 2005, gave further evidence-in-chief and was again cross-examined.
- He was asked at the outset why he had not produced his bank statements and why he had said that he had them in his possession when he had not. He said that Mr Duxbury had them, that he had not been asked for them, and had not therefore produced them. He said that although they were not in his possession he was able to produce them. He was not sure when the payments of £100,000 started. He had not said in the interview that he earned £120,000 a year. He gave part of what he was paid back to Mr Mehta. He was referred to the transcript of his interview which had taken place on 15 January 2004. In that interview he said that he had been working for Mr Sood at Silvernet, and Mr Sood introduced him to Mr Mehta. Then Mr Mehta took over Silvernet. He said that he had not been paid on a regular basis by commission for services to Atlantic Bridge, Silvernet, and DMT. He said that whatever he had been paid was paid into his bank account. Of that, he kept a certain amount and handed some back to Mr Mehta. He said that he had explained in the interview that he had given "kick-backs" to Mr Mehta. He said that without his bank statements he could not give an exact figure of what he was receiving each year. He had been receiving £120,000 from Atlantic Bridge; that had not started in 1999, and he could not say when it had. He did not accept that he had been paid at that level for several years. He said that he had never worked for Atlantic Bridge, he had worked for Silvernet. Asked whether he had been paid £120,000 a year by Silvernet, he said that he could not answer without his bank statements. He was paid commission of 5p. in the pound. He had known nothing about DMT, since he had always been working for Silvernet. He said that he had learnt a lot from Mr Duxbury about the companies involved.
- As marketing assistant, the Appellant said, he was responsible for finding out in the cash-and-carry shops what the market prices were. It would depend upon how one negotiated with a cash-and-carry. He would visit wholesalers throughout England, negotiate prices for purchases from them or sale to them, and report back to Mr Mehta who would then get in touch with them. He normally worked about 16 hours a week, but if he was travelling it could be as much as 16 hours in a day. He made notes of the prices, and gave oral reports to Mr Mehta. He was, he said so good at his job that he could only give oral reports. He retained all the details in his head.
- He said that he had been introduced to Mr Mehta by Mr Sood. Mr Mehta had agreed verbally to take him on. That was in about 2002, though he could not say in which month. The terms of his engagement were that he would be paid a basic £500 a week with 5p. in the pound commission. That was all there was to it. Mr Mehta had taken some notes, he had noted the Appellant's National Insurance number and his address. The Appellant said that he had been given some sort of document, which he had tried unsuccessfully to find. Mr Mehta had given him an actual contract when DMT was formed, and he had signed it. That was in mid-2002. He was asked why he had said that he only had a verbal contract. He said that he had a verbal contract of what he would be doing; if he had been more literate perhaps he would have understood. He said that he could not really read or write. The Appellant was referred to a copy of a contract apparently between himself and Atlantic Bridge entered into on 1 March 2002 (and for some reason also dated 1 August 2002), which was stated to be a contract for services and consultancy. The Appellant said that he had never seen that document before; he looked at the signature, and said that it was not his signature, and he did not know who had purported to sign for him. It appeared to us that there was not a great resemblance between the Appellant's admitted signature on his statement and his purported signature on this contract. He declined to read the document, saying that it had nothing to do with him and he had no knowledge of it, even if it were to reflect what he was asked to do for DMT. It may well be, he said, that DMT made many fraudulent signatures. He said that he had learnt from Mr Duxbury that DMT were masters of fraud.
- He was asked about a number of documents which appeared to shew that he provided services to and was paid by Atlantic Bridge and DMT. One was an e-mail dated 31 July 2002 from Courtney Kane, a director of Atlantic Bridge, to Mr Mehta which included the statement "T Bashir payment entered into the banking system." Another was an invoice dated 5 March 2002 from the Appellant addressed to Inder Sood of Atlantic Bridge at an address in Switzerland. The invoice stated that it was in respect of the period from 1 to 7 March 2002, for "trade support", and was for £6,000. It bore a typed signature, "T Bashir", though no hand-written signature, and gave details of an account of the Appellant with Barclays Bank and another with the Woolwich. The Appellant said that he had never seen either of those documents and had not initiated either of them. None of the invoices in the bundle of documents was produced by him, and he added that he was unable to use a computer. He said that he would be given his wages; an amount would be paid into his account and he would pay back to Mr Mehta all but his pay of £2,000 a month and his commission. Out of that £6,000, his commission would have been about £2,000. He admitted that that £6,000 had gone into his account. He did not know what "Trade support" might mean. Another invoice, of the same date and in respect of the same period in March 2002 stated that it was for "finders fee and commission payment for supplier guarantee". The Appellant said that he had no idea what that meant, and that invoice had not come from him. He agreed that that invoice suggested that £6,000 went into his bank account, but he said that he had no records with him and could not confirm or deny this. A further invoice was dated 15 May 2002 and related to the period 17 April to 21 May 2002, also for "Finders fee and commission payment for supplier guarantee", and was for £11,604. The Appellant said that he could not accept that any of these payments went into his bank account because he had not got the statements with him. There were other invoices also which were not individually put to the Appellant.
- A further invoice from Panther Capital Ltd, with a Swiss address, with its heading in Greek characters, was dated 28 January 2003. It stated the customer's name to be T Bashir, giving his address as "Switzerland", and was for £5,000 for "Commission for services and consultancy". The Appellant said that that document had not been created by him, nor had it ever been produced to him. The invoices were addressed to the Appellant at "Bowhill, The Drive, Hailsham, Sussex", which, the Appellant said, was the address of a mental home.
- In interview, Mr Duxbury put to the Appellant that he had been involved with DMT for some five years and had earned about half a million pounds. The Appellant answered, "Impossible. The only, only account I've got is the Woolwich and check it. In total whatever it comes to yeah, fair enough, if there I've earnt it." The Appellant agreed that he had said that. A further number of documents relating to payments made to the Appellant between 1 March and 26 June 2002 were put to the Appellant. In each case he said that he could not accept that the payment had been made to him without reference to his bank statements. The documents included a summary of payments between 1 March and 26 June 2002, which amounted in all to £46,045.
- The Appellant said that he had not been working for Mr Sood for five years. He had been working for him self-employed, with his own company, but had been unable to obtain finance. He therefore decided to work for Mr Sood. He met Mr Mehta, and was asked to work for him providing market information first to Mr Sood and then to Mr Mehta. He said that never at any time had he been self-employed. He had started to supply services to Mr Sood in 2001, though he had known him for a long time. He had not kept records of what his own company had done for Mr Sood. He had not, specifically, been a self-employed agent providing services to Silvernet and then DMT since 2000. He said that he had received monthly wage slips from Mr Mehta, but had destroyed them. He had also received some wage slips from Mr Sood. He agreed that in the interview he had said that he had never received any pay slips. He could not prove that DMT had been paying his income tax.
- The Appellant was referred to a letter from the Inland Revenue to the Commissioners, dated 14 April 2005, which was a response to an inquiry as to the Appellant's position for fiscal purposes. The letter said that he had not been registered for any employment in the previous six years. He had registered as self-employed from 24 April 2001 but had deregistered from December in that year. He had said that the business had never traded, and had rendered a nil return. No employment with DMT was recorded in respect of the Appellant. The Appellant said that there was no such record because of Sood and Mehta not paying his income tax as they said that they were. If they were trading fraudulently, the Appellant said, why should they bother to pay his PAYE?
- The Appellant said that he did not know whether Mr Sood or Mr Mehta had been controlling DMT. He said that he had been working for Mr Mehta. DMT was Mr Mehta's company but he was working for Mr Mehta. If he, the Appellant, was receiving 5p. in the pound, he supposed that Mr Mehta was getting 25p., or as a director even 95p. DMT paid money into the Appellant's account, he said, and he paid kick-backs in cash to Mr Mehta. He would retain about £2,500 a month. The cheques were paid into his account with Barclays Bank, which paid them into his Woolwich account, Barclays being a subsidiary of the Woolwich. Any payslips would have had the Silvernet head.
- Also produced to the Tribunal were the interview of the Appellant, an affidavit sworn by Mr Duxbury in the bankruptcy proceedings, and statements made in the bankruptcy proceedings by Mr Duxbury, Mrs Marston, Mr Mehta and Frances Coulson (producing the transcript of the Appellant's interview). The evidence of the Customs officers was then called. Mr Mehta was not called to give evidence.
