United Kingdom VAT & Duties Tribunals Decisions

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Cite as: [2004] UKVAT V18768

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Malik Laws Solicitors v Customs and Excise [2004] UKVAT V18768 (08 September 2004)

VALUE ADDED TAX – assessment – appeal dismissed.

MANCHESTER TRIBUNAL CENTRE

MALIK LAWS SOLICITORS Appellant

- and -

THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

Tribunal: Mr R Barlow (Chairman)

Mr Strangward (Member)

Sitting in public in Manchester on 12 July 2004

No appearance by the appellants.

Mr Trevor-Jones, of counsel, instructed by the solicitor of HM Customs and Excise, for the respondents

© CROWN COPYRIGHT 2004


 


DECISION
1. When this appeal was called on for hearing there was no appearance by the appellants and the respondents were represented by Mr Trevor-Jones of counsel. As the appellants had been notified of the hearing and had not requested any adjournment we decided to hear the appeal in their absence under rule 26(2) of the VAT Tribunal rules.
2. The appellants are a firm of solicitors and the appeal is against assessments of value added tax totalling £29,449 made in respect of four prescribed accounting periods, being the periods ending April 2001 to January 2002. The assessments were made on 8 July 2002. The first period was a long period and so the period covered by the assessments is from 1 December 2000 to 30 April 2001.
3. Mrs Shanker, an officer of customs and excise, gave evidence. She gave her evidence in a clear and precise manner. The burden of proof lies upon the appellants in a case like this to show that the assessment is wrong and, in their absence, unless anything emerged which contradicted any of Mrs Shanker's evidence, that burden would not have shifted. Nothing of the kind did emerge and our findings of fact are as summarised below. We commend Mrs Shanker for a logical and fair approach and have no hesitation in holding that the assessments were to the Commissioners' best judgment as they are required to be by section 73 of the VAT Act 1994.
4. Mrs Shanker visited the appellants on 30 April 2002. She found that the partnership which is the appellant in this case had taken over an existing practice from a predecessor partnership which had de-registered with effect from 30 November 2000 but the appellant had not retained the VAT registration number of the predecessor. She concluded that the new partnership had taken over the business as a going concern. The appellants had been registered for VAT with effect from 1 December 2000 and have not appealed against that registration date. They had originally applied to register from 1 January 2001 but the Commissioners had concluded that, as there was a transfer of a going concern and the previous business had been trading above the registration threshold, the liability to register began with the date of transfer and the appellants were liable to account for tax from that date.
5. The appellants maintained records on a SAGE computer programme but had only commenced to list sales and purchases from 1 January 2001. For the period ending April 2001 (a five months long period), Mrs Shanker averaged the monthly outputs and inputs in the four months that were recorded in the SAGE record and included in the assessment, in respect of the first month, the sum of £271. In addition, four items of input tax were disallowed. One item was disallowed because no tax invoice was available; one because the invoice was addressed to a third party and two because they related to the previous partnership (which was correctly disallowed because the VAT number was not retained). These items totalled £6,841.
6. The SAGE record covered the whole of the three month period ending July 2001 but it showed that output tax declared on the VAT return for that period was under-declared by £4,956 and input tax was over-claimed by £2,197 so both those amounts were assessed.
7. In respect of the three month period ending October 2001 no return had been made so Mrs Shanker calculated the VAT due from the SAGE record but because of the discrepancy in the previous period she also checked the banking records. She assessed the output tax due accordingly having ensured that there was no duplication in her calculations (i.e. only including bankings that were not in the SAGE record). In the absence of other information she allowed for the input tax recorded in the SAGE record. That was a reasonable approach to take as the Commissioners are entitled to see proper records before allowing for input tax, at least where no explanation for the absence of the records is offered, and we note that the input tax in the SAGE record exceeded the output tax in the SAGE record which tends to confirm that the record was complete so far as input tax was concerned even though deficient in respect of outputs. The output tax due on the basis of the calculation referred to was £15,821 and the input tax allowed was £5,206.
8. For the three month period ending January 2001 the method of calculation was similar to that for the preceding period except that the SAGE record only existed for November and December 2000, so to arrive at a notional SAGE figure for January 2001, an average of those two months was added to the recorded SAGE and bankings figures. Output tax was calculated at £8,905. Again only the input tax actually recorded was allowed and a recorded sum of £270 was disallowed as there was no evidence to support it, indeed it may well have related to zero rated books, giving a total of £3,199.
9. Fuel scale charges were added to the assessments in respect of the senior partner's car as he had claimed input tax on motoring expenses and after Mrs Shanker had discussed the matter with him. These items totalled £185.
10. The assessments were then adjusted to take account of payments made when 'centrally issue assessments' were paid (i.e. assessments in lieu of VAT returns).
11. Our findings of fact are as stated in paragraphs 4 to 10.
12. The appeal is dismissed. Because of the appellants' non-attendance, this case falls within one of the exceptional circumstances in which the statement made on behalf of the Commissioners in Parliament, that they would not normally seek the recovery of costs in the tribunal, does not apply. The tribunal has a discretion to award costs which must be exercised judicially and, although it has a complete discretion, that statement must have a direct bearing on the exercise of that discretion because litigants may have taken it into account when deciding whether to appeal and because the statement must be given due weight as a formal announcement in Parliament. However, as this is a case falling within the exceptions and as all normal costs considerations indicate that an award should be made, we award the respondents their costs of the appeal to be assessed by a chairman sitting alone if not agreed by the parties.

MR R BARLOW

CHAIRMAN

RELEASED:

MAN/03/0313