United Kingdom VAT & Duties Tribunals Decisions

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Slix UK Ltd v Revenue & Customs [2006] UKVAT V19588 (23 May 2006)

19588

VALUE ADDED TAX – Notice requiring security for payment of VAT challenged – heard in Appellant's absence – Appeal dismissed

LONDON TRIBUNAL CENTRE

SLIX UK LIMITED Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY'S

REVENUE AND CUSTOMS Respondents

Tribunal: ADRIAN SHIPWRIGHT (Chairman)

ANGELA WEST

Sitting in public in Southampton on 20 April 2006

The Appellant did not appear

Mrs Crinnon of HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2006

DECISION

Introduction

This is an appeal concerning the issue of a Notice of Requirement to give Security ("the Notice") by the Respondents ("HMRC") under paragraph 4 Schedule 11 VATA. The Notice required Slix UK Ltd ("SUK") to give security in the sum of £19,350.

This Notice was the subject of a local reconsideration. The review decision appealed against is contained in a letter dated 19 July 2004.

This case was heard in the absence of SUK under Rule 26 of the Tribunal Rules.

The Issue

In essence, the issue in this case is whether the Notice requiring security for the payment of VAT was properly made. This involved essentially two questions:

(1) the previous history of companies owned by participators and officers in SUK; and

(2) the reasonableness of the requirement for security and its amount in the light of that history.

The Law and Authorities

The provisions allowing security of payment of VAT to be required are found in paragraph 4 Schedule 11 VATA. This provides:

4—(1) The Commissioners may, as a condition of allowing or repaying input tax to any person, require the production of such evidence relating to VAT as they may specify.

(1A) If they think it necessary for the protection of the revenue, the Commissioners may require, as a condition of making any VAT credit, the giving of such security for the amount of the payment as appears to them appropriate.

(2) If they think it necessary for the protection of the revenue, the Commissioners may require a taxable person, as a condition of his supplying or being supplied with goods or services under a taxable supply, to give security, or further security, for the payment of any VAT that is or may become due from—

(a) the taxable person, or

(b) any person by or to whom relevant goods or services are supplied.

(3) In sub-paragraph (2) above "relevant goods or services" means goods or services supplied by or to the taxable person.

(4) Security under sub-paragraph (2) above shall be of such amount, and shall be given in such manner, as the Commissioners may determine.

(5) The powers conferred on the Commissioners by sub-paragraph (2) above are without prejudice to their powers under section 48(7).

The Tribunal Rules allow a case to be heard in the absence of a party. Rule 26 provides:

26—(1) If, when an appeal or application is called on for hearing no party thereto appears in person or by his representative, a tribunal may dismiss or strike out the appeal or application, but a tribunal may, on the application of any such party or of any person interested served at the appropriate tribunal centre within 14 days after the date when the decision [or direction] of the tribunal was released in accordance with rule 30, reinstate such appeal or application on such terms as it may think just.

(2) If, when an appeal or application is called on for hearing, a party does not appear in person or by his representative, the tribunal may proceed to consider the appeal or application in the absence of that party ...

(3) Subject to paragraph (4) below, the tribunal may set aside any decision or direction given in the absence of a party on such terms as it thinks just, on the application of that party or of any other person interested served at the appropriate tribunal centre within 14 days after the date when the decision or direction of the tribunal was released.

(4) Where a party makes an application under paragraph (3) above and does not attend the hearing of that application, he shall not be entitled to apply to have a decision or direction of the tribunal on the hearing of that application set aside.

No authorities were cited to us nor were any copies of decisions provide to us.

Procedural Matters

The case had been set down for hearing on a number of occasions. Because of various postponements the case had not been heard even when dates been set well in advance.

The date for this hearing had been set a considerable time in advance. Late on the afternoon before the hearing the Chairman received a request from SUK seeking the postponement of the hearing on the grounds of Mrs Potter's ill-health. This request was unsupported by any medical evidence. The postponement was opposed by HMRC. The Chairman decided having considered all the circumstances that the hearing should go ahead and be adjourned to hear Mrs Potter's evidence if such evidence became relevant.