- Mr Alan Duxbury was the first of the Customs officers to give evidence. His statement and the affidavit sworn by him were treated has his evidence-in-chief. (In fact the affidavit is concerned entirely with the activities of DMT and its immediate associates in the perpetrating of the fraudulent trading, and adds nothing to the evidence relevant to this appeal.) His statement recorded that he was the senior case officer in the matter of DMT which had been placed in liquidation on the petition of the Civil Asset Recovery Team of Customs and Excise in December 2003. He first heard of the Appellant during an interview with Mr Mehta on 23 December 2003, when Mr Mehta said that it was the Appellant who had introduced missing traders to DMT for the purposes of DMT carrying out fraudulent trading.
- What Mr Duxbury learnt from Mr Mehta was that the Appellant had been introduced by Kamaljit Singh Sood in or about August 2002. The Appellant had introduced missing traders, which were described by Mr Mehta as "agents", and was paid the same monthly fee however many agents he introduced. At that time, DMT was taking over the business of Silvernet, a company operated by Mr Sood. Mr Mehta and the Appellant had devised a document entitled "The use of company agents" which had been found in a notebook in Mr Mehta's desk in the Sackville Street office of DMT. That document was a description of the method of perpetrating fraud on Customs and of how this fraudulent system could be improved. There had been a suggestion that the Appellant and Mr Mehta should set up business together in a warehouse belonging to the Appellant, but that came to nothing. The Appellant introduced a number of missing traders, giving their names, addresses, telephone numbers and VAT certificates to Mr Mehta. These he would hand over at some neutral venue, such as cafés and bars. The Appellant went once or twice only to DMT's offices in St James's Square. Mr Mehta told Mr Duxbury that the Appellant was paid by bank transfers from Panther Capital in Switzerland through a bank in Mauritius, and before that, when he had been working for Silvernet, by Atlantic Bridge through its Swiss bank account. Silvernet had paid him about £12,000 a month and DMT paid him between £7,000 and £8,000 a month. He was not always paid the full amount in a single payment, but frequently in lumps of several thousand pounds each, and was constantly pressing for payment.
- By way of background, Mr Duxbury said that the principal mover in the fraudulent trading, David Singh, had set up DMT after the Swiss authorities had taken action against Atlantic Bridge, which was an off-shore vehicle for Silvernet which was run by Mr Sood. Silvernet also used missing traders in order to evade VAT, and had been assessed to tax in the total sum of £1,248,901. Mr Sood had resigned as a director of Silvernet in July 2002; he was also disqualified for five years under the Company Directors Disqualification Act 1986 on 30 July 2002.
- Mr Duxbury related that all the invoices and other documents relating to payments to the Appellant had been found in the main computer of Atlantic Bridge and the DMT server, both of which had been found in the offices of DMT on 4 December 2003. Substantial amounts of information had been deleted from the computer. Both computers were imaged forensically and deleted material was recovered. The Atlantic Bridge server had belonged to a company known as Prometheus, in Switzerland, which had been run by David Singh. The documents retrieved included a payroll document relating to DMT, upon which the Appellant's name did not appear; a contract of employment between DMT and Krishna Jain; a P.60 issued by DMT to Mr Mehta for 2002-03 which recorded Mr Mehta's earnings of £62,112.98, and a pay slip also issued to Mr Mehta. No documents of any kind relating to the Appellant were found in DMT's office, and there was no evidence of his connexion with that company. Documents going back for many years had been seized and examined. There was also a document headed "Switchboard Information" which listed names of employees, their job titles, telephone numbers, extension numbers and e-mail addresses. Of these there were six, Mr Mehta, Gretta Antonescu, Stephanie Larre, Vijaya Laxsmi, Kamal Sood and David Singh. A note at the bottom of that page said that Mr Sood and Mr Singh did not work for DMT but were contracted external consultants. There was no mention of the Appellant on that document.
- Mr Duxbury was cross-examined in some detail about the mechanics of the fraudulent transactions and the roles of the various companies and missing traders concerned in it. This, in our view, was only incidental to the present appeal. It did shew that Silvernet had created all the fictitious companies which were used in the frauds, and that DMT was claiming input tax in respect of tax that had never been paid by it. Also DMT's bank account was stripped each day and large sums were sent to Panther and to the banks in Mauritius and Switzerland.
- As to the payments made to the Appellant, Mr Duxbury said that he did not believe that the Appellant paid "kick-backs" to Mr Mehta. He did not believe that Mr Mehta was sufficiently trusting to pay large sums to the Appellant in the hope of receiving sums back from him. The fraud itself was a very well oiled machine, and David Singh, who had to approve all payments out, was a very greedy business man with a huge personal expenditure. The fact that the Appellant was chasing up payments did not lend credibility to the payment back of sums paid to him. But if the Appellant was right as to that, it might explain why the sums paid to him were so high, though in a company taking £6,000,000 a year unlawfully why should it be important to launder a mere £150,000? Mr Mehta's earnings could be seen going out of the bank account; he was living in a two-bedroomed flat over a shop. Gretta Antonescu's job was to ring round cash-and-carries and supermarkets to inquire daily as to prices. She was at that time sleeping with David Singh who was paying for her flat. Her salary was inflated; she was nominally a director but was not in reality a director. It was possible that the Appellant was part of a scheme for diverting money, though it was difficult to see why such a company should pay out £120,000 and take say £80,000 back. The fact remains that the Appellant did receive the money. In the context of the frauds, the "kick-backs" were small change. During his interview, Mr Duxbury had suggested to the Appellant that what was going on had been money laundering and that was the purpose of his paying sums back, and he denied it, and said that he was not paying money back.
- When searching through the computers, Mr Duxbury said, they had done word searches over periods when they would have expected to find that the Appellant was working for Silvernet and DMT. There was a large number of documents and of ledgers and spreadsheets in the computer. They discovered that Krishna Jain was the in-house accountant, and that DMT was actually run by Panther. There were no records of payments to the Appellant in the sales ledgers of DMT, but the Panther bank account did shew payments to the Appellant. There was no record of any debt from DMT to the Appellant. If DMT had been paying the Appellant it would have been able to deduct the payments in computing corporation tax. The invoices from the Appellant to Panther could possibly be thought to be invoices from Panther to the Appellant; if so that conceivably could demonstrate a kick-back. They were in the DMT computer; Mr Duxbury did not accept that that shewed that DMT was organising payments and therefore the kick-backs. Mr Mehta had emphatically denied that there had been any kick-backs.
- The invoices were found in the Silvernet-Atlantic Bridge computer, which had been in use for a time before DMT came into existence. The Appellant had no access to that computer, though Mr Duxbury said that he had found on the computer discs numerous documents created by various people who did not work at DMT. It was not impossible that the Appellant could have handed over a disc. He was aware that "Bowhill" was the address of a mental home, and that it was not an address that the Appellant had ever used.
- Mr Adrian Dobson, an officer of customs and Excise, was one of those who attended at the premises of DMT on 4 December 2003. He gave evidence of examining records taken from those premises in which were mentioned payments to "Bashir", who was described as a commissioned person who received substantial cash sums for introducing missing traders to DMT. A list of five payments was given. One of these had been wrongly transcribed from an exchange of e-mails between Courtney Kayne of Atlantic Bridge and Mr Mehta, on 13 August 2002, as "£151,911", which should have been £5,911.76. The e-mails read as follows:
"Sent: Tuesday, August 13, 2002, 7:43 a.m.
. . .
- WPC and T Bashir payments £151911.76
Sent: Tuesday, August 13, 2002, 9:51 a.m.
£151,911.76??!!
Can I have more details please.
Thnx.
MJM
Sent: 13 August 2002 08:37
WPC - £10,000
T Bashir £5,911.76
Total GBP 15,911.76
Input error.
Apologies.
CK"
The sums totalled £37,639.76, and had been deposited into the Woolwich bank account of the Appellant. (The uncorrected figures amounted to £183,539.) As a result of the Appellant's receipts being in excess of the then threshold of £56,000, Mr Dobson said, the assessment of £61,063 was raised. He said that the Appellant had told him that he was an employee of DMT, but that he had found no evidence that that was the case, nor, in spite of having been asked to do so, did the Appellant produce any pay slips, P.60s or P.45s. He had also been informed orally by the Inland Revenue that the Appellant was not registered as an employee of DMT for PAYE and that there was no employment record for him at DMT. He was unable to explain why, if he was an employee of DMT, he was paid through Panther, and, prior to that, by Atlantic Bridge. He was aware that Mr Mehta had said that the Appellant was being paid at the rate of £10,000 a month. Having raised the assessment, he told the Appellant that if he was able to produce any evidence of employment or that the figures were wrong he would reduce the assessment; however no such evidence was produced by the Appellant.
