United Kingdom VAT & Duties Tribunals Decisions

Eggerton v Customs & Excise [2003] UKVAT V18287 (13 August 2003)

VAT — security systems installer and supplier — failure to register when turnover exceeded registration limit — appeal against backdating of registration date and assessments to tax — appellant keeping two accounts books —admission in interview that information in private book contained true takings — registration and assessments based on private book — held backdated date of registration correct-assessments made to best judgment and for correct amounts — appeal dismissed

CIVIL EVASION PENALTY — penalty reduced by 80 per cent for appellant's co-operation in determining true liability to tax — co-operation effectively withdrawn in defence — penalty increased to 50 per cent of tax assessed — appeal dismissed.

MANCHESTER TRIBUNAL CENTRE

MICHAEL EGGLETON Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: Mr J D Demack(Chairman)

Mrs M Kostick

Sitting in public in York on the 15 July 2003

The appellant did not appear and was not represented

Mr J Cannan of counsel instructed by the Solicitor for the Customs and Excise for the Respondents

© CROWN COPYRIGHT 2003


 


DECISION
1. This is an appeal by Michael Eggleton against three decisions of the Commissioners of Customs and Excise, namely:

1) to backdate the effective date of his VAT registration to 1 April 1995 notified by letter of 17 April 2000;

2) assessments to VAT for the period between 1 April 1995 and 31 December 1997 in the sum of £9941.12 notified by letter of 30 March 2000 (as subsequently reduced by letter of 12 June 2000 to £9884.34); and

3) an assessment to a civil evasion penalty of £9884.34 notified by letter of 10 July 2000, which penalty was mitigated to £2471.08 for his co-operation in determining his true liability to tax.

2. In his notice of appeal, Mr Eggleton gave his reason for appealing as, "I was not eligible to be registered as my turnover did not exceed the VAT registration threshold". And in his defence, he said;

"The records and information which you based your claim on do not give an accurate insight into the actual takings of the business. In the records seized by your officers were details of any estimates which were given to prospective customers and the correct actual takings was far lower than shown in these rough records. My actual accounts was going to be taken from the rough accounts and I therefore dispute the amount claimed by yourselves. I have since drawn up accounts of cash actually received and not projected cash received."

3. Mr Eggleton gave his address for service as his home address in Beverley, East Yorkshire. Consequently, on 1 May 2003 a letter containing details of the hearing was sent to his home by pre-paid post. But it was returned to the Manchester Tribunal Centre marked "Gone away". Not surprisingly in those circumstances, Mr Eggleton was not present when his appeal was called on for hearing. On the application of Mr Jonathan Cannan, counsel for the Commissioners, we determined to proceed in Mr Eggleton's absence under rule 26(2) of the Value Added Tax Tribunals Rules 1986, as amended.
4. From the documentary evidence presented to us as supplemented by the informal oral evidence of Miss Carrick, the assessing officer, we find the following facts to have been established.
5. Mr Eggleton traded on his own account under the style of Admiral Security System as an installer and supplier of security systems. For most of the period covered by the assessments to tax his business base was his home, but for a short time he did trade He commenced trading in 1994. On 27 January 1998 he applied to be registered for VAT with effect on 1 January 1998. The Commissioners registered him on that basis, but he failed to make any returns of tax. Consequently, he was told that a Customs officer would visit him, but he failed to keep the appointment offered. He also failed to reply to correspondence. In view of those failures, the Commissioners determined to assess him to tax, and on 8 October 1999 he was notified of assessments of £12659 for the period between 1 January 1998 and 31 May 1999, the assessed amounts having been calculated on his estimate of takings of £60,000 per annum included in Form VAT 1. He did not appeal against those assessments.
6. A Customs officer, Mr Hodgson, made an unannounced visit to Mr Eggleton on 13 October 1999. He found that Mr Eggleton kept two record books, a blue one headed "Admiral Security" and a red one. From the blue book Mr Hodgson identified listings of sales as follows:

