First-tier Tribunal (Tax)

[2010] UKFTT 528 (TC)

TC00782

Appeal number LON/09/470

VAT - registration of two-person partnership – one person leaving partnership – whether registration as a partnership could continue when only one ‘partner’ – hearing in appellant’s absence  - appeal dismissed

FIRST-TIER TRIBUNAL

TAX CHAMBER

THOMAS MARYAM Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS (value added tax) Respondents

TRIBUNAL: Judge Malachy Cornwell-Kelly

Sitting in public in London on 11 October 2010 at 45 Bedford Square London WC1B 3DN

The Appellant did not appear and was not represented

Mr David Anderson, office of the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.     This appeal was lodged on 20 February 2009 against a decision of the respondents re-registering the appellant under a new VAT registration number.  There is no tax at issue.

2.     On a control visit on 6 November 2007, the officer visiting discovered that the appellant’s former business partner Mandy Maryam had ceased to be a partner in the business, which had been registered originally on 1 June 2001 as a partnership of Thomas and Mandy Maryam, trading as ‘Hazeldene Catering’.  The visiting officer took the view that the partnership should be de-registered and that Mr Maryam should be registered as a sole trader, and he proceeded to do that.  The appellant’s case is that his registration should have been left unaltered, he trading as a ‘partnership’ of one person pending the admission of a new partner.

3.     Neither the appellant nor his representative, Mr Peter Clarke of Clarke & Co, Hailsham, were present.  It is not entirely clear why: the tribunal was informed on the morning of the hearing that Mr Clarke would not be attending because his client had ceased trading; the explanation could also lie in a letter from Mr Clarke to the tribunal dated 13 August 2010 saying that his health would not allow him to attend any hearing this year, although that letter appeared to relate to a direct tax case also under appeal.  It is clear, however, from the file that notice of this appeal hearing was duly given on 11 August 2010 and not withdrawn.  In the circumstances, I decided that the criteria of rule 33 allowing the tribunal to proceed in the appellant’s absence were fulfilled and I proceeded to the disposal of the case.

4.     I have read the appellant’s reply to the respondents’ statement of case, together with other items of correspondence from Mr Clarke in the file, and the argument is essentially based on the propositions (a) that a partnership is a legal entity and (b) that there is therefore nothing to prevent it continuing as such if one of its members ceases to be a partner.

5.     In regard to point (a), although it is true that an English partnership is treated by various procedural provisions of law and regulation as if it were a single legal entity, that is always done for a specific and limited purpose.  The underlying and substantive position is that a partnership in English law (as contrasted with that in Scots law) is not a legal entity: there is no general incorporation of the relationship which section 1 of the Partnership Act 1890 defines as ‘the relation which subsists between persons carrying on a business in common with a view of profit’; the persons so carrying on business remain distinct and separate persons.  The consequence sought to be drawn in point (b) therefore does not follow.

6. It may be that confusion has arisen in the appellant’s mind because of one of the procedural provisions in tax legislation to which he makes reference, namely section 45 of the Value Added Tax Act 1994, which provides:-

45.  (1) The registration under this Act of persons—

(a) carrying on a business in partnership, or

(b) carrying on in partnership any other activities in the course or furtherance of which they acquire goods from other member States,

may be in the name of the firm; and no account shall be taken, in determining for any purpose of this Act whether goods or services are supplied to or by such persons or are acquired by such persons from another member State, of any change in the partnership.

7.  This provision is essentially a deeming provision to allow, for reasons of procedural convenience, English law partnerships to be treated for the purposes stated as if they were legal entities; if they had already been legal entities, section 45(1) would not have been needed.  And there can be no doubt that where a partnership is dissolved by one of two partners ceasing to be a member of it, the partnership no longer exists and section 45 is no longer needed.  The respondents were therefore right to re-register the appellant as a sole trader and the appeal must accordingly be dismissed.

8. This document contains the full findings of fact and reasons for the decision.

8.1 The appellant, by reason of not having been present or represented at the hearing,  has a right to apply for it to be set aside pursuant to Rule 38 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.  The application must be received by this tribunal no later than 28 days after this decision is sent to the appellant.

8.2   Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this tribunal no later than 56 days after this decision is sent to that party. 

8.3 The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

Malachy Cornwell-Kelly

Tribunal Judge

RELEASE DATE: 29 October 2010