United Kingdom VAT & Duties Tribunals Decisions

Retro (Scotland) Ltd v Revenue and Customs [2006] UKVAT V19529 (06 April 2006)

19529

Value Added Tax – deduction of input tax – whether sufficient evidence of taxable supplies to Appellant – VATA 1994 Sections 24-26 – VAT Regulations (1995/2518) nos 13, 14 and 29 – Appeal refused.

EDINBURGH TRIBUNAL CENTRE

RETRO (SCOTLAND) LTD Appellant

- and - THE COMMISSIONERS FOR HER MAJESTY'S REVENUE & CUSTOMS Respondents Tribunal: (Chairman): Mr Kenneth Mure, QC (Member): Riaz Ahmad, BA., LL.B., C.A.
Sitting in Edinburgh on 7 March 2006

for the Appellant Appellant – Not represented

for the Respondents Mr Andrew Scott, Shepherd & Wedderburn, WS

© CROWN COPYRIGHT 2006.

DECISION

Preliminary

In this Appeal Mr Scott appeared for the Respondents. The Appellant was not represented either by its agent, Mr Javid, or by any of its officers. By faxed letters dated 3 and 6 March 2006 Mr Javid sought a fourth adjournment for a period of 10 weeks because of continuing medical problems affecting his back. A third adjournment had been granted by us on 21 February 2006 in the hope of Mr Javid recovering sufficiently to appear himself, failing which there was a sufficient opportunity to instruct another agent. In a Direction of that date we indicated that given the delays to date no further adjournment was likely to be granted.

Indeed on behalf of the Respondents Mr Scott opposed a further adjournment and we did not consider that the faxed letters referred to disclosed any new or exceptional factor justifying a fourth adjournment. Accordingly we decided that in terms of Rule 26 the Proof should proceed without further delay in the absence of the Appellant.

The issue is whether the Respondents were justified in refusing a claim for input tax of £16,607.00 for the initial period of account of the Appellant to August 2003. The Appellant claimed that this represented input tax in respect of supplies from Bluestone Shirts Ltd, a company based in Manchester.

The Law

We were referred to Sections 24-26 VATA 1994 as affecting the deduction of input tax generally. Section 24(1) provides that VAT on supplies to a taxpayer is treated as "input tax". Section 24(6) makes provision for the evidencing and quantification of input tax by reference to documentation or other information.

Reference was made also to the VAT Regulations (1995/2518) nos 13, 14 & 29. In particular Regulation 29(2) provides that where invoices or certain other identifying documentation is not available, regard may be made to "… such other evidence of the charge to VAT as the Commissioners may direct".

The Tribunal's decision in Joytot Ltd (LON/97/514) was considered.

The Facts

Mr Scott led evidence from two officers of HMRC, Ms Lesley Purves, the local officer who visited the Appellant's premises, and Michael Lloyd, who is based in Manchester, and who was asked to investigate the alleged supplier's records. We found both officers credible and reliable witnesses and on the basis of their evidence we make the following Findings-in-Fact:-

(i) The Appellant was registered for VAT on 1 April 2003. It is in business as a clothing retailer and trades from Unit LR13, Centre West, East Kilbride.

(ii) It submitted a repayment claim for input tax for the period to 30 August 2003 for £31,897.65. (Document 10, page 2). This includes the disputed figure of £16,607.00.

(iii) Ms Purves visited the Appellant's premises on 8 October 2003 to check its records generally. She met there a director of the company, Mr Ayub. She decided to investigate VAT on supplies made allegedly by Bluestone Shirts Ltd of Manchester.

(iv) Ms Purves referred to the Respondents' Manchester office 3 invoices in respect of ladies' clothing made allegedly by Bluestone Shirts Ltd for verification generally. (Document 11).

(v) Mr Lloyd visited the premises of Bluestone in October and November 2003. One of his objects was to cross-check that Bluestone had declared the VAT due on its outputs. He met a Miss Hodder, its bookkeeper. There was no trace in Bluestone's business records confirming that these supplies had been made to the Appellant. Miss Hodder was unaware of any transactions with the Appellant. Bluestone's sales ledger did not contain any reference to sales to the Appellant.

(vi) The three copy invoices supplied by Ms Purves to Mr Lloyd seemed irregular to Miss Hodder. The reference numbers had six digits whereas Bluestone's true references had only four. The goods allegedly supplied were much higher in value than those customarily sold by Bluestone. (Document 12).

(vii) Mr Lloyd visited also the liquidator of Bluestone in November 2005 but no further documentation was available.

(viii) Thereafter Ms Purves revisited the Appellant. She investigated whether any other evidence such as receipts or proof of payment was available. She was not able to examine the stock itself. No such alternative evidence or proof of payment has been provided to date by the Appellant. (Documents 10/page 7, Documents 7 and 9).

(ix) As a result Ms Purves indicated that input tax would be disallowed on eleven invoices purportedly from Bluestone Shirts for a total of £16,607.00. (Documents 7 and 9). Accordingly a Notice of Assessment for £16,607.00 with interest thereon of £431.52 was issued by the Respondents. (Documents 3 and 5).

The Respondents' Submission

Mr Scott moved us to dismiss the Appeal and to uphold the assessment as made to best judgment. He submitted that for the appeal to succeed the VAT invoices must, on the evidence, be from a taxable person. The tax must be tax due. In the absence of invoices in satisfactory form, there was a range of other evidential documents and factors which could be accepted by the Commissioners as proof of taxable supplies. However, such evidence was not available or forthcoming in the present case.

The invoices here were not satisfactory or acceptable. No alternative evidence had been produced by the Appellant in spite of the Respondents' requests. The onus of proof rested on the taxpayer. Mr Scott cited Joytot Ltd in support of his argument. Crucially there as in the present case there was no satisfactory evidence of taxable supplies having been made.

Decision

We consider that the Respondents' arguments are well-founded and, therefore, we dismiss this Appeal.

All the evidence before us does not indicate that taxable supplies were made for the disputed amount of £16,607.00 by Bluestone Shirts Ltd to the Appellant. Moreover, the burden of proof rests on the Appellant, and this has not been discharged. The business records of Bluestone Shirts Ltd contradicts the Appellant's ever having been one of its customers. Given the disparity in the system of numbering the Invoices identified do not appear to have been genuine although they bore Bluestone Shirts Ltd's heading. The goods itemised on the invoices were not, it seems, of a type or value in which ordinarily it traded.

The Appellant was given ample opportunity to produce alternative evidence to confirm that taxable supplies were made for the disputed amount. However, no such evidence has ever been produced. The Respondents' officers were not given an opportunity to view the stock in the disputed invoices.

For these reasons we refuse this Appeal and uphold the assessment for £16,607.00 together with interest.

Costs

Mr Scott sought an award of expenses, which we grant. Failing agreement expenses will require to be taxed in terms of Rule 29(3).

Finally, although eleven invoices were checked by the Respondents' officers (Document 7), none of these (or any copy) was actually produced. Given the other evidence available to us and its quality, this did not affect our ability to reach our decision. However, as a matter of best practice we would observe that such original evidence (or even copies) might in other cases be helpful to the Tribunal and therefore should be produced.

MR KENNETH MURE, QC CHAIRMAN
RELEASE: 6 APRIL 2006

EDN/04/163