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	United Kingdom VAT & Duties Tribunals Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> Globe Logistics Ltd v Revenue & Customs [2007] UKVAT V20265 (20 July 2007) URL: http://www.bailii.org/uk/cases/UKVAT/2007/V20265.html Cite as: [2007] UKVAT V20265

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20265

SECURITY — poor compliance record — previous notice of security satisfied by Appellant — reasonableness of Commissioners' decision — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

GLOBE LOGISTICS LIMITED Appellant

- and -

THE COMMISSIONERS FOR

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: Lady Mitting (Chairman)

Mary Ainsworth

Sitting in public in Manchester on 25 June 2007

Mr A Teal, director, for the Appellant

Bernard Haley, of the Solicitor's office of HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2007

DECISION

1. The decision under appeal is that of the Respondents contained in a letter dated 8 November 2006 to require the Appellant company to give security under paragraph 4(2)(a) Schedule 11 of the Value Added Tax Act 1994. The amount of security required was £31,950.44.
2. On behalf of the Appellant, we heard evidence from its director, Mr Andrew Teal, and on behalf of the Respondents we heard oral evidence from Mrs Helen Stanley, the officer responsible for raising the requirement.
3. When the case originally came before Mrs Stanley, she was aware that there had been a previous notice of requirement to provide security dated 27 October 2005. This requirement was satisfied when the Appellant paid £14,000 and agreed to go onto monthly returns. The Appellant had registered for VAT with effect from 20 April 1998 and its compliance record was good until period 03/04 when arrears began to build and it was for this reason that the earlier notice of requirement was raised. When paid, the Appellant's then indebtedness was then offset against the security. The returns for 09/05 and 12/05 were submitted and paid on time but from 03/06 onwards, returns were submitted late, payments were made late and in some cases not at all. Default surcharges had been raised and had also gone unpaid. By month 08/06, the total tax on the returns outstanding was £22,050.44 and default surcharges of £1,994.76, making a total indebtedness of £24,045.20.
4. Mrs Stanley considered the position on 4 September 2006. The latest information she had was up to and including period 08/06. She saw a history of deteriorating compliance and accumulating indebtedness; the delays in payment were getting substantially longer and a number of payments not made at all. Mrs Stanley also took note of the fact that being a limited company, the Appellant could have become insolvent at any time, leaving the Revenue with no protection. For all these reasons, Mrs Stanley considered that there was a significant risk to the Revenue and that security should be required. She based the amount of security on the VAT declarations for periods 09/05 to 06/06 inclusive. As the Appellant was on monthly returns, she based the requirement on four months net tax, adding on the amount of the debt.
5. Unknown to Mrs Stanley, by the time she raised the requirement, a return had been submitted for period 09/06. It was in the sum of £1,690.02, was received on 1 November 2006 but no payment had been made. Had she been aware of this, the amount of the indebtedness would therefore have been that much greater than she believed it to be.
6. Mr Teal told us that his business was concerned with refrigerated forwarding. He arranged the transport for people who wished to import and export refrigerated goods throughout Europe. His problems had begun when he had incurred two bad debts, one Spanish and one Irish. He had been chasing these debts for some three or four years but without success. His approximate annual turnover had been £380,000 for the year ending 31 March 2007. His last annual accounts were up to March 2005 when he had made a net loss of £20,000. He did not know his figures for 05/06 or 06/07 but believed that he would also have made a loss in those years.
7. Mr Teal submitted that if only he could recover the two outstanding debts, he would once again be on top of his financial situation and could clear his indebtedness. His plea to us was that we should give him time so to do. The company was not in a position to raise the amount of security requested and he made an alternative suggestion that the amount of the debt be deducted from the amount of security required and he would try and agree a repayment schedule with the Civil Recovery Unit. Although he did not expressly say so, the implication was that if the debt were taken out of the amount required, he would be able to raise the remainder of the security. Mrs Stanley said that this was not an offer which would be acceptable to the Respondents and they would want the debt to be repaid in full before they could even begin to reconsider the security.
8. As we explained to Mr Teal, our jurisdiction is supervisory and we are limited to considering the reasonableness of the Respondents' decision, such consideration to be limited to those matters prevailing at the time the decision was made. We believe the decision made by Mrs Stanley was totally reasonable. She had in front of her one previous request for security which had been satisfied, but this was then followed by a deteriorating compliance record with the amount of the indebtedness increasing month by month. The factors which she took into account were relevant and reasonable. She explained that the most significant factor was the deteriorating compliance record and although she did take into account the fact that the Appellant was a limited company, this was of minor significance in her thinking. There are no other factors which she ought to have taken into account but did not. Her calculation of the tax due was correctly based on four months' tax and was based on the Appellant's own declarations for a 12 month period.
9. We find the decision to require security was reasonable. There are no grounds upon which we could expect the Respondents to reduce the amount required and the appeal is therefore dismissed. Mr Haley made no application for costs and no order is made.

LADY MITTING

CHAIRMAN
Release Date: 20 July 2007

MAN/06/087