- Mr Dobson said that the assessment had not been based upon the list of payments into the Woolwich, which (when corrected) would not have produced a sufficient total for registration, but on a schedule prepared by Mr Hicks which shewed that the Appellant had, on the basis of being paid £10,000 a month, exceeded the threshold in May 2000, and that compulsory registration should therefore be with effect from 1 July 2000. That schedule had been derived from what the Appellant had said in his interview and in his witness statement in the bankruptcy proceedings. He had seen the transcripts of the interviews of the Appellant and Mr Mehta, but he had seen none of the e-mails. In one of the interviews it was said that he was paid £12,000 and in the other £7,000 to £8,000, and he had taken the mean average. The figure of £61,063 was derived from Mr Hicks's schedule. He had been aware of what information had been given to Mr Duxbury. Mr Dobson said that he had on several occasions asked for copies of the Woolwich bank statements, but none was ever forthcoming. They might have solved a lot of problems. He had not been aware of any Barclays account, since that was part of the Atlantic Bridge matter with which he was not concerned. Mr Dobson said that he had told the Appellant that if he could produce records he could have helped him reduce the assessment, and this could be done even after the appeal. The Appellant had asked for a meeting with Mr Dobson, but never came to any meeting. The Appellant had rung the National Advisory Centre, which had put him in touch with Mr Dobson. Copies of the telephone logs were produced.
- Mr Hicks produced his schedule. This, he said, was compiled on information received from Mr Dobson and mainly from information derived from Mr Duxbury. His schedule shewed a total over the period from April 1999 to November 2003 of £410,000 received. The sums set out in the schedule were treated as inclusive amounts rather than adding 17½ per cent tax to them. He said that the schedule did not go back for six years, and the six years had had no effect upon his calculations, though is was possible that the Appellant had been paid by Mr Sood for longer than that. If he had had all the information from the Appellant the assessment might have been different.
- Helen Marston made three statements. The first, dated 13 September 2004, was made in connexion with the bankruptcy proceedings against the Appellant, as was the second, of 14 April 2005. The third, dated 19 April 2005, and which repeats the contents of the first, was made for the purposes of this hearing. All were put before the Tribunal as her evidence-in-chief. Miss Marston took part in the raid on the offices of DMT on 4 December 2003, when the whole of that company's records, including the computer system, were uplifted. She said that she learnt from Mr Mehta that the Appellant introduced missing traders to DMT in order to facilitate its fraudulent transactions, and that he received cash commissions for so doing. The records revealed a number of payments to "Bashir" which, she said, were well in excess of £56,000. Miss Marston was present at the interview of the Appellant, when he said that he was an employee of DMT and had only become self-employed after the action was taken against DMT in early December. However, she said, there was no evidence within the records of DMT that the Appellant had been employed, although there was evidence of the employment of others. Miss Marston listed the payments made to the Appellant, including the erroneous figure of £151,911. She said that the assessment was based upon the amount of earnings said by Mr Mehta to have been approximately £7,000 a month.
- In her second statement, stated to be further to her statement dated 20 September 2004 [sic] Miss Marston corrected her earlier statement, by saying that she had been informed by the liquidator of DMT that P.45s were no longer issued by liquidators, but that employees of companies which went into liquidation who made claims were listed in a form RP14a. Whatever the procedure, the Appellant made no claim for any arrears of wages, holiday pay, pay in lieu of notice or redundancy from the liquidator, which, if he had been an employee, he could have done. The form RP14a was produced. It listed a number of names, including Mohit Mehta, Krishna Jain, Gretta Antonescu and five others, not including that of the Appellant. In cross-examination, Miss Marston agreed that if the Appellant had had no money outstanding as against DMT it would not be surprising if he had not made a claim.
- The interview with the Appellant took place on 15 January 2004. He was asked first of all about certain companies, which were named to him (and which were missing traders), and which he was said to have introduced to DMT. He denied all knowledge of any of them. When Mr Duxbury put it to him that he had been paid a commission for introducing those companies he said that he had never been paid like that. He went on to say,
"I was working for Mr Sud [or Sood] at Silvernet and that's how I become ... That's how I got to know Mr Mohet Mehta. Mr Mehta was introduced by Mr Sud to me. I was just doing business development for them, Silvernet at the time. And then Mr Mehta had taken over Silvernet and then changed ... I don't know what happened, how that happened or whatever, apart from that I've never been paid in the sense of how you're explaining it. Whatever I was paid, I was paid into my account which you've probably got knowledge of, how much I was being paid. Certain amount I used to keep myself and a certain amount used to go back to them."
Asked to whom they went back, he said "Back to Mr Mehta." He said that he did market research in cash-and-carry shops to see what the price ranges were, and report back orally. He used to report to Mr Mehta outside DMT's offices. He said that he had once been to the St James's Square office but never to the other offices.
- The Appellant said that he had worked for Mr Sud for four or five years, during which he had been self-employed, and was paid about £500 a week. Mr Duxbury put to him that he had been paid on a regular monthly basis by Atlantic Bridge through a computer belonging to a company called Cornethius. The Appellant said that those were new names to him. A number of the specific payments (including the erroneous sum of £151,911) were put to him, and it was suggested that that was inconsistent with what he had said. The Appellant answered to this,
"No. I've said nothing wrong, did you hear what I said? I said that a certain amount used to come to me and a certain amount used to go back to them."
He would receive the payment through his bank and paid them back in cash. It was suggested to him that that was laundering money which was the proceeds of crime. The Appellant said that he did nothing like that. He agreed that on 11 June 2002 £10,464 was paid into his Woolwich bank account, and he said that he would take it out bit by bit and use it. Then the following exchange took place:
"Duxbury: Well, what I'm saying to you is this, that you received £10,464 right? On that particular month. A month later you received a similar sum.
Bashir: Mm-hmm.
Duxbury: You're telling me that you were paid £2,000 a month.
Bashir: No, I was getting commission as well.
Duxbury: So all this money was gong to you was it?
Bashir: Yeah.
Duxbury: So basically we're looking at this. You're receiving about 10 grand a month, right? That's £120,000 year plus dips and go-go, right? And all you were doing was going round and checking on prices and competition within the industry and feeding that back to them.
Bashir: Yep.
Duxbury: You didn't even have a seat in the office, you didn't prepare a report, you just gave them a verbal update on what the price was out there.
Bashir: Yep.
Duxbury: And they were paying you that amount of money?
Bashir: Would you refuse if they was paying you that much?"
- At that point Mr Duxbury explained briefly to the Appellant that they were dealing with a £4.5 million VAT and excise fraud perpetrated through Silvernet by Mr Sood, and that Customs was in possession of all their computers, and that DMT was also involved in the fraud and in excise diversion fraud, and there was something of the order of £30 million at stake. He suggested that the Appellant was being offered up as a scapegoat, and that if he told the truth about the missing traders he, Duxbury, would "just walk away from" him. Mr Duxbury told the Appellant that he had an e-mail from David Singh to Mr Mehta saying that the Appellant would bring all the agents (the term used for missing traders) to the table and provide all their details, and said that he would have difficulty bringing a criminal prosecution against the Appellant because all he was doing was supplying details of companies which existed. It was not suggested that the Appellant was creating the fraudulent invoices. After that the Appellant continued to say that he had no knowledge of missing traders, had never heard of any of the companies named, had been given no instructions to introduce missing traders, and had not in fact done so. He said that David Singh was trying to blame it all on him. He said that he was shocked to hear about what had been done.
- Mr Duxbury asked the Appellant what he had been doing with the money. The Appellant said that he was a heavy gambler, and had been spending £10,000 a month gambling, which was why he had no money left. He suggested to Mr Duxbury that if he had been in with people doing £30 million worth of fraudulent deals he would not only be getting £10,000 a month. Mr Duxbury told him that others in DMT, including Mr Mehta, were in fact paid less than he was, and suggested that over the five years in which he had been involved the Appellant had been paid at least half a million. The Appellant said that that was impossible, that the only account he had was with the Woolwich and whatever was in there he had earned.
