United Kingdom VAT & Duties Tribunals Decisions

 


Barton & Anor (t/a The Railway Tavern) v Revenue & Customs [2003] UKVAT V18194 (15 June 2003)

18194

BUSINESS – whether catering at a pub is a separate business – yes

LONDON TRIBUNAL CENTRE

VAUGHAN ALAN BARTON AND MANDY JANE BARTON

T/A THE RAILWAY TAVERN Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: DR JOHN F AVERY JONES CBE (Chairman)

K S DUGDALE FCA

Sitting in public in Lowestoft on 12 June 2003

Vaughan Alan Barton in person

Richard Smith, counsel, instructed by the Solicitor for the Customs and Excise for the Respondents

© CROWN COPYRIGHT 2003

DECISION

1. Mr and Mrs V A Barton appeal against two assessments to VAT of £1,663 made on 2 November 2000 for period 10/97 and £7,760 made on 12 December 2000 for periods 01/98 to 01/99. The point in issue is whether Mrs Barton runs a separate catering business from the pub business at the Railway Tavern in Stowmarket which is run by Mr and Mrs Barton in partnership. Mr Barton appeared in person and the Commissioners were represented by Mr Richard Smith.
2. We heard evidence from Mr Barton and from the officer concerned, Mrs S. Lea and find the following facts.
3. Mr and Mrs Barton took over the pub on 27 May 1997. The previous owners had operated in the same way as the Appellants did as a partnership, which was registered for VAT, with a separate catering business run by the wife, which was unregistered. the Appellants thought that no separate payments had been made for the two activities on the purchase. The Appellants changed this from 31 December 1998 after which the catering activity was incorporated into the partnership figures. About 18 months ago they stopped the catering activity. Mrs Lea made a visit on 5 June 2000 at which she recorded that Mr Barton had been unable to answer some of her questions and had referred her to his accountant, but, since they were meeting in the bar and Mr Barton was serving customers at the same time, he may have been unwilling to give answers in public. She paid a second visit with another officer, Mr Erskine, at which the Appellants' accountant, Mr M. E. Bryan FCA, was present. Both officers made a note of that meeting.
4. As a result of information obtained at the meeting. Mrs Lea wrote to the Appellants on 7 August 2000 setting out a list of reasons why she considered that there was only one business carried on by the partnership and not a separate catering business carried on by Mrs Barton. Her letter ended "Before proceeding further with the assessment action resulting from the conclusion, I would offer you the opportunity to give your view on the matter and I would ask you to reply by 21 August." Mr Bryan replied on 17 August making the point that the Appellants had the intention of operating two businesses, that there was no need for the public to be informed when the partnership took over the catering business; and that Mrs Lea had not inspected the separate accounts for the catering business. Mrs Lea replied that she was still of the view tat there was only one business and asked for figures for the catering side, which was never provided. A review carried out by a different officer on 6 February 2001 confirmed the decision.
5. The following are the reasons set out in Mrs Lea's letter of 7 August 2000, with her reasons set out in quotation marks followed by further findings of fact made as a result of the evidence.

(a) "There was no agreement in place to charge a rent for the use of premises, equipment or overheads. A non invoiced charge at the end of the year of £9,400 was in fact an accounting adjustment necessary to reconcile the taking figure for both businesses which were deposited in the same bank account." Mr Erskine's note of the meeting records "Rental charged for use of facilities. £9,400 in first year. Figure represents difference from takings on food paid into joint account against expenses drawn on joint account." We did not see the accounts but understand that this is a charge between the two businesses (using that expression for simplicity and without pre-judging the result), fixed after the year end rather than an indebtedness caused by money from the catering business being in the partnership bank account.

(b) "No overhead bills from the suppliers were invoiced separately to the catering business." This is agreed.

(c) "There were no invoices raised from the catering business for rent, equipment and overheads." This is agreed; the payment referred to in (a) above was not invoiced.

(d) "There was no separate bank account and no distinction made when making bank deposits to the partnership account between catering and wet sales." This is agreed, but it does not mean that a distinction between the two businesses could not be made as a matter of bookkeeping.

(e) "Purchases of supplies were often shared. Cash and carry invoices include both wet and catering goods and were often paid for by cheques drawn on the partnership account." This is agreed although most of the catering purchases were paid in cash. The cash and carry invoices have a code to identify the type of purchases.

(f) "The catering activity was only available when the public house was open." This is obviously the case.

(g) "The same till was used for both business activities." This is true but separate buttons were operated on the till for drinks and catering.

(h) "The public perception was that it was one business. There is nothing to suggest that it was s separate business eg no trading name displayed around the premises, on the menus or on the invoices for (sic) used for issuing receipts. No separate advertising." This is not the case. We saw menus headed: Mandy Barton welcomes you to the Railway Tavern Restaurant." This gives a clear indication to the public that the catering was her separate business.

(i) "There was no separate insurance cover for public liability." This is agreed.

(j) "The catering activity could not continue or stand alone without the public house. The catering was dependent upon the clientele who entered the public house." This is true as far as it goes but people book to eat in the restaurant and only drink water, and no doubt the catering leads to the purchase of drinks.

(k) The partnership have (sic) taken over the catering activity and it has been included in the VAT Returns since January 1999. There was no significant occurrence to suggest to the public that there was a change in the business or ownership of the catering. The business continued to trade as before using the same menus, staff and equipment." This is agreed. In particular the same menus with Mrs Barton's name continued to be used after the change.

6. Mrs Lea set out her views clearly and offered the Appellants the opportunity of putting forward their point of view. It is a pity that, apart from effectively only one point made by Mr Bryan in his letter of 17 August 2000, they did not do so because from our further findings of fact it is clear that there were points to be made in reply, and Mrs Lea had shown herself willing to listen to them. On Mr Bryan's point that she had not inspected the separate catering accounts, she explained that she accepted that there were separate accounts and as the catering business was unregistered and she had at that stage not decided that there was one business, those accounts did not concern her.
7. The question for us is whether the Appellants have shown that there were two businesses. In favour are the following factors: the sales (from the till buttons) and the purchases (by the use of cash from the catering side or items on cash and carry bills) were separately identified; there were separate accounts; and the public were informed from the menus that the catering business was that of Mrs Barton. The factors against are: the lack of any charge for shared utilities, and equipment; the lack of separate public liability insurance; and the lack of any change when the partnership took over the catering activity. There are some other factors that are neutral: use of one bank account; catering available only when the pub is open; the catering activity depended on the pub; and the fact that all the utilities were in one name.
8. In considering the evidence, we bear in mind that this is a case of husband and wife and one does not expect the same legality to be applied in their separate relations as independent parties. Standing back and looking at the factors as a whole, while the separation was not perfect, we conclude that the Appellants have shown that there are two separate businesses with the sales and purchases separately identified.
9. Acordingly we allow the appeal in principle, leaving the parties to agree the figures in the light of our decision with liberty to apply if agreement cannot be reached. Although the question of costs was not raised at the hearing we award the Appellants the costs of their travelling expenses to the hearing.

J F AVERY JONES

CHAIRMAN

15 June 2003

LON/01/282