United Kingdom VAT & Duties Tribunals Decisions

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Cite as: [2004] UKVAT V18663

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Alarmond Ltd v Customs and Excise [2004] UKVAT V18663 (21 June 2004)

18663

Assessment: sale of aircraft; alleged forgery and extortion and non-receipt of payment; whether established.

EDINBURGH TRIBUNAL CENTRE

ALARMOND LIMITED Appellants

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: (Chairman): T Gordon Coutts, QC

(Member): James D Crerar, WS., NP

Sitting in Edinburgh on Tuesday 8 June 2004

for the Appellants Mr Charles Cant

for the Respondents Mrs Lyndsey Hall, Shepherd & Wedderburn, WS

© CROWN COPYRIGHT 2004.

DECISION

Introductory

The circumstances narrated in this appeal were bizarre. There exists a document purporting to vouch that the Appellant company entered into a financial transaction in respect of which a sum of £10,500 was due as VAT to the Commissioners. This was on the sale of an aircraft by the Appellant.

Before the Tribunal there was oral evidence from the Director of the Appellant Mr James McAuley and evidence from Mrs Gibson an officer of the Respondents. Mrs Gibson obtained possession of the document purporting to be a record of a transaction which brought out a sum of £10,500 due as VAT. The Tribunal had paper in front of them comprising a Closed Record in a Court of Session action, (which resulted in no findings being made because the Appellants who were the pursuers abandoned it on a finding of no expenses due to or by), three written opinions by a handwriting expert and some correspondence from the Appellant's accountant.

The position maintained by the Appellant was that there had been no transaction but that the aircraft in question had been stolen.

The ascertainable facts

The Appellant company at the time in question was trading as Turnhouse Flying Club. It leased and sold aircraft. Mr McAuley's evidence was that the company had contracted to sell to one John Bain a CESSNA 310 aircraft at a price initially agreed at £110,000 plus VAT and that in part exchange a CESSNA 182 would be taken at a price of £35,000. The balance between the prices of £75,000 plus VAT was said to be the amount which Mr Bain was to pay to the Appellant.

Mr McAuley's evidence was then that the prices of both aircraft were, for reasons imperfectly explained, to be enhanced to £150,000 and £75,000 respectively. That still left a balance of £75,000 due. Mr McAuley, thanks to his experience in the motor trade, saw nothing untoward in such an arrangement. £88,125 was paid by the pursuers to Mr Bain by CHAPS transfer on 18 May 2000. So much appears to have been admitted by Mr Bain in the Court of Session action above referred to. Mr McAuley however deponed that he had never received any money from Mr Bain whereas in the Closed Record Mr Bain said that he paid some money in cash and that is the import of the 2 invoices which were challenged.

Mr McAuley then said that at a meeting at Kirknewton Airport on 18 May he was presented with 2 documents to sign and when he demurred was threatened by a shotgun being pressed into his stomach. He signed but said he disguised his hand. Accordingly the signatures on the documents were not forgeries as seemed to have been claimed originally and the Appellant's challenge was that the documents themselves had been specially created by the said Bain and were not the Appellant's letter head.

Another person Mr Cation was present at the threatening incident.

Subsequently Mrs Gibson found in an examination of Mr Cation's records the document purporting to be the receipt and transfer signed by Mr McAuley. Mr Cation having subsequently purchased the aircraft from Mr Bain doubtless, wished to have some evidence about its provenance.

The next step was said to be that Mr McAuley was asked by Mr Bain to telephone persons at Perth who were in charge of the aircraft and to instruct them to release it to Mr Bain. He was released from Kirknewton and the attentions of Mr Bain. He then contacted the Police who investigated who for a time arrested the aircraft as well as Messrs Bain and Cation but released them all subsequently. Mr McAuley said that he had telephoned his girlfriend at Cumbernauld to advise her of the position; that he had given to the Police a shirt which indicated that some action had taken place with a shotgun. He subsequently raised the action referred to in the Court of Session, for delivery payment and interdict.

It can be seen therefore that the only evidence presented to the Tribunal was the oral evidence of Mr McAuley, the documents he referred to and sundry papers including the Closed Record. Notably there was no evidence from the girlfriend, the Police, Mr Cation, Mr Bain, other than his admissions in the Record, no corroboration and in particular no bank records relating to any of the incidents of acquisition or transfer of any of the funds.

Decision

The Tribunal were much exercised by the narration they had been given. On the one hand the story was so bizarre as to lend it some air of plausibility.

On the other hand there was no evidence other than that of Mr McAuley himself that the Tribunal could assess and they were not satisfied that they could accept his account without corroboration. They noted the documents prepared by Malcolm Graham a forensic consultant. He did not give evidence. He had been concerned with the actual signatures and could not give any view about their authenticity. However all that was somewhat of a smoke screen since Mr McAuley did in fact sign the documents. He then turned his attention to the invoice itself and concluded that the document was a fabrication. The document was undoubtedly created but that does not establish either that it is a fabrication or, if it was, that it was not legitimate to create a document which could be signed by the parties transacting. All it required to do was to have the heading of the Appellants and their VAT number. What it looked like otherwise is not material.

The account given by Mr Bain in the defences in the Court of Session action, which was not pressed to proof, was entirely different from that presented to us by Mr McAuley. Neither of these versions were tested in court. The matter is neutral. The whole story reeks of suspicion. There was the alleged manipulation of the purchase prices, an impropriety at the least; there were allegations of sums being transferred in cash and there was also the fact that Mr Cation ended up as the owner of the aircraft in question.

On the whole matter the Tribunal are unable to hold that the invoice before them did not record a transaction susceptible to VAT.

The Appellant has failed to establish even on the balance of probabilities that no sale took place and certainly would not have established beyond reasonable doubt that Mr McAuley was coerced into the transaction.

In her submission to the Tribunal Mrs Hall for the Commissioners indicated that a proper way out would be, if monies had not been received, to claim bad debt relief. That course was also raised by the Appellants accountant, John Lynch and Co in a letter to the Commissioners on 26 August 2003. It is a pity that that course was not pursued.

On the whole matter however the appeal fails on the basis that the Appellant has not established to our satisfaction on the balance of probabilities that no Vatable transaction took place.

The Commissioners did not ask for expenses.

T GORDON COUTTS, QC

CHAIRMAN

RELEASE: 21 JUNE 2004

EDN/03/123