- Then Mr Duxbury told the Appellant that he was not on DMT's books, at which the Appellant appeared to express surprise. Mr Duxbury said that since he was running a consultancy business he was self-employed, and he said that he was not, he had been working for Mr Sood, who should have been paying him rather than Atlantic Bridge. He said that he should have been on DMT's books, that DMT was paying his income tax, and that he was paying national insurance. He said that he had no idea why he was being paid by Panther rather than from DMT's account with TSB. He said that he didn't know where the money was coming from but thought it was all from DMT. He said that he had received the money directly into his account, and had never received any wage slip. He paid the national insurance assessments when he received a letter.
- The interview ended with Mr Duxbury saying that if the Appellant did not co-operate he would register him immediately and raise an assessment, that he would get a demand for about £120,000, and if that was not paid he would receive a statutory demand followed by bankruptcy proceedings; he would also inform the Inland Revenue that the Appellant had not been paying income tax. At that point the Appellant said that he wished to get legal advice.
- At the end of the second day of the hearing, in view of the Appellant's repeated statements that he could not say whether he had or had not received certain payments without reference to his bank statements, the hearing was adjourned in order to give him time to produce statements from the Woolwich and from Barclays Bank. The Tribunal reconvened on 6 July 2005. On that date the Appellant produced statements from the Woolwich, but none from his Barclays account. He also produced a payment summary and analysis of the statements. He gave further evidence in order to explain the sources of the payments into his account.
The Appellant's bank statements
- The Appellant produced bank statements relating to a current account in his name with the branch of the Woolwich at 370-372 Green Street, Upton Park, account number 70810101. These extended from 31 March 1999 to 15 March 2005. The account had been opened on 8 March 1999 with two cheques each for £628.15. The statements shew the account to have been very busy, and included a large number of very large cash transactions. The Appellant's analysis of the statements we found to be of very limited value. It set out certain large payments (ranging from £3,245 to £24,097.36) which were said to have been followed immediately by large withdrawals. It also mentioned ATM withdrawals "if they appear to be significant", and mentioned that there were several "POS" withdrawals which were said to be cash-back withdrawals. The payments into the account listed in the analysis amounted to £192,348.54, and the withdrawals listed to £102,250. But the latter figure does not include ATMs amounting to £114,715.24 and POS withdrawals amounting to £64,054.28. Those total withdrawals amount, therefore, to £281,019.52, and that figure does not include other cash withdrawals. It is therefore not clear from that analysis what it is intended to shew. If it is intended to shew that there were large payments followed shortly by the payments of kick-backs, it fails to do so. In the first place, there is no indication at all of the destination of the cash withdrawals. Secondly, there was a large cash withdrawal shortly after the payment in of a sum of £24,097 which was from the sale of a property, according to the Appellant's oral evidence: that was clearly not a kick-back. Thirdly, there were several large cash withdrawals within a very few days after the receipt of a sum of £113,255, said to be the proceeds of sale of a property which had belonged to the Appellant's late mother. That receipt and the later withdrawals were omitted from the analysis. It is also the case that the analysis listed no input for the year 2000, and that certain sums received and recorded in the bank statements do not appear in the analysis. The analysis appeared to us, therefore, to do no more than summarise some, and by no means all, of the payments into and withdrawals from the Appellant's account.
- The Appellant gave evidence by way of expanding the information in the statements. He began by saying that the sum of £24,097 received on 4 November 1999 came from the sale of property, at 75 Hampton Road, Ilford, which he had owned. He also said, at an early stage, and on a number of other occasions, that a lot of the payments in "were my own money coming in from casinos and from other people". He was not able to indicate which payments were in which of those categories. He was referred to statement number 41, which shewed a cash payment in of £11,095 on 24 September 2002 and a cash withdrawal the next day of £5,000 together with a number of ATM withdrawals. He said that the £5,000 may have been a kick-back to Mr Mehta, though he could not say definitely. He could not remember what a lot of the cash withdrawals were, except that he had a lot of bills and expenses going out at the same time. He stated in his oral evidence that the larger sums were going as kick-backs to Mr Mehta "as was clearly shewn in the statements".
- The sum of £113,255 paid in in cash on 28 March 2003, he said, was the result of a remortgage of 18 St Clair Road, which had been owned by his mother, who had died on 30 September 1999. He remortgaged it with either the Woolwich or the Halifax, he could not remember which. He said that he had not brought any documents relating to those two property transactions to court with him because no-one had told him that he would need them. He said that he did not now maintain, in the light of this evidence, that everything that went into his Woolwich account had been earned. He agreed that as well as payments coming in from DMT he also had money coming in on his private account.
- The Appellant was cross-examined as to the large payments into and out of his account.
On 12 August 1999 the sum of £5,438.35 was paid in, and the same sum paid out again on the same day. The Appellant said that he could not remember where that came from. He did not say where it was paid or transferred to.
On 13 September 1999 £1,894.50 was paid into his account. He did not know where that had come from, but said that it might have been Mayfair Telecom or Silvernet. He said that payments from Silvernet, Mr Sood and DMT were paid into that account but were not identified. He was unable to say which of the payments in came from any of those sources.
The sum of £24,097.36 paid in on 4 November 1999 was from the sale of 75 Hampton Road, Ilford. That address was, in fact, the address to which that particular statement was directed. The statement for June 2000 was sent to him at the new address of 18 St Clair Road, Plaistow. The payment out on 8 November of £20,500 was a cash withdrawal for himself. He added that he did not gamble it away.
Between January and April 2000 was when his mother had died, and he had not then been working.
On 21 November 2000 £4,085.64 was paid into the account, probably, the Appellant said, by himself. At that time, he said, there were payments from Mr Sood, though he did not know which. He said also that he had a lot of cash of his own going in and out.
The payment in of £3,000 on 6 February 2001 was a payment in of cash by himself. He said that he had always had money after the receipt of the £24,000. He said that it was possibly a payment by Mr Sood, but not so far as he could remember.
The payment in of £1,580 on 16 March 2001 may have been from Mr Sood, but he could not remember.
On 30 April 2001 £2,200 was paid in; that might have come from Mr Sood, he could not remember.
On 23 June 2001 £10,229 was paid in. The Appellant said that he could not remember where that had come from. It could have been a lot of things, he said, such as money he had lent or winnings from a casino. He had no documentary evidence to shew what it was. He could not remember what the amount of £4,000 withdrawn on 29 June was for, nor the withdrawal of £4,000 on 3 July.
The sum of £6,328.49 paid in on 12 July 2001 might have come from Mr Sood.
On 14 August 2001 £1,663.93 was paid in, and on 21 August £3,173.63. A number of other large payments, of between £3,000 and £12,000 were referred to. The Appellant said that he was receiving payments from Mr Sood but could not remember which they were. Some payments in were from Mr Sood and some were his own payments after the sale of 75 Hampton Road and the remortgage of 18 St Clair Road. He complained that the questions were going round and round. He said that he might have some documentary evidence relating to the remortgage.
The amount of £10,405 paid in on 8 May 2002 might, the Appellant said, be the same payment as the £10,410 listed as paid on 17 April 2002 in the summary of payments made to the Appellant between March and June 2002. It was also possible that the £8,000 paid out on 9 May 2002 was a kick-back paid to Mr Mehta.
Also in that summary there was a sum of £11,904 referred to as being paid on 21 May 2002. The Appellant thought that the sum of £11,899 listed as paid in on that same day in the statement could be the sum after deduction of a £5 service charge. The sum of £8,000 paid out on 21 May 2002 was paid in cash, he said, to Mr Mehta.
A number of other payments which were recorded in the e-mails and computer documents of DMT were referred to. That of £10,459 paid in on 11 June 2002, the Appellant agreed might be the same as the payment of £11,464 recorded as paid to him by DMT, and also that of £4,995 paid in on 28 June 2002 with an e-mail record of payment of £5,000, and £5,159 paid in on 10 July 2002 the same as £5,164 recorded as paid to the Appellant by DMT. The Appellant said that there were also large sums going back to Mr Mehta, and via him to Mr Sood. The whole point, the Appellant said, was that he was being used as an employee by Mr Sood and Mr Mehta, with large sums coming to him and large kick-backs paid. The question was, he said, why they were using him in that way.
There was a series of payments between 2 August 2002 and 31 October 2002, of £5,995, £5,911.76, £1,995, £11,095 and £3,000 which corresponded, in some cases with a £5 difference with payments referred to in the documents. These, the Appellant said, may have been the last of the payments from Atlantic Bridge.
