First-tier Tribunal (Tax)

MARK LANCASTER

Trading as Airport Cars

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS

Appellant

Respondents

SUPPLEMENTAL DECISION

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The Original Decision

1.   On 10 July 2009 the same tribunal issued its decision (the 2009 Decision) in respect of an appeal by Mr Mark Lancaster (the Appellant/Mr Lancaster) trading as Airport Cars against two decisions raising assessments of output tax issued by the Commissioners on 12 July 2006 and 26 September 2006 for net sums of £12,546.84 and £1,174.06.

2.   In paragraph 60 of the 2009 decision it was stated :

      “The Appellant not only appealed against the two decisions/assessments but

      also the retention of money he alleged was owed by HMRC in a total of

      £3,422.09.This additional issue was not before the tribunal as it was not

      included in the grounds of appeal and there was accordingly no information

      before the tribunal upon which it could adjudicate.”

3.   Paragraph 85 of the 2009 Decision set out the following decision on the issues which the tribunal considered were for the determination in the appeal as follows :

     “ (1) The Respondents did access the two amounts of tax due, from the

        Appellant to the best of their judgment, through their Officer Mr Leatt. He

        based his decision on the only information available to him at the time; and

        (2)  The assessments are correct as increased by the assessment dated 4 June

         2009

        (3)   The appeal against both the assessments is dismissed

        (4)    Having taken all the factors into account, there is no order as to costs.”

Events post the 2009 Decision

4.  The Appellant wrote to the Respondents on 20 July 2009 asking them to consider further documentation and to reconsider his appeal generally.  By letter dated 7 August 2009, the Respondents confirmed that they had considered further documentation but that, in their opinion, it did not affect the Tribunal’s decision.

5.  The Appellant then applied to the tribunal for permission to appeal to the Upper Tribunal (Tax and Chancery Chamber) stating in his application dated                   31 August 2009 those errors of law he considered the tribunal had made in its decision.

6.  The tribunal chairman Mr R P Huggins, on behalf of the tribunal decided not to give permission to appeal in relation to the 2009 Decision on or about                   16 September 2009 and applying Rule 40 of The Tribunal Procedure (First-tier Tribunal (Tax Chamber) Rules 2009) (the 2009 Rules) and taking into account the over-riding objective in Rule 2 of the 2009 Rules decided not to review the decision.  Mr Huggins gave reasons for the tribunal’s refusal.

7.   On 14 October 2009 the Appellant filed his application to appeal against the 2009 Decision with the Upper Tribunal.  The application was put before Judge Avery Jones for consideration and he noticed that one of the grounds of appeal relating to the retention of monies had not been previously considered by the First-tier tribunal and advised that the Appellant be asked if he would like to make a further application to the First-tier tribunal on this ground.  He stated that the advantage would be that the First-tier tribunal might want to review its decision on this ground without the case having to go to the Upper Tribunal.

8.  By way of a letter dated 2 November 2009 Mr Lancaster re-submitted the required documents for consideration by this tribunal.

The issues before the tribunal

9.  As a result of these events, there are two issues arising from the Appellant’s appeals which the tribunal has to consider :

      (1)   Are the Respondents entitled to retain input tax due to the Appellant for

              tax returns January 2006, April 2006 and July 2006 ?

       (2)   Is the First-tier tribunal able to review its 2009 Decision on the ground

              that it did not consider the retention of monies issue ?  If so, what is its

              conclusion ?

The evidence

10. The Appellant who again was not represented produced another bundle of documents and a further submission with accompanying documents dated            12 September 2010.  Also he relied upon a skeleton argument dated 9 October 2010.

11.  On behalf of the Respondent Commissioners, Mr Sachdeva produced another bundle of documents with two addenda and a further submission dated 1 October 2010.

The facts

12.   On the evidence before us, we find the following facts.

13.   The facts as set out in paragraphs 7 to 52 inclusive of the 2009 Decision are found by this tribunal to be accurate and in so far as they are relevant are accordingly repeated herein as if they were specifically set out.

14.    Mr Lancaster submitted VAT Tax returns for the three months commencing January 2006, April 2006 and July 2006. In these Returns he reclaimed VAT for the relevant periods on “purchases” and other inputs.  The Returns were amended (after adjustments had been made) by Officers of HMRC.

15.  The amounts reclaimed after amendment (as referred to in paragraphs 46, 47, 48 and 49 of the 2009 Decision) are as follows :

       (1)    £845.16 full credit allowed on the Amended Return of 3/06

       (2)    £768.30 full credit allowed on the Amended Return of 6/06

       (3)    £600.74 full credit allowed on the Amended Return of 9/06

These total £2,214.20.

16.   The Respondents also offset two reclaims for inputs made by the Appellant for the following periods.

       (1)    £140.89 (for period 12(07) offset against the Amended Return of 3/06

       (2)    £1,106.51 (for period 3/08) offset against the Amended Return of 3/06.

These total £1,247,40.

17.   The original appeal is dated 19 December 2006 and received at the Tribunal London Office on 20 December 2006. Therefore, the offsetting referred to in paragraph 16 above occurred after the lodging of the appeal.

18.  On 1 July 2008, Mr Lancaster wrote to HMRC Officer, Mr Hopkinson as follows :

        “Please can you request that monies that are being held by HMRC on my

        VAT account are released.  I am sure that they cannot hold on to my

        reclaimed VAT on the basis of their assessment which as you can now see is

        totally without foundation.”

The legislation

19.   It is provided in section 73(1) of the Value Added Tax Act 1994 (VATA) that:

        “Where a person has failed to make any returns required under this Act (or

        under any provision repealed by this Act) or to keep any documents and

        afford the facilities necessary to verify such returns or where it appears to the

        Commissioners that such returns are incomplete or incorrect, they may assess

        the amount of VAT due from him to the best of their judgment and notify it to

       him.”

