United Kingdom VAT & Duties Tribunals Decisions

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Cite as: [2005] UKVAT V19306

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Abbeymuir Ltd v Her Majesty's Revenue and Customs [2005] UKVAT V19306 (26 October 2005)

19306

SECURITY – bar – involvement of directors and licensee in previous businesses with poor compliance records – was request for security reasonable – appeal dismissed

LONDON TRIBUNAL CENTRE

ABBEYMUIR LIMITED Appellant

and –

THE COMMISSIONERS FOR

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: Nicholas Aleksander (Chairman)

Sandi O'Neill

Sitting in public in London on 13 September 2005

The Appellant did not appear and was not represented

Mr P Webb, a Senior Officer of HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2005


 


DECISION

1. The decision under appeal was that of the Commissioners of HM Customs and Excise (as was) contained in a letter dated 1 November 2004, requiring the Appellant to give security in the sum of £11,450 (if the Appellant filed quarterly returns) or £7,560 (if the Appellant filed monthly returns), pursuant to paragraph 4(2)(a) of Schedule 11 of the Value Added Tax Act 1994.
2. The Appellant did not appear either personally or by representative. The Appellant's accountant sent representations to the Tribunal by fax which we took into account and refer to below.
3. We heard oral evidence on behalf of the Commissioners from Mrs Lynn Andrews, a senior officer with the security team. On the basis of the evidence which we heard and the documents in front of us, we find the facts to be as follows.
4. The Appellant carries on business as licensed premises (a bar) trading as "Green House Effect" from premises at 63 Church Road, Hove, East Sussex. The Appellant was registered for VAT with effect from 1 February 2004 and the registration remains extant, and the company still trades.
5. Mrs Andrews told us that her decision to issue a requirement to give security was based on a number of factors. First, Mr JK Sturgeon, a director of the Appellant, had had an involvement in another business with a poor compliance record. Secondly, Mr A Sturgeon, one of the licensees and the son of Mr JK Sturgeon, had been involved in another business which had previously traded from the same premises as the appellant in the same line of business, and which went into liquidation owing a significant amount in tax, surcharges and interest. Thirdly, the Appellant had been tardy in responding to correspondence from the Commissioners.
6. We were told that Mr JK Sturgeon, a director of the Appellant, is also director of Posidrive Limited, whose business is a public house in Brighton, and which has a poor record of compliance. From periods from 00/00 to 11/04 this company was late in filing its returns on 14 occasions and in paying its tax on 20 occasions.
7. We were then told that Mr A Sturgeon was a director of Hyper House Limited, which traded from the same address as the Appellant in the same line of business, and which went into liquidation owing in excess of £14,000 in tax, surcharges and interest. As a cash business, Mrs Andrews considered that Hyper House Limited should have been able to pay its tax as it fell due. The Appellant acquired the assets and business of Hyper House Limited as a going concern shortly before it went into liquidation, and Mr A Sturgeon continued as one of the licensees. A licensee is in a position of authority in relation to a business, as one of the licensees is required to be on the premises during opening hours to supervise the operation of the business.
8. As the Appellant acquired the business of Hyper House Limited as a going concern, and traded from the same premises, Mrs Andrews noted that it would have substantially the same customer base, stock and trading activities. So as Hyper House Limited had a poor record of compliance, there was a risk that the Appellant (as the successor to that business) would also have a poor compliance record, unless steps had been taken by it to address the risk of default.
9. Taking all of these factors into consideration, Mrs Andrews considered that there was a risk to the revenue, and wrote a letter of intent to the Appellant on 29 September 2004. No reply was received to that letter, and Mrs Andrews proceeded to issue a Notice of Requirement for security under Schedule 11, paragraph 4(2)(a) of the Value Added Tax Act 1994. The amount required was based upon the returns filed by Hyper House Limited for the last four periods of its trading.
10. Following receipt of the Notice of Requirement, the Appellant requested by their letter of 30 November 2004 a local review which was carried out by Mrs V Toth who upheld the issue of the Notice of Requirement in her letter of 9 December 2004.
11. A security payment of £7650 was paid by the Appellant on 25 January 2005.
12. The representation made by A.K & Co (Accountancy Services) Limited was that Mr JK Sturgeon was the father of Mr A Sturgeon. Mr JK Sturgeon was a licensee of the premises only because the lease of the premises was in his name. He was not involved in the management of Hyper House Limited, and was not an employee for its final two years of trading.
13. Mr Webb made a submission to us that as the Appellant had paid the security deposit, we had no jurisdiction to hear the appeal. He submitted that the effect of section 83(1) of the Value Added Tax Act 1994 taken with section 48(7) was that by paying the deposit, the Appellant had acknowledged that the security was due and that there was no longer a decision which could be subject to an appeal.
14. We consider this submission to be ill founded and the statute cannot be interpreted in this manner. There is nothing in the legislation which would suggest that by paying a security deposit, a taxpayer forfeits his right to any appeal in respect of it. It is clear from the correspondence that in this case the Appellant only paid the deposit under protest following a visit by Customs officers on 17 January 2005 who explained the possible prosecution action that could follow as a result of non-payment. The Appellant in appealing against the Notice of Requirement is seeking a refund of his deposit.
15. However the jurisdiction of the Tribunal in relation to security is strictly circumscribed. Our role is to consider the reasonableness of the decision made by the Commissioners on the exercise of their discretion. Did Mrs Andrews, in making her decision, act in a manner in which no reasonable panel of Commissioners could have acted? Did she take into account any irrelevant matter or disregard something to which she should have given weight, or had she made any error of law?
16. Looking at the position when the Notice of Requirement was made, Mrs Andrews had in front of her a poor compliance record of a business in which one of the directors of the Appellant was a director. In addition, the Appellant had acquired as a going concern the business of Hyper House Limited (a company which went into liquidation owing significant amounts to the Commissioners), and continued to trade from the same premises, with the same customer base and stock. One of the directors of Hyper House Limited continued as a licensee for the Appellant. The Appellant did not respond to a letter of intent.
17. Against this background we consider that the decision of the Commissioners was justified and that the decision of the Commissioners was a reasonable one. Accordingly we dismiss the appeal.
18. Mr Webb made no application for costs and we make no order.

NICHOLAS ALEKSANDER

CHAIRMAN

RELEASED: 26 October 2005

LON/05/0091