There were two payments in, of £10,245 and £10,250, both on 15 October 2002. The Appellant could not remember whether they were payments from Mr Sood or not.
There was an invoice from Panther referring to a payment to the Appellant of £5,000, and an entry in the statement for 28 January 2003 for £4,995. The Appellant said that he could not remember what that had been, except that the invoice had nothing to do with him, and he had nothing to do with Panther. However, he might, he said, have received that payment from Mr Mehta. However, he repeated, he did have money from his own savings coming in.
Another invoice, for £2,500, might, he said, correspond with a payment in of £2,489 on 13 March 2003, which may have been for services to DMT.
The payment out on 28 March 2003 of £20,082 to Capital One was an error, it should have been £2,082. This was corrected on 11 April by a repayment of £17,953.24.
The payment out on 31 March 2003 of £10,290 to H F C Direct was the repayment of a loan.
The payment of £4,995 on 3 May 2003 may, he said, have been from DMT, but he was not sure.
The sum of £3,994 paid in on 22 May 2003 may have been the same as the £4,000 of the Panther invoice of that date. The Appellant said that that was probably for expenses from DMT, as he had to do a lot of travelling, by cabs, London Transport, and by air. He added that a proportion of all the payments to him would have been to cover his expenses.
The statements shewed a sum of £6,994 paid in on 24 June 2003, and an entry in a payment record from DMT's computer of £7,000 on 27 May 2003. That was probably from DMT, the Appellant said, and would have included expenses. In that same document there were two payments to the Appellant of £3,000 and one of £4,000. The Appellant said that they might have been expenses paid by DMT relating to the whole time that he was working for that company. Since the payments were in DMT's expenditure records, he said, they must have been for expenses. The £2,994 paid in on 2 July 2003 was one of those two payments of £3,000.
The Appellant could not remember whether the payment in of £11,000 on 4 July 2003 was from DMT. He said that it may have been his own money, or winnings from casinos, or from his brothers.
The payment in on 21 July 2003 of £1,000 may have been from DMT, or, the Appellant said, it might have been his own payment in: he did, he said, have a lot of cash which he withdrew and then paid in again. Or may be it was a sum that he had borrowed.
The £2,994 paid in on 28 July 2003 was another of the two sums of £3,000 listed in the payment record. The two sums of £2,494 and one of £2,994 in August 2003 were the same sums as those referred to as the payments of £2,500 and £3,000 listed on another page of the payment summary from DMT's computer.
The payments in of £1,500 and £5,000 at the beginning of September 2003 the Appellant said that he could not remember. He said that they were not from DMT and could have been his own payments. He had, he said, lent money to a lot of people, since he had received £113,000 in March. Also, he was in and out of casinos, being, as he had said in interview, a heavy gambler. He had gambled away quite a lot of money, but not all of it.
The £2,994 paid in on 17 September 2003 was possibly the same as the £3,000 recorded in DMT's Management Cashflow document as paid on 18 September 2003.
On 26 September 2003 £2,994 was paid in, which the Appellant said may have been from DMT. The £1,000 paid in on 29 September was not from DMT; he knew that because all the payments made by DMT at that time were around £2,994. This would have been one of his own payments.
The payment in of £1,994 on 9 October 2003 could have been from DMT, also that of a like amount on 22 October, but those of £1,200 and £1,000 on 3 and 9 October were his own payments in.
The two payments in of £1,994 in November may have been from DMT. Those were the last payments that he had from DMT. The others, of £1,000, £1,300 and £2,000 were not, because there were always charges of £5 deducted from DMT's payments. These would be his own payments in.
The payment in and immediate payment out of £12,300 on 15 February 2004 occurred when his credit card had been stolen and someone had tried to pay that sum into his bank account.
- The Appellant said that the Woolwich was a subsidiary of Barclays. It was possible that before opening the Woolwich account he had had another account, but he could not remember with which bank. There had been payments out of hundreds of pounds throughout the period covered by the statements. This he said was probably his own money, and he could not say where it had come from. There were some payments which had been mortgage payments. He had had mortgages with both the Woolwich and the Halifax at some time. There was a direct debit reference on 1 May 2003 to "ANMF", which stood for Abbey National Mortgage Finance.
- In neither examination-in-chief nor in cross-examination was the Appellant asked about the destination of any of the payments out of his account, some of which were large. There were also many payments out of sums between £100 and £500, either by ATM, or by cash-back, or in cash withdrawals. None of these was explained either. In answer to a question from the Tribunal relating to the kick-backs, the Appellant stated that payments shewn in 14 of the 70 statements were payments back to Mr Mehta or DMT. These were the following:
22 November 2000 £2,500
29 June 2001 £4,000
3 July 2001 £4,000
18 September 2001 £5,500
17 October 2001 £4,000
5 November 2001 £2,000
20 November 2001 £2,500
5 December 2001 £3,000
27 December 2001 £4,000
29 January 2002 £2,000
9 May 2002 £8,000
21 May 2002 £8,000
17 June 2002 £6,000
1 July 2002 £3,000
9 August 2002 £3,000
25 September 2002 £5,000
15 October 2002 £10,250
17 October 2002 £6,500
7 March 2003 £9,000
25 June 2003 £3,000
9 July 2003 £3,000
Those amounted in all to £98,250. The Appellant said that Mr Mehta would ask him to arrange payments of these sums after the money had arrived in his account. It the amount asked for was larger than the payment in, he would wait until more had come in. It was always a round figure. Everything that Mr Mehta earned from the Appellant's activities would, he said, reach him through the Appellant's account. The Appellant added that his only sources of money were DMT, Silvernet, and the properties which he sold or remortgaged. He said that he had made no mention of kick-backs when asked what he had been doing with the money by Mr Duxbury (interview, page 33/37) because he was nervous and had never been interviewed like that before.
- The information given by the Appellant was so incomplete that it was not at all easy to see what money he had received from DMT, Silvernet, Atlantic Bridge and associated companies and what (if any) had been paid back. If the sums which he said were referable to properties owned by him are deducted, his total earnings appear to have been (doing the best that we can on what the Appellant's evidence disclosed) £153,615.66, of which his bank statements suggest that £126,504.82 was paid back. However, for that figure there might properly be substituted the kick-back total that the Appellant gave in evidence. If his evidence is correct, the net earnings therefore appear to have been £57,365.66, or an average of approximately £13,238 a year, or slightly over £1,100 a month.
The Appellant's contentions
- Mr Jeremy Gordon, who appeared for the Appellant, supplied us with a skeleton argument and also a summary of legal argument on the issue of whether the Appellant was employed or not.
- The first point that fell to be considered, Mr Gordon contended, was that the compulsory registration was made on consideration of figures which were obviously wrong and known to be wrong at the time the decision was made. If the Appellant were to succeed on that point, that would be an end of the appeal, the registration would fall, and the assessment with it. The figure was wrong because of a mistake made in an exchange of e-mails between Courtney Kayne of Atlantic Bridge and Mr Mehta on 13 August 2002 (see paragraph 36 above). The corrected figure of payments to the Appellant between June and September 2002 was £37,475.76, which was well under the registration threshold as at April 2003 which was £56,000. Mr Dobson, whose decision it was, so decided because he believed, erroneously, that the Appellant had received £183,539 between 11 June and 24 September 2002, but he admitted in cross-examination that that was so. It was obvious on a cursory examination of the e-mails that the figure was wrong. The Appellant had also denied in interview receiving any such sum. It followed that the decision to register had been made on the basis of information that was inaccurate and obviously so. The nature of the appeal is not the same as that against an assessment, in which case a mere mistake would make little difference. In the case of registration, if the figures are wrong and not over the threshold, then the registration is wrong. The compulsory registration should therefore be set aside.
- The registration was also challenged on the basis that the Appellant was an employee of DMT and that registration was therefore inappropriate. Again, if the Appellant succeeded on that point the registration and assessment would fall. The Commissioners should have accepted that the Appellant was an employee. It was not denied by Mr Mehta until some months after the registration, and he was not asked about it in either interview. Moreover the Appellant was consistent throughout in maintaining that he had been an employee.