1995 £90,951

1996 £94,410

1997 £115,971

7. As the earliest of those figures was substantially above the 1995 VAT registration limit of £46,000, it was plain to Mr Hodgson that, assuming the blue book contained Mr Eggleton's true takings, he should have registered much earlier than he did.
8. Mr Eggleton was interviewed under the terms of Notice 730 by Miss Carrick, a senior officer of Customs, on 17 January 2000 when he made the following admissions:

1) that the blue record book contained his true takings;

2) that he had provided the inland Revenue with "reduced" takings listed in the red book;

3) that he had "reduced" the figures in the red book because he had not kept all his receipts and had not wanted to declare all his takings;

4) that he had prepared a second set of records - those in the red book - because the blue book had been maintained in a poor state;

5) that he had been aware that his turnover had been above the threshold for VAT registration, but had not registered; and

6) that his annual turnover had been at about the same level throughout the previous 5 years and was about £100,000 at the time of interview.

9. On 19 January 2000 Mr Eggleton wrote to Customs applying to be deregistered, saying that he intended to limit his future turnover to £50,000 to avoid the requirement to be registered for VAT. He added that it had always been his intention to split the turnover of his business into two parts, keeping each part below the registration limit. Not surprisingly, the Commissioners did not act on his application.
10. The Commissioners, having determined that Mr Eggleton was liable to be registered with effect from the end of March 1995 (his turnover on an historical basis having determined that date of registration) proceeded to make and notify the assessments to tax and penalty mentioned in para 1 above. We find that Mr Eggleton was correctly registered for VAT with effect from the end of March 1995.
11. Against that factual background, we turn to consider whether the tax assessments were made to the Commissioners' best judgment, as required by s. 73 of the Value Added Tax Act 1994. We are quite satisfied that they were. The Commissioners made a value judgment on Mr Eggleton's own private records and performed that function bona fide (see Van Boeckel v CEC [1981] STC 290 at p. 292 per Woolf J).
12. We then turn to consider the question of quantum. The amount assessed on Mr Eggleton " identical to the tax due on the sales totals contained in the blue book. In interview he confirmed that that book contained a true record of his takings. Against that evidence, we have his reason for appealing, set out in para 2 above, and withdrawing of many of his admissions in interview in his Defence. As Mr Eggleton has chosen not to pursue his appeal to its conclusion, we must decide whether to accept his private records as representing the truth. As we can think of no why any taxpayer should maintain private records showing figures different from those in public records, other than for the purpose of tax evasion, we accept Mr Eggleton's private records as representing the truth. We therefore confirm the tax assessments in their full amount.
13. As far as the penalty assessment is concerned, it is for the Commissioners to establish to a high degree of probability that Mr Eggleton has done an act or omitted to take an action; that his purpose in doing or omitting to do the act in question was to evade VAT; and that his conduct in connection with the act or omission involved dishonesty.
14. In his closing submissions, Mr Cannan relied on the following matters as establishing dishonesty:

1) the admissions made by Mr Eggleton in interview;

2) the existence of conflicting hand written records, namely the blue book and the red book; and

3) the lack of any credible explanation for the figures in the blue book.

15. On the basis suggested by Mr Cannan, we hold that Mr Eggleton dishonestly evaded VAT in the tax assessment period.
16. As we mentioned earlier, the Commissioners mitigated the penalty assessed for Mr Eggleton's co-operation in determining his true liability to tax. That co-operation consisted in his attending for interview and admitting that the figures contained in the blue book were the true ones.
17. But, as we mentioned earlier, in his Defence he subsequently effectively restricted the admissions made in interview so that it was necessary for his appeal to proceed to a full hearing. He then failed to give notice to the Manchester Tribunal Centre of his change of address necessitating the attendance at the hearing of two Customs' officers. Against that background, we propose to exercise the powers given to us by s. 70(2) of the 1994 Act whereby we may reduce the amount of mitigation of the penalty allowed by the Commissioners . We reduce the mitigation to 50 per cent of the penalty, so that we increase the assessment to £4,942.17.
18. Having indicated that we intended to dismiss Mr Eggleton's appeal against both tax assessments and penalty, Mr Cannan applied for the Commissioners' costs of the appeal in the sum of £1000. We grant his application in full.
David Demack Chairman Release Date:

MAN/00/867