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Cite as: [2004] UKVAT V18580

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Spennachi v Customs and Excise [2004] UKVAT V18580 (23 April 2004)

APPEAL – Time limits – Notice of Appeal lodged four years after decision – No evidence to justify extension of time – Appeal struck out

ASSESSMENT – Best judgment – Whether Appellant liable to register – Whether Appellant carried on restaurant business as sole proprietor during period covered by assessment – Yes

LONDON TRIBUNAL CENTRE

AGOSTINO SPENNACCHI Appellant

and –

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: STEPHEN OLIVER QC (Chairman)

ELIZABETH MACLEOD CIPM

Sitting in public in London on 30 March 2004

The Appellant did not appear

Mario Angiolini, counsel, instructed by the Solicitor for the Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2004

DECISION

The Appellant, Mr Agostino Spennacchi, (Mr Spennacchi), has lodged two appeals. As we understand the first appeal, it is against the decision of the Commissioners to register him for value added tax as a partner in VAT registration 583666106. The other decision appealed against is that of the Commissioners to register him compulsorily as a sole proprietor with effect from 1 April 1997 under the registration number 680087527.

When the appeal was called on for hearing at 10.30am on 30 March 2004, Mr Angiolini was not present nor was there anyone at the tribunal to represent him. On 12 February 2004 Mr Spennacchi had been notified of the hearing. The same day a colleague of his, Mr Giovanni d'Avola was notified of the hearing. It had been indicated to the Tribunal that Mr d'Avola might attend as representative for Mr Spennacchi. We understand that Mr Spennacchi has been advised on the telephone that the tribunal has the authority, under rule 26 of the Tribunal Rules, to go ahead and hear the case in his absence. As there was no one present to represent Mr Spennacchi by 10.50am, we decided to go ahead with the case. We should mention that, shortly after we had decided to go ahead, Mr d'Avola arrived. He has been present at the hearing. He made some comments at the end of the hearing. Those comments were more concerned to give a picture of Mr Spennacchi as a friend, of his character and background, than to present any case in rebuttal of the arguments presented for the Commissioners. We have not regarded Mr d'Avola as Mr Spennacchi's representative for purposes of rule 26.

It follows from what we have said that, because we have heard this appeal in the absence of Mr Spennacchi, he will be at liberty to require this Tribunal to take such further action in relation to the appeal (which includes reinstating the appeal) on such terms as it may think just. Mr Spennacchi can only make an application to this effect if he notifies the Tribunal centre within 14 days of the release of this decision. If he wishes to have a re-hearing, he must attend the Tribunal in person for that hearing.

The decision to register Mr Spennacchi compulsorily as a sole proprietor of his restaurant business was notified to him by letter dated 16 July 1999. The same day Mr Spennacchi was notified of a VAT assessment in the amount of £7,175 for a single period from 1 April 1997 until 31 March 1998. On 29 June 2003 Mr Spennacchi appealed. His notice of appeal states as its grounds –

"Because from 26 October 1992 I'm not a registered. And the VAT office, they don't have my signature on the registration VAT document."

The next notice of appeal, signed on 26 September 2003, states that £400,000 is the approximate sum of money in dispute. The grounds of appeal simply state -

"All the papers are in the Court of the Human Rights in Strasbourg"

It refers to Application No.58045/2000: The United Kingdom v Spennacchi.

The time limit for appealing is 30 days from the original decision, i.e. from 16 July 1999. Mr Spennacchi's appeals are about four years late. As they are out of time we can only accept them if we are satisfied that it is reasonable in all the circumstances to do so. We are quite unpersuaded that there are any reasonable grounds for giving Mr Spennacchi a further time in which to appeal. He has produced no reasons in correspondence or otherwise that in any way advance his case for a four year extension of time. For that reason we strike out the appeals on the basis that they are out of time. Having said that, we feel we should look into the merits of Mr Spennacchi's case and explain what our reasons would have been had his appeals been in time.

We start by setting out, as a framework, the grounds on which the Commissioners' decisions to register Mr Spennacchi for value added tax have been based.

The first relevant registration, 586666106, was a partnership registration of Mr Spennacchi and his wife J D Spennacchi. This related to a business known as the "Il Paradiso" restaurant in Stonegate. The registration took effect from 26 June 1991. The partnership was deregistered with effect from 31 March 1997 following an application made by J D Spennacchi.