- Thirdly, the registration was challenged on the basis that the decision was made on figures which the Appellant has now shewn to have been wrong. The Appellant was used by Messrs Sood and Mehta to channel away their excesses, Mr Gordon said. The Appellant's evidence relating to kick-backs should be believed, for a number of reasons. The Appellant had started to explain about the kick-backs during the interview, but, Mr Gordon said, "was put off by Mr Duxbury's reaction". The evidence about the kick-backs explains why the Appellant did not appear as an employee on DMT's books, since the PAYE and national insurance contributions would have been enormous. It also explains the Atlantic Bridge contract. That contract was an odd document: it purported to start on a date well after that on which the Appellant started to work for Mr Sood; it appeared to be a clumsy adaptation of another document; there was no proper provision for fees, only expenses and a 10 per cent mark-up. It was clearly not a working document. Further no supplier of services would have agreed such terms. It might have been used by Mr Sood or David Singh to explain away large payments made to the Appellant in the course of their fraudulent dealings.
- The Appellant was being paid far more than the work he actually did would justify, a point with which Mr Duxbury agreed during the interview, in which he expressed surprise that the Appellant was paid £10,000 a month just to check up on prices of drinks in cash-and-carry shops. Mr Duxbury also agreed that the Panther invoices could have been evidence of kick-backs, in that they were invoices for payment by the Appellant not to the Appellant. They were used, Mr Gordon contended, to legitimise the payments made by the Appellant back to DMT and its representatives. The schedule of payments referred to as "advances" agreed with that evidence. The payments were advances, not remuneration. Mr Duxbury had agreed that some of the payments listed could be related to money laundering. It was also the case that other employees were in receipt of large payments, in particular Gretta Antonescu, whose salary was supposed to be £20,000 as managing director of DMT, but was being paid £50,000, or, according to Mr Mehta, at least £103,000.
- The invoices which purported to come from the Appellant gave him a bogus address, that of a mental hospital. These documents came from Silvernet's computer. They could not, therefore, have been created by the Appellant, who had never been to the Sackville Street address, where that computer was kept.
- The Appellant's Woolwich account shewed an unusually large number and amount of cash withdrawals after large amounts had been paid in. For all the above reasons the Appellant's evidence that he was paying substantial kick-backs should be believed.
- It was contended also that Mr Mehta's statement that the Appellant had been paid for introducing missing traders as "agents" was not believable. In the first place, Mr Mehta had not given evidence and been cross-examined. He was an experienced business man and an admitted fraudster. There was no corroboration of any of his statements. It was more likely that Mr Mehta made up that allegation against the Appellant to explain the high payments made to him. There was a document headed "Use of company agent" that had been found in a drawer of Mr Mehta's desk. In his interview, Mr Mehta said that it had been drawn up by the Appellant, but Mr Duxbury had said that he did not believe that. Mr Mehta also said, inconsistently, that the document was a joint production of himself and the Appellant.
- Mr Gordon contended that the evidence did not necessarily shew that the Appellant had not been an employee of DMT. The Tribunal should consider whether there had been an implied contract of service which could be deduced as a necessary inference from the conduct of the parties, the circumstances, and the work done by the Appellant: Dacas v Brook Street Bureau (UK) Ltd [2004] ICR 1437, CA. In order to determine whether a person is self-employed it is necessary to consider many different aspects of the work activity, and to view the overall effect and examine the details. These may very in importance from one case to another, and it was not a matter of checking through a list of items to see whether they were present or not: see Hall v Lorimer [1992] ICR 739, 744. To determine whether there is a contract at all there must be mutuality of obligation. Whether it is a contract of service depends upon control: Stephenson v Delphi Diesel Systems Ltd [2003] ICR 471. The particular points in the present case, Mr Gordon said, were, first, that the work had to be done by the Appellant himself. Secondly, there was control of his activities by his employer which amounted to subservience. Thirdly, there was a regularity and consistency of work. Lastly, the Appellant was paid monthly. The formal appearances of employment, PAYE, national insurance, paid holidays, and the like were not necessary to shew that there was a contract of employment, but if present these would shew that there was such a contract.
- Mr Gordon contended that if the Appellant was liable to pay any VAT the quantum should be revised. The Appellant had been right when he had said that his memory was very poor: this was especially true when it came to dates and figures. But an imperfect memory did not mean that he was dishonest. The first payment to the Appellant by Mr Sood was on 23 June 2001. The assessment went back to 1999 based upon what the Appellant had said to Mr Duxbury, and it could not stand for that reason alone if no other. The Commissioners' schedule was based upon the Appellant's figures, but these were not necessarily the amounts that he had been paid by DMT.
- The bank statements shewed, Mr Gordon said, that small sums had been paid into the account ahead of direct debit payments out, for mortgage instalments for example. There were funds to do that because of the proceeds of sale of one property and the remortgage of the other. It was obvious that it was a remortgage, as the mortgage instalments went up. The round figures paid in were not those from DMT or Silvernet. Therefore the round figures should be excluded from the calculation of the Appellant's receipts for VAT purposes. If that is done, the receipts do not reach the registration threshold in any quarter. But even if they are not deducted, the kick-backs should be. A reasonable amount should also have been deducted for the Appellant's expenses. There was a page missing from the statements, which was statement 33, covering the period from 28 February to 31 March 2002. It was possible that the payments listed in the "Total of advances" document (amounting to £46,045) could have been recorded in that statement. (That document covered the period 1 March to 26 June 2002, and of that total £13,267 was listed as having been paid in March 2002.) Early in the interview the Appellant had mentioned the kick-backs, and then dropped it when Mr Duxbury started talking about money laundering, and did not raise the subject again until the hearing. At the end of the interview Mr Duxbury "put the frighteners on the Appellant", and the matter remained under cover until the hearing.
The Commissioners' contentions
- Miss Caroline Neenan, for the Commissioners, also produced a skeleton argument, and supplementary submissions in writing in response to those of the Appellant.
- Dealing first with the bank statements, Miss Neenan observed that although the Appellant had said that Mr Sood had paid him by cheque into his Barclays Bank account, no Barclays statements had been produced. The Woolwich statements shewed very few payments in in 1999-2000, which suggested the existence of another, undisclosed, account. There was only one payment into the Woolwich account over £1,000 in the year 2000, which was not consistent with the Appellant having been employed. Miss Neenan contended that the assessment should not be reduced simply because the picture was incomplete. It had been made on the facts then known to the best of the Commissioners' judgment.
- It was not accepted by the Commissioners that the payment in of £113,255 was the proceeds of a remortgage. No documents were produced to shew that this was so. Nor was it accepted that the receipt of £24,097 came from the sale of a property. The Appellant seemed very sure of which of the payments out were kick-backs, notwithstanding his vagueness and uncertainty about which were payments in from DMT and which not. It was contended that the Appellant was simply looking for large outgoings and saying that they were kick-backs. But even if they were kick-backs, that did not mean that the receipts were not taxable. The statements shewed that the registration threshold figures had been exceeded. They contained no information which would dislodge the assessment.
- It was the Commissioners' case that between July 2000 (at the latest) and late 2002 the Appellant provided the service of introducing missing traders to Atlantic Bridge for payment. After that period, he provided the same services to DMT. He was not an employee of either company, but an independent contractor. His supplies exceeded the registration threshold in or about May 2000, and he was therefore required to be registered with effect from 1 July 2000 under section 3 of the 1994 Act and paragraph 1(1)(a) of Schedule 1 to that Act. Not having notified the Commissioners of his liability to be registered, he was compulsorily registered under paragraph 5(2) of Schedule 1.
- In support of the contention that the Appellant was not employed, the Commissioners relied in particular upon the following. First, the contract for services and consultancy agreement between the appellant and Atlantic Bridge Dated 1 March 2002. Secondly, the fact that the Appellant had produced no bank statements (until the adjourned hearing) wage slips or other records, P.60, or any other documentation to shew that he had been employed. Thirdly, that during the interview the Appellant said that he had been self-employed. Fourthly, that there was no record anywhere in the records of DMT that the Appellant had been an employee. Fifthly, that the Appellant had no desk, computer, or work-station on DMT's premises. Sixthly, that he had produced no evidence to demonstrate that he was carrying out market research for DMT as an employee. Seventhly, that he had not been registered for PAYE for any employment during the previous six years. Eighthly, the Appellant had claimed no arrears of wages, holiday pay, pay in lieu of notice, or redundancy pay from the liquidator of DMT. Lastly, that when interviewed, Mr Mehta had said that the Appellant was paid fees for introducing missing traders.
- It was also the case that DMT had had employees whose particulars were to be found in the company's records. These included e-mail instructions to add two new employees to the pay-roll, a bank report shewing payment of "wages" to a named individual, a printed schedule of payments to employees, a schedule of directors' emoluments relating to Mr Mehta, switchboard information giving employees' names and job titles and extension numbers, a contract of employment of Krishna Jain, a payslip and a P.60 for Mr Mehta, and employee information from an employer's representative. All this in contrast to the absence of any such documents relating to the Appellant.
