20517

ASSESSMENT – Commissions for introducing clients following accidents in  motor cars – satisfied that the Appellant failed to account for VAT on the commissions – no self billing arrangements in force – prompt discount scheme did not apply – assessment based on information in the Appellant’s records – assessing officer had regard to the Appellant’s representations – Appeal dismissed

LONDON TRIBUNAL CENTRE

	CHARLES REED FLEET SERVICES LIMITED  	Appellant

	- and -

	HER MAJESTY’S REVENUE and CUSTOMS	Respondents

			Tribunal: MICHAEL TILDESLEY OBE	 (Chairman)
				      ANGELA WEST FCA                 (Member)	  

Sitting in public in Plymouth on 12 October 2007

Roland Waters, Managing Director, for the Appellant 

Jonathan Holl , Advocate of  HM Revenue & Customs, for the Respondents

© CROWN COPYRIGHT 2007

DECISION
The Appeal
1.	The Appellant was appealing against an assessment dated 30 July 2003 in the sum of £6,642 plus interest. The assessment was in respect of output tax on purported supplies made in accounting periods 07/2000 to 01/2003 inclusive.
The Dispute
2.	The Appellant traded as an accident management company, which at the time of the assessment involved the recovery of crashed vehicles and supplies of replacement vehicles. Since the assessment the Appellant extended its operations so that it now offered a complete accident management service which was regulated by the Ministry of Justice and the Financial Services Authority. 
3.	At the time of the assessment the Appellant invoiced the drivers of the damaged cars for its services but sought recovery of payment from a third party. The Appellant offered a 75 per cent discount for prompt payment of its invoices. The Respondents raised separate assessments in respect of this part of the Appellant’s business which related to supposed under-declarations of VAT associated with the prompt payment discount scheme. The assessments were for £126,843 and £3,352 plus associated misdeclaration penalties. On 15 May 2007 the Respondents withdrew the assessments because the assessing Officer, Mr Wallis, did not examine the Appellant’s records to confirm that no discounts had been offered.
4.	The assessment under Appeal did not relate to the prompt payment discount scheme. The disputed assessment concerned payments from two companies, Ambassador Claims Services Limited and Centrus, which pursued claims on behalf of victims for their losses arising from a vehicle accident. The Respondents maintained that the Appellant received these payments as commission for introducing accident victims to the two companies, in which case the Appellant should have accounted for VAT on these supplies.
5.	The Appellant disputed the assessment on the following grounds:
(1)	Ambassador was a front for a local firm of solicitors which was prohibited by the Solicitors’ Professional Code of Conduct to give commission for introducing clients.
(2)	The Appellant operated a self billing arrangement with Centrus, which was part of a multi-national organisation. Centrus was liable to account for VAT on the supplies not the Appellant.
(3)	The assessment was suspect because it was issued by Mr Wallis who was responsible for the other assessment against the Appellant which was subsequently withdrawn.
(4)	 The assessment should be reduced to reflect the fact that the Appellant operated a prompt payment discount in respect of its supplies.
The Hearing
6.	We heard evidence from Mr Waters on behalf of the Appellant. We received a bundle of documents from the Respondents.
7.	The Tribunal refused separate applications from the parties to adjourn the hearing of the Appeal. The Respondents’ application related to the illness of their witness, Mr Wallis, which prevented him from attending the hearing. The Appellant’s application was based on Mr Waters’ expectation that the Respondents would be successful with their application, and the facts of the withdrawn assessment for £126,843.  The Tribunal took the view that it was incumbent on the Appellant to prove on the balance of probabilities that the assessment was wrong. In all the circumstances the Tribunal was satisfied that the attendance of Mr Wallis was not critical for the Appeal. The Tribunal considered that it held sufficient information about the circumstances of the withdrawn assessment. Finally the Tribunal took account of the age of the Appeal, (four years since the Notice of Appeal, and seven years from the start date for the assessment) and its adjournment history.
Facts Found
8.	We are satisfied that the payments received by the Appellant from Ambassador Claims Services Limited and Centrus represented commission for the Appellant’s introduction of accident victims to the two companies. We reached our conclusion from the following facts:
(1)	The admission of the Appellant’s book-keeper, Mr Shephard, in his letter dated 8 August 2003 to Mr Wallis. Mr Shephard described the payments from the two companies as commission for referrals. We placed weight on Mr Shephard’s letter dated 8 August 2003 rather than on his subsequent letter of 7 October 2003 in which he put the blame on the two companies to deflect attention from the Appellant’s liability for VAT.
