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You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> Lounge Lizard Ltd v Customs and Excise [2005] UKVAT V18971 (01 March 2005)
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Cite as: [2005] UKVAT V18971
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Lounge Lizard Ltd v Customs and Excise [2005] UKVAT V18971 (01 March 2005)

    18971

    SECURITY — involvement of director in companies which had de-registered owing large sums of money to the Commissioners — poor compliance record of Appellant — was the requirement reasonable — yes — appeal dismissed

    MANCHESTER TRIBUNAL CENTRE

    LOUNGE LIZARD LIMITED Appellant

    - and -

    THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents

    Tribunal: Lady Mitting (Chairman)

    Robert Grice

    Sitting in public in Birmingham on 8 February 2005

    David Howard, company secretary and Andrew Bentley, company director, appeared for the Appellant

    Mr Richard Mansell of the Solicitors' office of HM Customs and Excise for the Respondents

    © CROWN COPYRIGHT 2005


     

    DECISION

  1. The decision under appeal was that of the Commissioners dated 7 April 2004, requiring the Appellant to give security under paragraph 4(2)(a) of schedule 11 of the Value Added Tax Act 1994. The amount of security required was £32,170 if quarterly returns were submitted or £21,440 if monthly returns were submitted.

  2. On behalf of the Appellant, Mr Andrew Bentley, company director, and Mr David Howard, company secretary, attended the tribunal and oral evidence was given by Mr Howard. On behalf of the Commissioners, we heard oral evidence from Mr Martin Whitelegge, whose decision it was to issue the requirement.

  3. From the evidence which we heard and the documents before us, we find the facts to have been as follows. Lounge Lizard Limited carries on business as a licensed club from premises at 41 – 43 St Mary's Gate, Nottingham. The company registered for VAT with effect from 21 December 1995 and the registration remains extant and the company still trades.

  4. Mr Whitelegge told us that his decision to issue a requirement to give security was based on two factors. First Mr Andrew Bentley, a director of the Appellant company, had had an involvement in previous companies which had either deregistered or become insolvent owing the Commissioners large sums of money. Secondly, the Appellant company itself had a poor compliance record. Mr Whitelegge felt that for these two reasons, the Appellant company posed a risk to the Revenue.

  5. We were told that Mr Bentley had been a director of a company called Chameleon Promotions Limited which had traded from 7 October 1993 to 22 July 1999. From periods 11/97 to cessation, no payment was received on time and for the last five periods, no returns were rendered at all. The company went into liquidation owing the Commissioners £50,515.25.

  6. Mr Bentley had also been a director of a company called Lizard Lounge (Leicester) Limited, which had been registered from 1 December 1997 to 1 December 2002. This company was, for the last 12 months of its trading, on monthly returns and its last eight returns were all overdue and payment late. When it ceased trading, its debt to the Commissioners was £141.96.

  7. We were then told of a company called Saltwater Nottingham Limited which had registered on 31 August 2001 and went into administration on 21 June 2004. Mr Bentley had been the principal director of Saltwater, its business being a restaurant / bar in Nottingham. In view of Mr Bentley's involvement in his previous two companies, the Commissioners raised a requirement to give security in July 2002, this requirement being met by Saltwater. From December 2002, Saltwater got into severe financial difficulties, all subsequent returns and payments were late. The amount of security which had been required was £16,300 and in May 2003, this sum was offset against the debt owed to the Commissioners but despite this offset, when Saltwater went into voluntary liquidation, the Commissioners were still owed £37,994.96.

  8. Following the demise of Saltwater, Mr Whitelegge turned his attentions to the Appellant company. The compliance record from period 02/00 to 02/04 revealed that almost every return and payment were late, in a number of cases by very substantial periods. The return for 08/03 was paid only in part and the return for 11/03 was completely unpaid. The return for 02/04 was however received and paid on time. At the time the notice of requirement was raised, the Appellant owed the Commissioners in outstanding VAT and surcharges £24,307.29.

  9. This poor record and Mr Bentley's history was sufficient to persuade Mr Whitelegge that security was required and the notice of requirement was issued. The amount required was based on the last four submitted returns for 02/03 to 11/03 and the indebtedness of £24,307.29 was added in to make up the requirement. On 7 May 2004, the Appellant paid the debt element of the requirement, leaving only the amount of security unpaid. The company asked the Commissioners to withdraw the requirement but Mr Whitelegge's view was that given the compliance record of the company and Mr Bentley's involvement with other companies, there was still sufficient risk to the Revenue to justify the requirement. Mr Whitelegge did, however, review the amount required when the return for 02/04 was received but this would in fact have served to increase the amount of security so he disregarded it, although the requirement was reduced to £21,000 when the Appellant requested that it went on to monthly returns.

  10. Mr Whitelegge confirmed that as of today, apart from the disputed security, the company was up to date with its returns and all returns had been paid in full.

  11. Mr Howard explained to us that the poor compliance record of the Appellant was due to the fact that it had been supporting the other businesses in which Mr Bentley was involved, in particular it had been trying to keep Saltwater afloat and in paying off Saltwater's debts and liabilities, the Appellant had been left with insufficient funds to meet its own liabilities.

  12. Although the business was trading well and successfully at the moment, cash flow was tight and if security was to be required, it was doubtful that the business would be able to carry on trading. Approaches had been made to its own bank plus three others but none were willing to assist in the provision of security. What spare cash there was, was desperately needed to refurbish the club as the nature of the business was that if a club was in need of refurbishment then trade would fall.

  13. In a closing submission to us, Mr Bentley conceded that Mr Whitelegge had been acting reasonably when he raised the requirement for security but that such was the good compliance record of the Appellant since then, the continuing requirement was unreasonable.

  14. As we explained to Mr Howard and Mr Bentley, the jurisdiction of the tribunal is strictly circumscribed. The question which we the tribunal must address is whether or not Mr Whitelegge, in making his decision, acted in a way in which no reasonable panel of Commissioners could have acted; if he had taken into account any irrelevant matter or had disregarded something to which he should have given weight, or had made an error in law.

  15. We are also limited to considering the facts and matters which existed at the time when Mr Whitelegge took his decision.

  16. Looking at the position when the notice of requirement was raised, Mr Whitelegge had in front of him a very poor compliance record for the Appellant company itself and a substantial debt owing to the Commissioners and Mr Bentley's involvement in three other companies, all of which had collapsed owing, and in two cases, very substantial amounts of, VAT. Against this background, we consider the requirement was fully justified and correctly calculated; all those factors were highly relevant and we know of no other factors appertaining at the time which should have been taken into consideration. In view of the fact that our jurisdiction is limited to considering facts as they were at the time of the requirement, we are unable to take account of the later payment of the outstanding indebtedness or the subsequent good compliance record of the company. Equally, we are not allowed to be influenced by the financial impact on the company of the payment of the security.

  17. In summary, therefore, we find the decision of the Commissioners was a reasonable decision and one which we uphold and we dismiss the appeal. Mr Mansell made no application for costs and we make no order.

  18. We would reiterate one matter which we did raise at the hearing and that was to draw the attention of Mr Bentley and Mr Howard to the fact that they were able to make an application to Mr Whitelegge for leave to pay the security by instalments. Whether or not any such application is granted is entirely in the discretion of the Commissioners but no doubt Mr Whitelegge will take into account the recent compliance record of the company.

    LADY MITTING
    CHAIRMAN
    Release Date: 1 March 2005
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