20319

SECURITY — appellant trading from same premises in same line of business with same personnel as previous failed businesses — reasonableness of the Commissioners’ decision — appeal dismissed 

MANCHESTER TRIBUNAL CENTRE

SLIMLINE EURO LIMITED	Appellant

- and -

THE COMMISSIONERS FOR
HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

Tribunal: Lady Mitting
Mohammed Farooq

Sitting in public in Birmingham on 31 July 2007

The Appellant did not appear and was not represented

Bernard Haley, instructed by the Solicitor and General Counsel for HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2007

DECISION

1.	The Appellant appealed against the decision of the Commissioners contained in a letter dated 27 September 2006 and amended by letter dated 3 November 2006, being a requirement to give security under Schedule 11 paragraph 4(2)(a) Value Added Tax Act 1994.  The original amount required was £38,700.00 if quarterly returns were submitted or £25,800 for monthly returns.  This was reduced on reconsideration to £20,900 and £13,900 respectively.
2.	The case had originally been listed for hearing on 20 June 2007.  There was no representation on behalf of the Appellant and when the Tribunal clerk telephoned, she was told that the company had not received notification and knew nothing of the hearing.  The tribunal therefore relisted the case for hearing on 31 July 2007 at 1.30 pm.  The Appellant was notified, both by Notice of Hearing and by the direction of the tribunal chairman of 20 June 2007.  On Monday, 30 July, it was decided the hearing should be rescheduled for 10.30 am on the 31st rather than 1.30 pm and the Tribunal clerk telephoned both the Appellant and the Appellant’s accountant.  Both were informed that the hearing would take place at 10.30 am.  Neither offered any objection and neither gave any indication that there would be no attendance.  When the case was called on for hearing at 10.30 am, there was no attendance on behalf of the Appellant and we decided to hear the case under Rule 26(2) Value Added Tax Tribunals Rules 1986.  For completeness, we should also add that we were still in court at 1.30 pm, the original time of the hearing, and there was no attendance then either.
3.	We heard oral evidence from Mr Martin Whitelegge, whose decision it was to require security.  Mr Whitelegge began his investigation into the Appellant company in August 2006 after a reference from colleagues in the Leicester office.  He was able to trace a chain of five trading entities.  All had traded from the same premises; Unit 4, Imperial Typewriter Building, Leicester.  The Appellant was the fifth in the chain and the previous four had all become insolvent with an outstanding liability to the Commissioners.  The trading activity of all of them was CMT and with the exception of the first and second, they all overlapped.  Most importantly, the operating personnel were common to all.  
4.	The first of the companies was Manor Fashions Limited, registered from 17 May 1977 to 13 November 1991.  The company became insolvent with a debt to the Commissioners of £72.71.  Manor Fashions was registered from 1 August 1998 to 1 May 2001.  It went into liquidation owing the Commissioners £19,869 and it was operated by one Mohammed Iqbal Patel.  The third entity was again Manor Fashions Limited, registered from 6 April 2001 to 25 May 2002.  This company went into insolvency owing the Commissioners £11,082.  Mr Mohammed Iqbal Patel was company secretary and a Mr Aqueel Munhsi was a named director.  The fourth company was Slimline (UK) Limited, registered from 1 January 2002 to 10 August 2006.  This company went into insolvency owing the Commissioners £25,551.  Mr Patel was a director of this company from 1 January 2005 onwards.  The Appellant company registered with effect from 1 April 2006.  Mr Aqueel Ahmed Munshi was and is a director and from 30 September 2005 to 31 May 2006, Mr Patel was also a director. 
5.	Mr Whitelegge looked out the report of the creditors’ meeting for the second Manor Fashions Limited, which had been attended on behalf of the company by Mr Munshi.  It was apparent from the report that on the liquidation of Manor Fashions Limited, its vehicles, equipment and staff were all transferred to Slimline (UK) Limited.  Mr Munshi had told the meeting that he would be working for Slimline (UK) Limited but as an employee of Mr Patel.
6.	Mr Whitelegge also looked out the PAYE records for the Appellant and for Slimline (UK) Limited.  It was apparent from these records that the workforce of each was largely the same and also that there were no employee claims on the insolvency of Slimline.  This suggested to Mr Whitelegge that the staff had merely transferred across from the one entity to the other.  
7.	When Mr Whitelegge raised the requirement, the Appellant had had to render only one return which had been submitted 11 days late.  Mr Whitelegge calculated the amount of security required based upon the figures returned in the first return.
8.	By letter dated 26 October 2006, the Appellant sought a reconsideration of the requirement.  The letter stated that the Appellant was paying its VAT liability regularly and on time; none of the officers of the company had been registered for VAT in the last three years; there had been no explanation of the calculation of the security; the security could not be financed and would enforce closure of the business and finally, that the company was paying its other liabilities, including PAYE regularly.  It fell to Mr Pumfrey to carry out the reconsideration, the result of which he notified by letter dated 3 November 2006.  He pointed out that the first return had not been submitted on time but had been 11 days late; that the officers of the company had been involved in other VAT registrations albeit outside the three year period; that the prime concern of the Commissioners was to protect the Revenue and that, contrary to what the Appellant had stated, the company had not met its PAYE liabilities regularly.  Mr Pumfrey concluded that the requirement should stand but by this time a second return had been submitted (on time) and Mr Pumfrey was able to reduce the amount required in line with that return.  
9.	In support of its appeal to the Tribunal, the Appellant submitted a copy of its letter of 26 October 2006 and stated that the amount was excessive and if it were to be paid, it would mean the closure of the business.  Additionally, the tribunal was told that the director, Mr Munshi, had not been involved in any other VAT registrations for the past four years and in the opinion of the company the security demanded was not justified.
10.	The jurisdiction of the tribunal is supervisory.  It is the role of the Commissioners to protect the Revenue and the tribunal’s jurisdiction is to consider whether or not the Commissioners acted reasonably; whether they took account of all relevant material or whether they disregarded something to which they should have taken account and did they give appropriate weight to the various factors.  
11.	Mr Whitelegge could see what he described as a seamless business running through at least four trading entities, with no break in trade or trading style.  The businesses operated from the same premises, with the same equipment, the same staff and in the same line of business.  The principals of each were also ever present in some capacity.  Although Mr Munshi had not been a director of Slimline (UK) Limited, Mr Whitelegge knew from the creditors’ meeting of Manor Fashions Ltd that he was to be employed by the company.  The compliance record of each company had been poor and all had become insolvent with a debt to the Commissioners.  A Notice of Requirement of Security had been raised in respect of Slimline (UK) Limited but had been withdrawn on the request of the company after it demonstrated a period of compliance. 
12.	We believe that the Notice of Requirement was reasonable and entirely justified.  The factors taken into account by Mr Whitelegge were relevant and we know of nothing which he should have taken into account but failed to.  The amount required was based upon the figures returned by the Appellant itself and again was reasonable.  The effect of payment of the security on the company is not a matter which this tribunal can take into account and neither can we take into account factors which have arisen since the Notice was raised.
13.	The appeal is therefore dismissed.  Mr Haley made an application for a contribution of £100 towards the Commissioners’ costs, which we grant. 

LADY MITTING
CHAIRMAN
Release Date: 24 August 2007
MAN/07/0012