A fax attaching a copy of the general medical certificate was received and handed to the Chairman on the day of the hearing shortly before the start of the hearing.

SUK and its representatives did not do the Tribunal courtesy of attending the hearing.

When the time for the commencement of the hearing arrived, the clerk telephoned SUK's representatives to find out if they were going to attend the hearing. The clerk was told they would not be attending the hearing.

The case was called on at the notified time but SUK was not present, nor were its representatives. The Tribunal decided to proceed with the hearing under Rule 26 of the Tribunal Rules in the absence of SUK subject to an adjournment if it became relevant to hear Mrs Potter's evidence.

We find as a primary fact that Mrs Potter's evidence did not in any way become relevant. Mrs Potter was a director of SUK, but not the bookkeeper or accountant. Her evidence, of itself, could not have affected the objective facts concerning the history of previous companies in which SUK shareholders and directors had participated, nor the amount the security required. Insofar as such evidence might have had any relevance (which is not accepted), it could equally well have been given by any other participator.

We find that as Mrs Potter's evidence could not displace any objective facts concerning the previous history or the amount of the security required, SUK was not prejudiced in any way by her evidence not being heard. We bore this in mind when considering and making our findings of fact. We also considered whether to adjourn the case to hear her evidence but considered that this would achieve nothing for the reasons set out above.

Evidence

HMRC produced a bundle of documents. SUK was not present and so could not and did not object. They were admitted in evidence.

Oral evidence was given by Mrs Linda Andrews and Mrs Susan Ogburn, both members of HMRC. No witness statements were produced.

Findings of fact

From the documents and evidence we make the following findings of fact.

SUK

(1) SUK was a company incorporated in England whose principal business concerned swimwear including its design and manufacture.

(2) SUK's shareholders and officers include the following:

John Thornton Potter;

Patricia Elizabeth Potter; and

Timothy Potter.

(3) SUK sought registration of VAT purposes. In Form VAT 1 signed by John Thornton Potter, Director, SUK said it expected its turnover in the first year of business to be £1.5 million.

Prior History

(4) Mr and Mrs Potter had participated in a number of other companies which have become insolvent. The details we were provided with were as follows:

Company Name Vat No Trade Class	Period of Trading	Trading Address	Persons Involved/ PrivAddress	Status	Debt	Accountant Liquidator
Lamorna Leisureware Limited 383725528 25130	01/05/1983 to 11/11/2003 Liquidated on 11.11.2002	Stinford Road Poole, Dorset BH17 0NF Tel No: 01202 681222	Gifford, Michael Ivor 2 Powys Close Clwyd Potter, John Thornton Little Grove 17 Barrs Ave, Hants Potter, Patricia Elizabeth Little Grove 17 Barrs Ave, Hants	D D CS	£70,054.78
Fineline Apparel Limited 579 9636 58	01/01/1991 to current	Stinford Road Poole, Dorset BH23 1EF Tel No: 01202 681222	Potter, John Thornton Little Grove, 17 Barrs Ave, Hants BH25 5HL Potter, Patricia Elizabeth Little Grove 17 Barrs Ave, Hants BH25 5HL Potter Patricia Elizabeth Little Grove 17 Barrs Ave, Hants BH25 5HL Potter, Timothy Flanders House, Silver Street, Hants	D	£51,146.92
Sea-Legs Limited 816 0016 72 18242	30/10/2003 to current	Willis Way, Poole, Dorset BH15 3TB	Potter, John Thornton Flanders House, Silver Street, Hants Potter, Patricia Elizabeth Flanders House, Silver Street, Hants Potter, Timothy Flanders House, Silver Street, Hants	D CS D	£0.00
Fineline (1500) Limited 780 7597 83 99999	01/07/2001 to 07/03/2002 Liquidated on 15/11/2001	Dundas Spur Portsmouth, Hants PO3 5RW Tel No: 02392 655 541	Cooper, June Linda 17 Swallow Drive, Milford on Sea, Hants Gifford, Michael Ivor 2 Powys Close, Clwyd, Potter, John Thornton Little Grove 17 Barrs Ave, Hants BH25 5HL Potter, Patricia Elizabeth Little Grove 17 Barrs Ave, Hants BH25 5HL Potter, Timothy Flanders House, Silver Street, Sway, Hants	CS D D D D	£4,635.00
Fineline (Cymru) Limited 794 3932 84 52120	01/07/2001 to 20/12/2002 Liquidated on 22/11/2002	Cefndy Road Rhyl, Denbighshire, LL18 2LG Tel No:	Potter, John Thornton Little Grove 17 Barrs Ave, Hants BH25 5HL Potter, Patricia Elizabeth Little Grove 17 Barrs Ave, Hants BH25 5HL Potter, Patricia Elizabeth Little Grove 17 Barrs Ave, Hants BH25 5HL Potter, Timothy Flanders House, Silver Street, Sway, Hants	D D	£103,755.72
Slix UK Limited 834 5579 01 18242	15/05/2004 to Current	Willis Way, Poole, Dorset BH15 3TB Tel No: 01202 684 949	Potter, John Thornton Flanders House, Silver Street, Sway, Hants Potter, Patricia Elizabeth Flanders House, Silver Street, Sway, Hants Potter, Patricia Elizabeth Flanders House, Silver Street, Sway. Hants	D D CS	£0.00