(2)	 The payments were recorded in the Appellant’s sales ledger.
(3)	The information on the documents from the two companies enclosing payment. The document from Ambassador Claims Services Limited stated that the cheque was in respect of the Appellant’s fees for named clients. Further the letter stated that Ambassador looked forward to receiving any new instructions from the Appellant.  The Centrus’ document stated that it was a summary of referrals.
(4)	The amount of the individual payments was a set sum indicative of a commission. The sum for each of the clients for Ambassador was £200, whereas the sum was either £50 or £75 for each of Centrus’ clients.
9.	In view of our finding that the payments represented commission for introducing potential clients, we are satisfied that the Appellant supplied services to Ambassador Claims Services Limited and Centrus for consideration which was taxable at the standard rate for VAT.
10.	We decided that a potential relationship between a local firm of solicitors and  Ambassador Claims Services Limited had no material bearing upon the VAT liability of the Appellant’s supplies to Ambassador Claims Services Limited.
11.	We are satisfied that the “invoices” from Centrus enclosing the payments did not constitute self billing invoices. The “invoices” did not charge VAT on the supplies made to it by the Appellant and did not record the Appellant’s VAT number.  Centrus’ failure to include the VAT number on the “invoices” supported the contents of an e mail dated 23 September 2003 from Mr Spencer, the Officer investigating Centrus,  to Mr Wallis  which reported Centrus’s belief that the Appellant was not registered for VAT. Mr Waters challenged Centrus’ belief by pointing out that the Appellant invoiced Centrus for removal services on which its VAT number had been quoted.  We were not persuaded by Mr Waters’ argument. We were not presented with one of the invoices for removal services. Further Mr Waters offered no explanation for why the Appellant did not raise the issue of no VAT number with Centrus when the “invoices” were sent.
12.	We find that the circumstances of the disputed assessment were materially different from those of the withdrawn assessments. Mr Wallis based the disputed assessment for this Appeal on information contained within the accounts and documents supplied by the Appellant. Also Mr Wallis took into account the representations made by Mr Shephard on behalf of the Appellant. It would appear that the other assessments for £126,843 and £3,352 were withdrawn because Mr Wallis did not examine the Appellant’s records.
13.	We are satisfied that the Appellant did not apply its prompt payment discount scheme to the commissions received from Ambassador Claims Services Limited and Centrus. The Appellant supplied no documentation to support its assertion that the discount applied to the commission. Further the commission was for a set amount and paid at regular monthly intervals which strongly indicated that no prompt payment discount arrangement was in place for these payments.
Decision
14.	Section 73 of VAT Act 1994 empowers the Respondents to raise assessments for unpaid VAT. Under section 73 the Respondents are required to consider fairly all material placed before them by the tax payer, and on that material, come to a decision which was reasonable and not arbitrary as to the amount of tax due. 
15.	 We found that the Appellant made supplies of introductory services to Ambassador Claims Services Limited and Centrus in return for a commission. The Appellant failed to account for VAT on the commission received. We held that the “invoices” issued by Centrus did not constitute self billing invoices. Mr Wallis was, therefore, entitled to raise an assessment against the Appellant. Mr Wallis calculated the amount of unpaid VAT from the Appellant’s records and documents. Mr Wallis took into account the Appellant’s views when making the assessment.  We are satisfied that assessment dated 30 July 2003 in the sum of £6,642 plus interest was correct and made to best judgment. We, therefore, dismiss the Appeal.
16.	The Respondents applied for its reasonable costs in connection with the Appeal. Generally the Respondents do not apply for costs against unsuccessful Appellants unless the circumstances fall within one of the exceptions referred to in the Statement on Costs in Tribunal Appeals as reported in Hansard dated 24 July 1986. The Respondents suggested that the Appellant had been responsible for the delay in bringing the Appeal to hearing and, therefore, misused Tribunal procedure. We are satisfied that the Appellant was not entirely to blame for the delay. Also Mr Waters was hospitalised for a period after lodging the Notice of Appeal. In those circumstances we make no order for costs against the Appellant. 

                                

                                 MICHAEL TILDESLEY OBE
CHAIRMAN
RELEASE DATE: 4 January 2008

LON 2003/0854