- Miss Neenan relied upon the factors identifying a contract of employment as set out in Chapter 39 of the 29th edition of Chitty on Contracts. Those factors included the following. The degree of control exercised by the employer: in this case no control was exercised over the Appellant by DMT. Whether the worker's interest in the relationship involved any prospect of profit or risk of loss: the Appellant was not paid a share of the profits which resulted from his marketing information. Whether the worker was regarded as part of the employer's organisation: clearly the Appellant was not. Whether he was carrying on business on his own account or carrying on the business of his employer: the Appellant was engaged to provide services as a person in business on his own account. The provision of equipment: there was no evidence of any equipment being provided. The incidence of taxation: the Inland Revenue had no record of the Appellant being in any employment during the preceding six years. The traditional structure of the business concerned: the Appellant was carrying out the unusual function of introducing missing traders. The parties' own view of their contractual relationship: Mr Mehta clearly considered that the Appellant was an independent contractor, the Appellant first said that he was self-employed, and then that he was an employee. It was contended that on the evidence it was clear that the Appellant was engaged to provide services and consultancy which he did as a person in business on his own account
- The authorities relied upon by the Appellant were principally those relating to agency situations, in which the contract was between the worker and the agency and between the agency and the employer, but no contract between the worker and the employer. They are, Miss Neenan contended, of no assistance in the present case.
- As to the quantum of the assessment, Miss Neenan contended that the assessment had been made to the Commissioners' best judgment, and referred us to the decision of the Court of Appeal in Rahman v Customs and Excise Commissioners [2002] STC 73. In spite of requests, the Appellant had produced no bank statements or any documentary evidence as to the amount of payment that he received. The documents produced by the Commissioners, derived in many cases from DMT's or Atlantic Bridge's computer, shewed that the Appellant's receipts were well in excess of the registration threshold and amounted, between March 2002 and July 2003 to £101,170. In interview, the Appellant had accepted that he had been receiving about £120,000 a year from DMT. Mr Mehta, when interviewed, said that the Appellant had been paid about £12,000 a month by Atlantic Bridge and later he had negotiated it down to £7,000 to £8,000 a month by DMT. The assessment was based upon the admission that he had received £120,000 a year, or £10,000 a month in earnings and commission. The VAT was calculated as 7/47 of that amount.
- Replying to the Appellant's written submissions, Miss Neenan said that the decision to register had been based upon the estimated value of the Appellant's taxable supplies taken from his admission in interview that he received £120,000 a year and Mr Mehta's statement that he was paid £12,000 a month. The value of his taxable supplies therefore exceeded the registration threshold, and the Commissioners were under a duty to register him. The assessment followed in January 2004. The invoices which shewed payments to the Appellant, extracted from the computers, were not available to the Commissioners until 3 June 2004. While Mr Dobson's witness statement disclosed a mistake in the amounts of payments therein referred to, in his oral evidence he made it clear that the decision to register was based upon what had been said by the Appellant in interview. It was contended, therefore, that the decision to register was not based upon erroneous information. In any event, the evidence shewed that the value of the Appellant's taxable supplies was in excess of the registration threshold, and for that reason cannot be set aside. Miss Neenan said, that the Commissioners' position is and remains, that if the Appellant were to produce the relevant documentation the assessment would be reconsidered. Mr Dobson had requested the Appellant to produce evidence that would assist in establishing his true liability.
- The Appellant had said in interview that he was self-employed, and it was not until after he had been told that if he was self-employed he ought to have been registered for VAT that he said that he was employed and that he should have been on the books of DMT as an employee. For that reason, there was no obligation to accept the Appellant's statement that he was an employee. Although Mr Mehta was not expressly asked in interview whether the Appellant was an employee, it was clear, Miss Neenan contended, from the details given by him in interview that the Appellant was not an employee of DMT.
- As to the repayments of cash to DMT, or kick-backs, the Commissioners contended that the evidence shewed that there had been no such repayments to anyone other than or before Mr Mehta. The whole suggestion was bizarre, and it was unclear how any such system could have worked. It did not make sense in the context of DMT's operation. The Commissioners relied upon the following facts as demonstrating the improbability of the alleged kick-backs. At 3.0 p.m. each working day all the money in DMT's account was cleared out by Panther, and paid into its Mauritian account from which it was paid to the Appellant (amongst others). It was not believable that the Appellant would have returned any or any significant amount in cash at irregular intervals to Mr Mehta. It was suggested that Mr Mehta would not be silly enough to trust someone whom he barely knew, and was inconsistent with the highly organised and efficient DMT. Also, the repayments were very small change compared with the amounts of money that DMT was taking in.
- Even if, contrary to the Commissioners' contention, the Appellant was repaying sums to Mr Mehta or DMT, that would not have the result of bringing his receipts below the registration threshold. The money was received by the Appellant for services provided by him as an independent contractor: provided that he accounted for VAT at 17½ per cent, what he did with the money was his own affair.
Findings of fact and conclusions
(1) - The employment issue
- We find helpful guidance on this issue in the judgment of Mummery J in Hall (HMIT) v Lorimer [1992] ICR 739 at 744; [1994] STC 23, which was approved by Nolan LJ in the Court of Appeal ([1994] ICR 218). His Lordship said,
"In order to decide whether a person carries on business on his own account it is necessary to consider many different aspects of that person's work activity. This is not a mechanical exercise of running through items on a check list to see whether they are present in, or absent from, a given situation. The object of the exercise is to paint a picture from the accumulation of detail. The overall effect can only be appreciated by standing back from the detailed picture which has been painted, by viewing it from a distance and by making an informed, considered, qualitative appreciation of the whole. It is a matter of evaluation of the overall effect of the detail, which is not necessarily the same as the sum total of the individual details. Not all details are of equal weight or importance in any given situation. The details may also vary in importance from one situation to another."
With that guidance in mind we examine the detailed picture of the Appellant's work activities. We also bear in mind the passages in Chitty on Contracts referred to by Miss Neenan, which highlight the details at which we must look.
- In the first place, there was no written contract from which it could be discovered whether there existed between the Appellant and DMT a contract of service or a contract for services. The Appellant said in his witness statement that he had a "verbal" agreement with Mr Mehta under which he would do what he was instructed to do and would be paid monthly and would receive a commission of 5p in the pound as well. He also said, in his oral evidence, that he signed a written agreement; no such document was ever produced. In interview he said that he had been self-employed for some five years or more, and he did not say that he had been an employee of DMT until after it had been suggested to him that if he was self-employed he ought to have been registered for VAT. It was also the case that the Appellant's name did not appear anywhere in the books and records of DMT. There was no record of PAYE having been accounted for by DMT for him, nor of employer's national insurance contributions having been paid on his behalf. Nor did he make any claim for payment in lieu of notice, or redundancy pay, from the liquidator of DMT. We accept that there might have been no arrears due at the date of the liquidation, nor holiday pay. But the liquidation was achieved with expedition, and the Appellant must have found himself suddenly out of a very well paid job, if he had been an employee. By contrast, other employees of DMT were recorded in the books of the company and did receive documents relating to their remuneration. The Appellant never received a pay slip or a P.60 during the whole of the time during which he was working for DMT or Silvernet.
- As to the control exercised over the Appellant by DMT, all that the evidence disclosed was that he worked for three or four hours a day for three or four days a week, about sixteen hours a week, unless he was travelling in which case it might have been up to sixteen hours in a day. The Appellant gave no evidence about any specific orders that he was given, and it appeared to us that he worked as and when he wished. The fact that he had no desk, work-station or computer in DMT's premises did not appear to us to be of great importance, since it is no unusual thing for an employee to work entirely outwith the office. Nor did the fact that the Appellant was provided with no equipment appear to be a very important consideration, since the nature of the work that he did, whether it was as he described or as Mr Mehta stated, appeared to require no equipment.
- The Appellant stated that he was paid monthly. However, the bank statements did not suggest that. According to them he appeared to have been paid somewhat irregularly. He did not identify any entries in the statements as being regular monthly payments of a salary. Furthermore, he was not paid by DMT, as an employee of DMT would normally have been, but by a roundabout way through Panther and a Mauritian bank account.
