First-tier Tribunal (Tax)

[2011] UKFTT 230 (TC)

TC01095

Appeal reference: TC/2010/04347

VALUE ADDED TAX – security – poor compliance record – arrears of tax when notice issued – whether notice justified – yes – appeal dismissed

FIRST-TIER TRIBUNAL

TAX

SINGH & SINGH LIMITED Appellant

- and -

THE COMMISSIONERS FOR

HER MAJESTY’S REVENUE AND CUSTOMS Respondents

Tribunal: Lady Mitting (Judge)

Sitting in public in Birmingham on 7 March 2011

The Appellant did not appear and was not represented

Kim Tilling, instructed by the General Counsel and Solicitor to Her Majesty’s Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2011

DECISION

1.           The decision under appeal was that of the Commissioners to issue a Notice of Requirement to give Security under schedule 11, paragraph 4(2)(a) Value Added Tax Act 1994.  The Notice of Requirement was issued on 4 November 2009 in the sum of £54,700.  The decision to require security was upheld on consideration by letter dated 22 December 2009, but the amount of security required was reduced to £46,000.  The decision to require security in the amended sum was upheld on review by letter dated 9 March 2010.

2.           The Appellant was not represented at the hearing.  The scheduled time of the hearing was 10.30am.  At 9.15am the Tribunal Office received a phonecall from a lady speaking on behalf of the Appellant saying that Mr. Singh had been diagnosed with anxiety and depression, would not be able to attend and required an eight-week adjournment.  She said that a letter had been faxed in on the previous working day.  She was told that no such letter had been received and she promised to fax a copy through.  This fax never came.  The Office also at 10.15 rang the representative’s office but was told that the only gentleman in the office that day knew nothing of the hearing.

3.           I noted from the Tribunal’s file that an application due to have been heard on 30 July 2010 was adjourned when a letter was submitted saying that Mr. Singh was suffering from anxiety and depression and required a four-week adjournment, that letter being accompanied by a medical certificate.  The actual hearing of the appeal was first listed for 16 December 2010 but on 15 December another letter was received from Mr. Singh saying that he had been diagnosed with anxiety and depression and requiring a six week adjournment.  This letter was not accompanied by any medical certificate but the hearing was nonetheless adjourned.

4.           I was told by Mrs. Tilling that the gentleman to whom the medical certificates referred and on whose behalf the Tribunal Centre had received this morning’s call, Mr. Daljinder Singh, had in fact ceased to be a director of the Appellant company on 1 June 2010.  His involvement on the company’s behalf was therefore questionable.

5.           It was Mrs. Tilling’s application that I should proceed to hear the case notwithstanding the absence of the Appellant.  In deciding to go ahead, I took into account the history of adjournments on almost identical grounds; the fact that no documentation had been received in support of the application for today’s adjournment; the fact that Mr. Singh is no longer a director of the company and that the company is in any event professionally represented.  I also took into account the fact that this case concerns a Notice of Requirement to give Security which was issued well over a year ago.  The Commissioners’ interests have to be considered, and I decided in view of all the above factors that it was in the interests of justice for the hearing to proceed today.

6.           I heard oral evidence from the officer who raised the requirement, Mr. Maximilian Houghton.  When Mr. Houghton came to review the Appellant’s compliance with its VAT liabilities, he became aware that a previous Notice of Requirement had been issued on 9 October 2008 in the sum of £16,500.  This Notice was withdrawn when the company made payments in the required amount and agreed to go onto monthly returns.  Mr. Houghton, in his deliberations, was looking at periods 09/08 to 03/09 inclusive, all covered by quarterly returns, and 04/09 to 08/09 covered by monthly returns.  All returns had been submitted late by delays of between 7 and 124 days.  The payments due with each of these returns were, with the exception of 06/09 which was a repayment return, all late by a considerably greater amount of time.  The company had entered into a time to pay arrangement upon which it defaulted.  It had made sporadic payments of various amounts but the end result was that its liabilities were far outpacing its payments, and there was an ever-increasing debt due to the Commissioners.  It was clear to Mr. Houghton that the Revenue was at risk and the decision to require security was made.

7.           The quantum of the requirement was calculated in the normal fashion.  Mr. Houghton took the average net liability for a four-month period, this being a company on monthly returns (£14,678.26) to which he added the amount of the VAT debt of £40,026.93.

8.           Mr. Houghton was asked by the Appellant to carry out a reconsideration.  He upheld the need to require security but he reduced the amount to £46,000 to take into account a payment of £500 which had been made by the Appellant, unknown to Mr. Houghton, between the time when he made his decision and the time of service of the Notice of Requirement, and also to take into account the return for 09/09, which was a repayment return.  He could not take into account the return for 10/09 as it had still not been received.  In upholding his previous decision, Mr. Houghton did take into account representations made by the company but was of the view that it still continued to pose a risk to the Revenue, a decision upheld on review.

9.           There was one further factor which Mr. Houghton said he had taken into account but was of minor significance to him in comparison with the poor compliance record.  This was the involvement of Mr. Daljinder Singh in two previous companies which had ceased trading owing the Commissioners not-insignificant sums of money.  Neither Mr. Houghton’s original Notice of Requirement or his reconsideration made any reference to this factor although it was referred to by the review officer in the following terms, “although I would point out that this is not the main reason for the security requirement but it is something that was taken into consideration”.  I approach consideration of the Notice of Requirement by discounting this factor because it was at no time referred to by Mr. Houghton in either of his letters to the Appellant and the Appellant would have had no notice of that being a determining factor of any degree until receiving the review letter.  I approach my consideration therefore on the basis of the reasons put forward by Mr. Houghton for raising the requirement, namely that of the poor compliance record of this Appellant company.

10.        The jurisdiction of the tribunal is supervisory.  The Commissioners have the power to require security, the exercise of that power being a matter for their discretion.  The tribunal can review the exercise of that discretion but not substitute its own view.  I can therefore allow the appeal only if I am persuaded that the Commissioners have reached a decision which no reasonable body of Commissioners could have reached or if they had taken factors into account which were not relevant or discounted other factors which were relevant, or have made an error of law.  Otherwise I must dismiss the appeal.

11.        Looking at the compliance record of the company, which was the determining factor behind Mr. Houghton’s decision, I am fully convinced that the decision to require security was reasonable.  Although some payments were being made, they were not being made regularly and the deficit between liability and payment was ever increasing.  There was ample justification for the view that there was a risk to the Revenue.

12.        As far as quantum is concerned, two factors arose.  The first was that a payment of £500 had been made of which Mr. Houghton had no knowledge inbetween his making the decision and serving the notice some ten days later.  Secondly, when Mr. Houghton had made his initial calculation, he had used an eleven-month period in making his calculation.  Because on his reconsideration there was a further month to take into account (09/09) he should have divided by 12 but still in fact used the figure of 11.  This was a mathematical error but the difference which it made was minimal.  In no way could it be said to make the amount of security required unreasonable and the difference is too small to warrant the allowing of the appeal.

13.        I have considered the grounds of appeal put in by the Appellant but none of them can make any difference to my decision.  In particular the effect on the business of having to pay the security is not a factor which the tribunal can take into account.  The other grounds of appeal relate to the payment history which is something already covered earlier in this decision.

14.        The appeal is dismissed.

This document contains full findings of fact and reasons for the decision. 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 not later than 56 days after this decision is sent to that party.  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.

LADY MITTING

JUDGE
Release Date: 7 April 2011