The second relevant registration, 680087527, covered Mr Spennacchi alone as the proprietor of a restaurant "Il Piccolo" at Camden Road, Tunbridge Wells, with effect from 1 April 1997. Mr Spennacchi was compulsorily registered with effect from that date as sole proprietor and was deregistered with effect from 21 April 1998. Registration had been effected by the Commissioners who had completed a VAT 1 showing that Mr Spennacchi was sole proprietor trading as "Il Piccolo" and showing, as the date of transfer of business as a going concern, 1 April 1998 as the commencement date.

In essence, three issues appear to us to arise:

Issue 1 relates to a claim by Mr Spennacchi for repayment of VAT which he says was wrongly paid in respect of the trading supplies of the partnership. In a letter dated 26 February 2000 to the Customs and Excise at Hastings, Mr Spennacchi asserted that he "only traded as a partner in Il Paradiso. Therefore no money paid by Il Paradiso on behalf of Il Piccolo is legitimate and I claim a full refund." He goes on to state, in a letter of 13 July 2000 that the Customs "have no proof that I was registered because you have not got my signature, so I am still entitle to all of the VAT money which I paid in my name." Then in a letter dated 16 August 2000 Mr Spennacchi says – "… You have stolen all my money already".

Issue 2 concerns the assessment for the period from 1 April 1997 to 31 March 1998. Mr Spennacchi contends that he was not running the Il Piccolo business in Tunbridge Wells at the time. He had, therefore, been wrongly registered and was not liable to account for any VAT. In this connection he says that he had signed no VAT 1 form.

Issue 3 relates to the amount assessed. We have taken this to be a challenge to the assessment on best of judgment grounds.

We heard evidence from Mr Michael Rhodes, an officer of Customs and Excise. He explained that he did not have any comprehensive recollection of his handling of the enquiries into the VAT affairs of Mr Spennacchi. As an aide memoire he had produced a chronology of events sterling making his entries in January 1997. He continued making additions to this up to November 1999. He had paid a visit, on 14 April 1999, to the offices of Mr Spennacchi's accountants. There he had inspected such documents as were available. That visit had consisted of an initial discussion with Mr Bowen, the accountant, followed by an "interview" with Mr Spennacchi who had been present for only part of the visit. Mr Rhodes had compiled the full visit report on 15 April 1999 from the notes that he had made the day before. Mr Rhodes stated that, on the information available to him, he had concluded that Mr Spennacchi had been properly liable to be registered for VAT (registration number 680087527) as the sole proprietor of Il Piccolo (Camden Road, Tunbridge Wells) from 1 April 1997 until trading ended sometime after 22 February 1998. Mr Rhodes had also concluded that there was no repayment due to Mr Spennacchi. Instead he had concluded that, for the period 1 April 1997 to 22 February 1998 there had been a VAT output liability of £17,921 and an input tax credit of £4,209 giving a net VAT due liability of £13,712. Mr Rhodes went on to explain that, as no VAT return for the period 1 April 1997 to 31 March 1998 had been rendered, a "prime" assessment in the sum of £6,537 had been issued. He had therefore decided that an additional assessment in the amount of £7,175 should be issued. These decisions were notified to Mr Spennacchi on 16 July 1999.

Mr Rhodes went on to explain that he had visited the local Inspector of Taxes' office to establish what legal entity or entities had been declared to them. The outcome of that visit is referred to below.

It appears from the chronology produced by Mr Rhodes that, in October 1991 and March 1992, Customs officers had visited the Il Paradiso (Stonegate) premises. They had interviewed both Mr Spennacchi and J D Spennacchi "as partners". The chronology goes on to note that on 27 October 1992 the Commissioners had been advised of a change in the trading name to "Il Piccolo" and to the place of business which became Camden Road, Tunbridge Wells. The form was signed by J D Spennacchi and this indicated to Mr Rhodes that the business was still a partnership of Mr Spennacchi and J D Spennacchi.

The next relevant event set out in the chronology was a visit by bailiffs to Il Piccolo to collect a cheque for outstanding arrears of VAT. The next day, 23 August 1996, Mr Spennacchi had called at the public counter at the Hastings LVO demanding "his money".

On 27 June 1997 a batch of copy letters were received by the Customs from Mr Spennacchi. Among these was a letter dated 19 June 1997, apparently written by Mr Spennacchi, giving his address as Il Piccolo and making it clear that he was still trading there.

On 13 October 1997 the Commissioners received a letter from J D Spennacchi stating that she had ceased to be a partner as at 31 March 1997.

On 5 February 1998 the Customs received another bundle of copy papers from Mr Spennacchi. Letters of 14 August 1997 and 15 September 1997 from Mr Spennacchi give Il Piccolo and Il Paradiso as his address and make no mention of his being "abroad". Then there is a three page hand-written "statement" dated 3 August 1997, signed in the name of Franco Spennacchi who states that he is the brother of Mr Spennacchi who, it is said, is the owner of the Il Piccolo.