- Those are the details of the picture that we must examine. Standing back from it, and scrutinising it with care, we find that it does not depict a situation of employment by DMT or by any other company or organisation. Nor was there evidence from which a contract of employment could be implied from the conduct of the parties. The facts contained in the evidence do not amount to the Appellant being an employee. In our view, they clearly shew that he was carrying on business on his own account on the basis of a very loose contractual arrangement with Silvernet and then DMT: he was to provide certain services, and would be paid for doing so.
(2) - The registration issue
- The sequence of events, so far as concerned the Appellant, began when the Customs officers discovered references to payments of substantial sums of money to him apparently by DMT, or at any rate, when they were examining documents and records of DMT seized on 4 December 2003. On 23 December 2003 Mr Mehta was interviewed by Customs officers. He gave certain information to the officers concerning the Appellant and the Appellant's role in the DMT activities. We have given little weight to what Mr Mehta told the officers, because he did not give evidence before us and all that he told the officers was disputed by the Appellant. He was not cross-examined, and there was no opportunity for the Appellant to challenge his allegations. However, the important thing, as it appeared to us, was that the Commissioners had been told a great deal about DMT and about the Appellant by Mr Mehta, which they considered believable, and were entitled to rely upon in their investigations. This included the allegation that the Appellant's role was the introduction of missing traders to DMT in order to facilitate DMT's fraudulent activities. We make no finding of fact as to whether that was true, since it does not affect the matters which we have to decide.
- However, more important than that was that Mr Mehta told the officers that the Appellant had been paid £12,000 a month by Silvernet, and that when DMT took over Silvernet's activities under his direction he negotiated that down to between £7,000 and £8,000 a month. In the interview of the Appellant, on the same day, the Appellant accepted that he was being paid £120,000 a year, or £10,000 a month. He also said that he was being paid £500 a week and commission on top of that at the rate of 5p in the pound of (we understood) DMT's sales resulting from the information provided by him. How much that was was never divulged by the Appellant. The Woolwich statements shewed receipts significantly in excess of the registration threshold, which was £54,000 in 2003:
8 March to 30 December 1999 £40,713.32
16 May to 31 December 2000 £7,173.75
1 January to 31 December 2001 £75,679.61
1 January to 31 December 2002 £121,108.31
1 January to 31 December 2003 £209,319.46
The payments listed (erroneously) by Mr Dobson were recorded between 11 June and 24 September 2002, and, when corrected, amounted to £37,639.76. The payments into the Woolwich account in the same period amounted to £47,594. Between March and May 2002, receipts into that account amounted to £25,054, though that was the period in which one statement was missing. The closing balance in statement 32 was £1,678.91, and the opening balance in statement 34 was £271.99. There is nothing to shew what the receipts and payments may have been in the missing statement. The receipts in the October to December period amounted to £36,205. It was Mr Dobson's oral evidence that his decision was based upon the evidence then before the Commissioners, which was contained in the transcripts of the two interviews, that of the Appellant and of Mr Mehta. The payments into the Woolwich account seem to correspond very nearly with the £120,000 mentioned by Mr Mehta and the £10,000 a month with which the Appellant agreed.
- On the basis of those figures, it is clear that the Appellant's receipts were greatly in excess of the registration threshold during 2001 and thereafter. (Incidentally, though we make no finding of fact on this point, it is remarkable that the Appellant, whether earning £12,000 or between £7,000 and £8,000 a month, should have paid only a little over £7,000 into what he said was his only account during the whole of the year 2000.) He was, therefore, required under paragraph 1(1)(a) of Schedule 1 to the 1994 Act to be registered at some time during 2001. The fact that the list of payments found and misread by the officers contained a grotesque error, and the fact that that list of payments did not itself exceed the threshold, appears to us to be nothing to the point. The evidence was that the decision was based upon what the Appellant and Mr Mehta had said, and the fact remains, on the evidence of the Woolwich statements, that the Appellant was at that time required to be registered. In our judgment, therefore, the decision to register him compulsorily was correct.
(3) - The amount of the assessment
- The amount of the assessment was calculated on the evidence that the Appellant was making taxable supplies to the value of £120,000 a year. That was, at the time when the assessment was raised, credible evidence. It is also the case that the Appellant has been given many opportunities to explain to the Commissioners what each of the payments was and the contractual relationship, in detail, between himself and anyone for whom he carried out work and to whom he made taxable supplies. He has failed to do so. He has mentioned kick-backs paid, in large sums, in cash, to Mr Mehta (whether for himself or for DMT has never been clear). As to those alleged payments, the evidence relating to them was far from satisfactory. If DMT and Mr Mehta were carrying on a large-scale fraud on Customs, it is not surprising that such payments are not documented, if they amount to money laundering. However, in the context of what appeared to be a multi-million pound fraudulent "business", it does appear to us to be unlikely that payments should be made to an outside agent, a fortiori to an outside employee or agent, a significant part of which fell to be repaid in cash. Like Mr Duxbury, we, too, have difficulty in accepting that Mr Mehta, or his well organised group of companies, would trust someone such as the Appellant to repay substantial sums once paid to him. We use the word "substantial" in this context because as a proportion of what the Appellant was being paid the sums claimed to have been repaid were substantial. But in the context of the whole fraudulent scheme they must have been, again in Mr Duxbury's words, small change. Although the Appellant mentioned the repayments at an early stage of his interview, he appeared later on to abandon that allegation, to revive it only at the hearing of the appeal. Having read his interview, his witness statement, and having heard his oral evidence, we considered that, in view of the inconsistencies and self-contradictions in it, as will be apparent from the review of it in this decision, the Appellant's evidence should be treated with considerable caution at best, and we were not confident that he was always a witness of truth. For the above reasons, on the balance of probabilities we are unable to accept that the Appellant was repaying a large, or any, part of his receipts either to DMT or to Mr Mehta, or, indeed, to anyone else. In any event, if we were wrong to find that there were no such repayments made by the Appellant, we agree with Miss Neenan's contention, that the receipts were, on the Appellant's evidence, receipts from DMT for the services provided by him, and what he did with the money after receiving it was a matter for him, and did not affect the liability to VAT in respect of those receipts.
- It was suggested by Mr Gordon that the kick-backs should be deducted from the calculation of the assessment, and that a reasonable allowance should be made for the Appellant's expenses. We have already rejected the matter of the kick-backs. As to the expenses, it may very well be proper that a deduction should be made for expenses. However, in this sphere as well the Appellant has failed to produce any evidence save a bare assertion that he incurred some travelling expenses. He has produced no evidence of what expenses he incurred, on what dates, or for what purpose. The Commissioners have said, more than once, that if such evidence were produced they would be prepared to reconsider the amount of the assessment. It is therefore still open to the Appellant to produce such evidence; but without it, in our view, the Commissioners are not obliged to make guesses as to what the expenses may have been.
- It was also said by the Appellant that some of the receipts were "his own money", or winnings from casinos, or from some source or sources other than DMT, Silvernet, or other allied bodies. In particular he referred to two sums as having come, the one, from the sale of a property, 75 Hampton Road, and the other from the remortgage of 18 St Clair Road. Once again, no evidence of either transaction was forthcoming. If such evidence exists, it is very much to the Appellant's disadvantage not to disclose it. However, the Commissioners are not, in our view, obliged to accept the Appellant's uncorroborated word as to the origin of these sums, and neither do we.
- In our judgment, the amount of the assessment raised as a result of the compulsory registration of the Appellant was, in the light of the evidence before the Commissioners at the time when it was raised, was reasonable. No particulars have been given by the Appellant which suggest to us that the amount was wrong. It was not, in our view, arrived at capriciously, vindictively, or dishonestly, nor was it a spurious guess lacking the elements of judgment. It was based upon evidence which the Commissioners were entitled to accept at that stage of the matter, and which was not, between the interviews and the raising of the assessment, denied by the Appellant. We conclude that it was made to the best of the Commissioners' judgment. It may be that after the evidence produced at the hearing there is matter which would make a reconsideration of the assessment a proper course to follow. It would still be open to the Appellant to produce any evidence which might be of assistance in so doing.
- For all the above reasons, this appeal must be dismissed, save only to the extent that a reconsideration of the quantum of the assessment may, in the light of any further evidence that may be produced, be necessary.
- The Commissioners said that they would not be asking for their costs of this appeal. Accordingly, we make no order as to costs.
ANGUS NICOL
CHAIRMAN
RELEASED: 17 October 2005
LON/04/1348