20.   Offsetting is effected by HMRC under section 81(3) VATA 1994 which states

       “…  in any case where –

      (a)    an amount is due from the Commissioners to any person under

              any provisions of this Act, and

      (b)    that person is liable to pay a sum by way of VAT, penalty, interest or

              surcharge, the amount referred to in paragraph (a) above shall be set

              against the sum referred to in paragraph (b) above and, accordingly, to the

             extent of the set-off, the obligations of the Commissioners and the person

             concerned shall be discharged.”

21.   Section 83 of VATA 1994 sets out the matters whereby an appeal shall lie to a tribunal.  There is no reference to offsetting under section 81(3).

22.   Reviews of decisions of First-tier tribunals are dealt with under section 9 of the Tribunals, Courts and Enforcement Act 2007 (the 2007 Act) which by section 9(1) gives the power to such a tribunal to review a decision except where this is specifically excluded by the Act.

23.  However, section 9(10) provides as follows :

     “A decision of the Firs-tier Tribunal may not be reviewed under subsection (1)

     more than once, and once the First-tier Tribunal has decided that an earlier

     decision should not be reviewed under subsection (1) it may not then decide to

     review that earlier decision under that subsection.”

Reasons for decision

24.  The first issue which the tribunal has to consider is whether it is able to review its 2009 Decision on the grounds that it did not consider the retention of monies question.

25.  In September 2009, the tribunal, through its chairman, Mr R P Huggins, when deciding not to give the Appellant leave to appeal to the Upper Tribunal also determined not to review the 2009 Decision under Rule 40 of the 2009 Rules taking into account the over-riding objective in Rule 2 of the 2009 Rules. Therefore, the tribunal has already made a decision not to review and is accordingly barred from considering this power again by virtue of the statutory provision in section 9(10) of the 2007 Act.

26.   Mr Lancaster came to the tribunal prepared to argue extensively that the tribunal should review its decision.  He maintained that the tribunal should have dealt with the retention of monies issue as it was “listed in the appeal from the very beginning” and he suggested that the appeal “should be allowed purely for this error alone”.  But he did agree that “this part of the appeal was an integral element to the whole argument and disagreement of the assessments made by HMRC and should not have been ignored.”

27.  The Appellant reiterated his argument in his document entitled “Defence” dated 22 February 2010 when he states at page 1 :

       “The original appeal should have been dealt with not only the Assessments

        but also the retention of monies, as both are integral and essential to each

        other. Also that the Assessments are at the heart of the retention of monies

        and are connected by the fact that although the Assessments were erroneous

       and unproven and I consider still are, the Respondents deemed to withhold

       monies on the pretext that in their view, one is guilty unless proven

       otherwise.”

28.   The tribunal accepts the argument of Mr Sachdeva in his Response on behalf of the Respondents dated 31 March 2010 when he asserted in paragraph 7 that the reasons for the retentions is that the Respondents chose not to refund monies which were accepted as due to the Appellant in order to set off the Appellant’s liability contained in the two assessments.  This is referred to in a letter to the Appellant dated 21 November 2006 when Officer Leath made it quite clear that his adjustments to the 3/06, 06/06 and 09/06 returns would not be released until decisions had been reached by his colleague, Bill Beedie on reconsideration.  Office Beedie upheld the assessments on 27 November 2006.

29.   Therefore, the appeal in substance was against the assessments of 12 July 2006 and 29 September 2006.  It follows that the issues of the retentions fell to be determined automatically by the decision of the tribunal on the assessments. As Mr Sachdeva states “reflecting this reasoning, there were never any grounds of appeal expressed to be against the retentions alone, rather than against both the assessments and the retentions.”

30.  The second issue before the tribunal is whether the Respondents are entitled to retain input tax due to the Appellants for the three tax returns 03/06, 06/06 and 09/06.

31.  We are in agreement with both parties that this part of the appeal is an integral element to the whole argument and disagreement of the assessments made by HMRC.  As the tribunal has decided in the 2009 Decision that both assessments are correct as increased by the assessment dated 4 June 2009 and the appeal against both the assessment was dismissed, we find that the appeal against the retentions is likewise dismissed for the same reasons as stated in the 2009 Decision.

32.   The retentions were properly made in accordance with section 73(1) of VATA 1994.  We would add that the two offsets referred to in paragraph 16 of this decision arose as a result of claims for input tax by Mr Lancaster made in returns for periods 12/07 and 3/08 which were after the appeal against the retentions had been filed and clarified in a letter from the Appellant dated 13 March 2007.

33.   We agree with the assertion of the General Council and Solicitor to HMRC in his Supplementary Statement of Case dated 14 November 2008 that offsetting under section 81(3)of VATA 1994 is absolute and tribunals do not have jurisdiction to examine the matter as there is no statutory right of appeal.

34.  Although academic, we would comment that since the two offsets arose as a result of claims made in VAT returns for periods after the appeal against the two assessments had been made. It would appear for this reason alone the tribunal has no jurisdiction in respect of the two offsets.  However, in the opinion of the tribunal this does not affect the overall decision.

35.   The tribunal expresses its regret for not having dealt with the question of retentions in its 2009 Decision and apologises to both parties for the additional work this entailed.  In the circumstances, there is no order as to costs.

Decision

36 .   That part of the appeal relating to the retention of monies due to the Appellant for input tax claimed in the 03/06, 06/06 and 09/06 returns is dismissed.

37.   No further review of the 2009 Decision can take place.

Rodney P Huggins

Chairman

Released : 10 November 2010

LON/2006/1568