D = Director, CS = Company Secretary

The Notice

(5) HMRC issued the Notice before the first VAT return had been received.

(6) SUK asked for a local reconsideration. This review upheld the issue of the Notice. SUK appealed in time against the decision to uphold the Notice.

Rationale for the Notice

(7) The past history of the participators and officers in SUK had been one of loss of tax in the other ventures as far as HMRC was concerned. HMRC considered that, in the light of the past history, there was a risk of loss of tax as far as SUK was concerned and so issued the Notice.

(8) We find as a primary fact that in the circumstances of this case HMRC acted entirely properly and reasonably in deciding to issue the Notice. HMRC cannot be said to have acted irrationally, unreasonably, maliciously or on the basis of taking irrelevant matters into consideration or otherwise improperly or on wrong grounds in deciding to issue the Notice. The decision to issue the Notice cannot be held in any way to be outside the range of decisions to which HMRC acting reasonably could have come. We find this as a basic fact.

Amount of Security

(9) HMRC have constructed ratios of tax to turnover for various industries for use in calculating the amount of VAT (net of input tax) that might be expected to arise from a taxpayer in that industry.

(10) The amount of security in the Notice was arrived out by applying the appropriate ratio to the turnover SUK expected to make £1.5m (see paragraph 18(3) above).

(11) We find as a primary fact that this was a reasonable manner of calculating the potential tax. This amount was then divided by 2 or 3 to arrive at the amount of the security depending on the frequency Returns were to be made.

Conclusions on fact

(12) We conclude that:

HMRC were properly and reasonably concerned as to the loss of tax in respect of SUK when considering the previous history; and

the issue of the Notice seeking security for the payment of VAT was proportionate and reasonable.

Discussion

We have found (and to the extent it might be said we have not, we now find) as primary facts that:

(1) the previous history of the participators and the companies in which they had participated before SUK meant it was entirely reasonable for HMRC to seek security for the payment of VAT;

(2) the amount the security was arrived out on a rational and reasonable basis; and

(3) no evidence from Mrs Potter could have altered those findings.

Accordingly, we decide that there are no grounds for interfering with the decision to issue the Notice, or the reconsideration of that decision nor the amount of security or of its reconsideration. The appeal is therefore dismissed.

We note that under Rule 26 of the Tribunal Rules, SUK can request within 14 days of the issue of the decision that it be set aside. We direct that the hearing and determination of such a request be reserved to this Chairman and Member of the Tribunal in the first instance. No order has so far been made in respect of this hearing as to costs.

ADRIAN SHIPWRIGHT

CHAIRMAN

RELEASE DATE: 23 May 2006

LON/2004/1209