Grenville Hotel v Revenue & Customs [2006] UKVAT V19624 (13 June 2006)

19624

VAT – Requirement to give security – Para.4(2)(a), Sch. 11, VATA 1994 –whether requirement reasonable – whether quantum of security required reasonable – Held on the evidence that the requirement for security and quantum reasonable – Appeal dismissed

LONDON TRIBUNAL CENTRE

THE GRENVILLE HOTEL	Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S
REVENUE AND CUSTOMS	Respondents

Tribunal:	JOHN WALTERS QC (Chairman)

Sitting in public in Plymouth on 23 May 2006

The Appellant was not present or represented

Mrs. Pauline Crinnion, Advocate, of the Office of the Acting Solicitor for HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2006

DECISION

1.	This is an appeal by The Grenville Hotel (“the Appellant”), which is a partnership of which a Mr. Colin Hirons is a partner, against a requirement to deposit security, which was made by the Respondents (“Customs”) by a letter (“the Notice”) dated 8 March 2005.  
2.	The requirement was made pursuant to paragraph 4(2) of Schedule 11 to the VAT Act 1994, which reads as follows:
“(2) If they think it necessary for the protection of the revenue, the Commissioners may require a taxable person, as a condition of his supplying or being supplied with goods or services under a taxable supply, to give security, or further security, for the payment of any VAT that is or may become due from–
(a) the taxable person …”
3.	The requirement in this case is that the Appellant give security in the sum of £5,450, if quarterly returns are to continue to be rendered, or £3,600, if monthly returns were to be rendered.
4.	The reason given by Customs for requiring security is that at the date of the Notice the Appellant owed Customs £21,731.91.  This debt was made up VAT due (both pursuant to returns submitted and also an assessment following a visit by Customs), default surcharges and interest.  
5.	The Appellant has been in the default surcharge regime since the VAT period 02/93, and at the current rate of 15% default surcharges (the maximum rate) since the VAT period 02/03.  There have been 45 default surcharges raised against the Appellant.
6.	The level of security required was calculated by reference to the Appellant’s own declarations for the VAT periods 08/03, 11/03, 02/04 and 05/04.  These declarations showed VAT due for the 12 months ended 31 August 2003 as £10,913.43.  
7.	In accordance with Customs’ policy, an amount equal to 6 months’ VAT liability is required as security, where quarterly returns are to be submitted.  The amount of £5,450 is calculated as one half of £10,913.43 (rounded down).  Again, in accordance with Customs’ policy, an amount equal to 4 months’ VAT liability is required as security if monthly returns are to be rendered. The amount of £3,360 is calculated as one-third of £10,913.43 (rounded down).
8.	 The Appellant’s appeal is on the following grounds (taken from the Notice of Appeal):
“The amount of security is far above normal returns.  Have had assessment with no follow up as to how amount of VAT due was calculated.  Requested a complete breakdown and was denied.”
9.	Only the first sentence of these grounds directly relates to the decision to require security.
10.	The Appellant was not present in person or by a representative when the appeal was called on.  The Tribunal was told by its clerk that information had been received that Mr. Hirons was going to fax to the Tribunal Centre a withdrawal of the Appellant’s appeal.  Mrs. Crinnion, for Customs, confirmed that she had information that the Appellant wishes to withdraw its appeal.
11.	No withdrawal of the appeal had been formally received at the Tribunal Centre when the appeal was called on and therefore the Tribunal treated the appeal as effective.  
12.	The Tribunal decided to hear the appeal in the absence of the Appellant pursuant to rule 26(2) of the VAT Tribunals Rules 1986.
13.	The Tribunal heard evidence from the Customs officer who took the decision to require security and issued the Notice, Mrs. Andrews.
14.	Copies of the Appellant’s VAT returns for the periods 08/03, 11/03, 02/04 and 05/04 were before the Tribunal and so it was able to confirm that the security required was equivalent to 6 months’ and 4 months’ VAT liability as submitted by Customs.
15.	From the Notice of Appeal, the Tribunal deduced that the Appellant’s real complaint was not against the reasonableness of the security requirement, but against its quantum.
16.	On the basis of the evidence before it, the Tribunal considered that the appeal was hopeless.  The requirement for security is reasonable for the protection of the revenue and the quantum is also reasonable (cf. paragraph 4(2)(a), Schedule 11, VAT Act 1994), being calculated by a reasonable methodology, based on the Appellant’s own figures.
17.	The appeal is therefore dismissed.
18.	Customs asked for costs of £81 to be awarded against the Appellant, to cover Mrs. Andrews’s costs in attending the hearing in Plymouth.  She is based at Southampton.  The Tribunal directs the Appellant pursuant to rule 29(1)(a) of the VAT Tribunals Rules 1986 to pay that amount within 28 days of the date of release of this Decision to Customs on account of their costs of the appeal.

JOHN WALTERS QC

CHAIRMAN
RELEASE DATE: 13 June 2006

LON/2005/0361