First-tier Tribunal (Tax)

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Cite as: [2009] UKFTT 189 (TC)

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Sophie Holdings Ltd v Revenue & Customs [2009] UKFTT 189 (TC) (30 July 2009)
VAT - ASSESSMENTS
Time limits

[2009] UKFTT 189 (TC)

TC00144

Appeal number LON/2007/2054

Value added Tax – Assessments under s.73 (2) VATA 19994 – Time limit for making assessments – Date when evidence of facts sufficient in the Commissioners' opinion to justify making assessment, came to their notice – S.73 (6)(b) 1994 – Assessments out of time – Appeal allowed

FIRST-TIER TRIBUNAL

TAX

SOPHIE HOLDINGS LTD Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY'S

REVENUE AND CUSTOMS (Value Added Tax) Respondents

TRIBUNAL: DR K KHAN (Judge)

MR R J FRESTON FRICS

Sitting in public in London on 22 July 2009

Hui Ling McCarthy, Counsel, for the Appellant

Mr S Singh, Counsel, for the Respondents

© CROWN COPYRIGHT 2009

RECITAL

On 11 June 2009, the Respondents made the following applications:

(1). The Tribunal's decision released on 6 May 2009 ("the Decision") to be set aside and remade, pursuant to rule 38(11) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 ("the Tribunal Rules") on the ground of procedural irregularity because the Tribunal did not take into consideration the Respondents' Written Submissions of 26 February (the "Written Submissions.") These Submissions had not been forwarded to the Judge by the Tribunal although indications are that they were received.

And

(2). An extension of the 28-day time limit under Rule 38(3) of the Tribunal Rules.

On the 22 July 2009, the Tribunal granted the extension of time application on the grounds, inter alia, that it was in the interest of justice to hear the Written Submissions and the respondents should be given an opportunity to fully present their case.

The Tribunal (as originally constituted) now looks at the application under Rule 38(1) of the Tribunal Rules to determine whether the decision should be set aside and remade. The Written Submissions are now considered.

The Commissioners' Written Submissions make the following points:

(1). The Appellant did not make any taxable supplies. The Commissioners only became aware of this when their application to deregister was made on 30 March 2006 and when the Business Assets Form dated 29 March 2006 was filed. These were the relevant dates which justify the making of an assessment. Since there were the dates when the Commissioners had sufficient knowledge to make the assessments.

(2). The Commissioners sought information from the Appellant on 1 November 2006 and queried whether any taxable supplies had been made by them in order to establish whether the Appellant had a claim for input tax credit. The request was made to understand if the Appellant had made taxable supplies in the manner contemplated as intended traders on registration.

(3). The Commissioners say that no evidence of facts sufficient in their opinion, to justify the making of the assessment, had come to their knowledge at the time of the application for registration in October 2003. Protective assessments were therefore raised. These assessments would only be confirmed when the Appellant supplied documentation and plans, as requested, and these were only provided by the Appellant on 3^rd October 2007. This clearly showed that at no time was it possible for the work to the property to have constituted a substantial reconstruction. The information available in 2003 was insufficient to raise an assessment while the more substantial information giving rise to the assessment was provided in 2007.

(4). The Commissioners requested information from the appellant relating to taxable supplies in order to establish whether their activities (supplies) met with their intention (to make taxable supplies) at the time of registration. In the absence of provided information, the assessments had to be made on the basis of unsubstantiated claimed taxable supplies, which, it turned out did not give rise to an entitlement to input tax. The evidence of exempt rental income, which came to light in 2007, showed that no taxable supply had been made upon which input tax could be claimed.

(5). The Appellant's Written Submissions are largely concerned with the entitlement to receive input tax and to some extent with the claw back provisions. A recovery of input tax takes place when an intending trader intends to make future onward supplies which are capable of being taxable as a matter of law.

Let us look at the Witten Submissions:-

The Tribunal maintains that the Commissioner were made aware of the Appellant's intention to undertake a substantial reconstruction of the property, when the Appellant submitted an application for the registration together with supporting documents at the earliest in October 2003

The evidence showed that the Appellant intended to make taxable supplies at the time of registration and therefore would be entitled to reclaim input tax. The 11/03 Assessment was made on the basis that an onward supply did not take place (rather than an exempt supply having taken place) (para 86, the Decision). Input tax cannot be recovered if there is no onward taxable supply or indeed exempt rental income, as in this case. The Respondents say that the Written Submissions makes the point that the information relating to exempt rental income is relevant because it demonstrated that no taxable supply had been made upon which input tax could be claimed, The Tribunal reiterates that the basis of the Respondents' arguments was not about the non-recovery of input tax due to exempt property income. It was only after the Appellant's application for deregistration did the Commissioners come to know that no taxable supplies were made. The basis of the respondent's original argument is that the original intention (as expressed in the VAT registration document) "had not been carried out as initially put forward and that the property had not been substantially reconstructed.'' (per Mr Fletcher, para 13 page 5, Witness Statement). The point is that the Appellant had an original intention to make taxable supplies and this would give rise to a right to receive input tax regardless of whether the onward later supply turned out to be an exempt supply. It's a test of original intention.

Aside from these two points, the Tribunal doe not believe there are other points which need addressing, which were not addressed in the Decision.

The Tribunal finds that, after considering the Witten Submissions, there are no grounds on which the Decision should be set aside or remade.

The application is therefore dismissed. Matters of costs would be the subject of separate representations.

DR K KHAN

TRIBUNAL JUDGE

RELEASE DATE: 30 July 2009