On 6 February 1998 the Commissioners received a form VAT 68 from J D Spennacchi relating to the transfer of the VAT registration to Mr Spennacchi as sole proprietor. This includes a covering note from J D Spennacchi to the effect that Mr Spennacchi was refusing to sign any forms.

On 12 February 1998 authority was given by the Commissioners for the compulsory registration of Mr Spennacchi as sole proprietor with 1 April 1997 as the effective date of registration.

We have already referred to the visit that took place on 14 April 1999. In the course of that visit Mr Spennacchi, as well as repeating his list of claims for the return of moneys from the Customs, added that he was not involved with Il Piccolo from February 1997 onwards. It was at that stage he claimed that he had not been in the UK and asserted that someone else, whom he could not identify, was running Il Piccolo.

On 7 July 1997 an "officer's assessment" for £7,175 was completed.

Information obtained during visit of 14 April 1999

It was ascertained, among other things, that both the Stonegate premises and the Camden Road premises had been mortgaged and both had been "repossessed" by the mortgage provider at some time in April 1998.

Mr Bowen, Mr Spennacchi's accountant, had been aware that E D Spennacchi had dissolved the partnership with Mr Spennacchi with effect from 31 March 1997 she had, apparently, continued to keep an eye on the business at Il Piccolo during 1997 because she had taken various records to Mr Bowen. She had made a prepayment to Mr Bowen in an attempt to make sense of the records and the VAT situation.

Mr Rhodes' visit report goes on to explain how he calculated the net tax apparently due. He had examined the records provided to him. These were a mixture of invoices and receipts for expenditure, some till rolls, some credit card slips and bank statements. He had calculated, using some estimates for missing records, that the overall VAT position for the period from 1 April 1997 to 22 February 1998 disclosed a net amount of tax of £13,712 as being due. This was based on a calculation of gross income amounting to £120,327; VAT on this worked out at £17,921. Against that was allowed input tax based on actual invoices amounting to £4,209. Mr Rhodes compared that figure with the 1996 figures for turnover. These worked out at approximately £130,000; he therefore concluded that £120,000 was not unreasonable for a short period.

Later in the course of that meeting Mr Spennacchi arrived. He insisted that in early February 1997 he had left the business and that from that day onwards he had no connection with a responsibility for either the Il Piccolo or the Il Paradiso. He had left the United Kingdom. Later in the meeting he did state that during 1997/1998 he had been in the United Kingdom; but he insisted that he had not been involved with the business. When asked, Mr Spennacchi said that the person running the business could have been his wife or his son.

Mr Spennacchi asserted that he had been subject to harassment at the hands of the police and the Rother Council. Because of this harassment he had been prevented from trading and therefore he had refused to pay his taxes.

Mr Spennacchi insisted that, since the Customs could show no papers signed by him after February 1997, all money in the hand of the Customs belonged to him.

In the course of an examination of records and other documentary evidence Mr Rhodes had discovered the following, among other things:

• Invoices from December 1997 to January/February 1998 from Cellphones Direct had been made out in the name of Mr A Spennacchi. There was an electricity bill in the name of Mr A Spennacchi with an actual meter reading taken on 7 January 1998.

• For the months March, August, September, October, November 1997 and January and February 1998 there were copies of invoices for suppliers (covering wines, spirits, pasta etc) from "Annessa", all bearing the signature of A Spennacchi.

• A receipt issued by bailiffs working for Rother District Council, dated 22 November 1997 in respect of a payment collected relating to the property at Stonegate was found. That receipt states that the premises visited by the bailiffs was the Camden Road premises, the Il Piccolo, and had been signed by A Spennacchi.

• In November 1997 receipt for advertizing referred to Mr Spennacchi. The same month a fire inspection certificate was signed by A Spennacchi and an invoice from Kall Kwik print shop in Camden Road Tunbridge Wells refers to Mr Spennacchi.

• A "media Order" agreement (issued by a business called Tourist Information Services Ltd) dealing with the sale of advertizing space to Il Piccolo is signed on 3 September 1997 by Agostino Spennacchi who declares himself to be the director/owner of the Il Piccolo.

In the course of the visit Mr Rhodes notes that he was shown an Inland Revenue form actually signed by Mr Spennacchi in December 1997. The signature on that matched those that he had seen on the documents referred to above. Mr Rhodes records that Mr Bowen seemed ready to accept that, at the very least, Mr Spennacchi had been actively involved in the Il Piccolo during 1997/98.

On return to the office following the visit, Mr Rhodes notes that he had discussed developments with the district manager. It had been agreed that they had sufficient information to justify treating Mr Spennacchi as a sole proprietor with effect from 1 April 1997 and that an additional assessment should be raised against the sole proprietor registration. £6,537 had already been assessed; the amount of tax due, £13,712, was therefore reduced to £7,175.

Early in 2000 Mr Rhodes visited the Inspector of Taxes to determine what material they had tht could assist. The tax return for the two year period to 7 April 1997, lodged on 23 December 1997, showed Mr Spennacchi and J D Spennacchi as partners. Turnover for the two years was shown as £261,540.

Issue 1

Mr Spennacchi had contended that he had not been in partnership with J D Spennacchi during the period from October 1992 until March 1997. The Commissioners pointed to the original VAT 1 registering them as a partnership. This was dated 26 June 1991 and had been signed by Mr Spennacchi. The notification of the change of business address from Stonegate to Camden Road, Tunbridge Wells, had been submitted, on 5 October 1992, by both Mr Spennacchi and J D Spennacchi. Then the Commissioners pointed to the Inland Revenue return made as a partnership return to the end of March 1997. A letter of 1 February 1994 from the partnership accountants to the Inland Revenue, referring to the partnership between Mr Spennacchi and J D Spennacchi, states that the business was carried on at premises in Tunbridge Wells and Stonegate. The later self-assessment return confirms that Mr Spennacchi and J D Spennacchi were in partnership. It is signed by him.

On what basis, therefore, can Mr Spennacchi sustain his claim for repayment? It is clear from the evidence set out above that until March 1997 the business was conducted in partnership by Mr Spennacchi and J D Spennacchi. It is, as we understand the evidence, impossible to argue otherwise. Indeed there appears to be no legal basis whatever for contending that any money paid to the Commissioners in respect of the partnership liabilities should be repaid to Mr Spennacchi on the grounds that no partnership existed, or indeed on any other grounds.

Although we have already ruled that the appeal on this ground is out of time, we should mention that, were it in time, we would dismiss it.

Issue 2

The second issue concerns the question of whether the Commissioners were correct to have registered Mr Spennacchi compulsorily as a sole proprietor for the period from 1 April 1997 to 31 March 1998. Mr Spennacchi says that he was not running the business and so was wrongly registered. In this respect, as already noted, he asserts that he had signed no VAT 1 form. Against this we note that the visit report shows a large amount of documents in the form of invoices and other records signed by Mr Spennacchi that indicate that he was actively involved in the management of the business. We refer, among other things, to the advertizing contract in which Mr Spennacchi describes himself as a director and proprietor as of 3 September 1997.

Mr Spennacchi contends that he should never have been compulsorily registered for that period. The Commissioners are however required to register someone compulsorily in circumstances where, as here, they form the view that his turnover has exceeded the threshold. VAT Act 1994 Schedule 1 Paragraph 1(2) makes a person liable to register in circumstances where his supplies overtop £56,000 in a year. It will be recalled that Mr Rhodes calculated Mr Spennacchi's turnover as £120,000, observing that the turnover of the previous year had been £130,000. We are satisfied that Mr Spennacchi was liable to be registered for that period. Schedule 1 paragraph 7(2) directs that the Commissioners shall register any person liable to be registered. In this connection it will be noted that the partnership tax return for the 1997 year shows turnover (for two years) as £261,540 and the termination of the partnership as at 31 March 1997. J D Spennacchi's letter referred to above says that she has ceased to be a partner and in due course she signed a VAT 68 form showing 1 April 1997 as the date of the transfer of the business from her.

On the strength of the points just made, we think that the Commissioners were entirely justified in registering Mr Spennacchi as a sole proprietor with effect from 1 April 1997.

Issue 3

Issue 3 relates to the quantum of the assessment. We have already explained how the amount of tax was calculated. The amount of the assessment was determined on the basis of evidence available to the assessing officers. It seems to us in all the circumstances that the assessment was in a fair and reasonable amount, particularly having regard to the turnover of the previous year being £130,000. In this connection we repeat that the turnover disclosed to the Inland Revenue for the two years to 1997 was some £260,000. Those factors alone underline the reasonableness of the figure for turnover determined by Mr Rhodes. We note that credit has been given for input tax. On that basis we can see no reason for dismissing the assessment on the basis that it has not been made to best of judgment. Nor can we see any reason for reducing the assessment.

In conclusion we would say that, had these appeals been in time, we would have dismissed them. In any event, as stated at the start of this decision, the appeal was out of time and is therefore struck out.

STEPHEN OLIVER QC

CHAIRMAN

RELEASED:

LON/03/898