United Kingdom VAT & Duties Tribunals Decisions

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You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> Cotswold Computer Components Ltd v Revenue & Customs [2006] UKVAT V19833 (26 October 2006)
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Cite as: [2006] UKVAT V19833

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Cotswold Computer Components Ltd v Revenue & Customs [2006] UKVAT V19833 (26 October 2006)

19833

VAT – Appeals – Whether an appealable matter – Letter stating that input tax repayable would be withheld for continuing enquiries – Held not a decision crystallising rights – Appeal struck out – VATA 1994 s.83(c) – Trib Rules 1986 rule 18(1)(a)

LONDON TRIBUNAL CENTRE

COTSWOLD COMPUTER COMPONENTS LTD Appellant

and –

THE COMMISSIONERS FOR HER MAJESTY'S REVENUE & CUSTOMS Respondents

Tribunal: THEODORE WALLACE (Chairman)

Sitting in public in London on 19 October 2006

Andrew Young, counsel, instructed by Peter Smallwood & Co Ltd, for the Appellant

Gerry Facenna, counsel, instructed by the Acting Solicitor for the Respondents

© CROWN COPYRIGHT 2006


 


DECISION

1. This decision concerns an application by Customs to strike out an appeal against a decision contained in a letter dated 5 May 2006 to withhold repayment of £2,405,382.88 claimed in the Appellant's return for 12/05. The letter dated that until enquiries had been completed the repayment would remain withheld.
2. The application to strike out the appeal was on the ground that Customs had not made a decision to withhold the sum claimed and that no appeal lies under section 83(c) of the VAT Act 1994 or otherwise.
3. Since the application would if successful determine the appeal I directed that it be heard in public.
4. The only witness was Ashley Drake, managing director of the Appellant. There was a substantial bundle of documents.
5. I find the following facts.
6. The Appellant was registered for VAT in March 2004. Turnover declared on its returns increased from £2.7 million in 2004 to £53.5 million in 2005. Turnover for January and February 2006 was £54.1 million. It made monthly returns.
7. The VAT return for 12/05 showed input tax claimed of £2.409 million and no output tax. All sales were to EC Member States. It was dated 24 January 2006. The sales and all the input tax apart from £4,224 overheads represented mobile telephones.
8. On 7 February 2006 a Customs officer from Oxford Business Centre asked for the records relating to period 12/05 to be submitted to the VAT office.
9. The original records were sent by Courier to Customs at some date in March including the invoices, inspection documents, consignment and release notes for each deal and bank statements. Mr Drake told me that the original documents were lost by Customs and at Customs' request he provided copies of the photocopies which he had taken of the originals sent. There was a meeting on 9 March at Customs' office.
10. On 27 March 2006 N. M. Saunders, a Customs officer wrote with a series of 5 questions, referring to a visit in December and among other matters asking about the funding arrangements for the £4.7 million not covered by a credit line. The letter also asked about terms of payment with the Appellant's suppliers and customers.
11. On 4 April 2006 PriceWaterhouseCoopers replied with answers stating among other matters that trading terms were on a "ship and hold" basis and that how Mr Drake chose to cope with the delay in paying £6.7 million was a matter for him.
12. A letter from Mr Saunders on 19 April stated that "any payment due will not be made until the return has been fully verified." He wrote that some information sought from a third party had been received. He said that the means of financing the increase in turnover and input tax was germane to the credibility of any repayment claim. He wrote that the letter of 4 April had not covered the payment arrangements for purchases and sales.
13. An e-mail of 3 May stated that Mr Drake had requested Euro Tunnel tracking documentation from his freight agent and it would be forwarded when received.
14. On 5 May Mr Saunders wrote the letter against which the Appellant seeks to appeal. It contained the following passages,

"I can confirm that your client's repayment has not been withheld just because Euro Tunnel tracking documents have not been provided.

…

For the avoidance of doubt your client's repayment is not being withheld for want of information from another party in the deal chain.

…

Client Co-operation

I acknowledge that your client has provided paperwork to support the VAT repayments claimed. However I still await your client's advice as to the terms of payment agreed with his suppliers and customers as requested in my letters of 27 March 2006 and 19 April 2006. Your client has also refused to provide details of the funding arrangements for the substantial increase in turnover and large VAT repayments. As I stated in my letter of 19 April I consider this information central to the credibility of any repayment claim and this is an area I shall be exploring further with a departmental accountant. I regret therefore that I cannot agree with your assertion that your client has provided his full support in providing information requested.

…

Until my enquiries have been completed the repayment claimed for December will remain withheld."

15. Mr Drake was called as a witness to substantiate Mr Young's contention that the letter of 5 May 2006 contained material errors. He said that it had been difficult to obtain the Euro Tunnel tracking documents because the freight agents had substantiated the haulage. He said that the Appellant was only visited once at its offices regarding the 12/05 repayment and that was when officers came to get copies of the documents which had been delivered to them but which had been lost.
16. As to co-operation, PriceWaterhouseCoopers had told Customs that the terms of payment were "Ship and Hold" in the letter of 4 April : this meant that the freight agent at destination would hold the goods until payment. He accepted that a fuller explanation could have been given. He said that he had provided Mr Saunders with the name of the company which was co-funding the business in December 2005. Bank statements were among the documents which Customs had lost. He did not accept that he had not provided full co-operation.
17. Mr Facenna submitted that the letter of 5 May 2006 was not a decision but the very reverse because it had said that enquiries were continuing. The intention was clear that no decision had been taken.
18. He said that the circumstances were very similar to those considered in PNC Telecom Ltd v Revenue and Customs Commissioners (2006) when an appeal against a similar letter had been struck out. The Tribunal had relied on R (UK Tradecorp) v Customs and Excise Commissioners [2005] STC 138 where Lightman J said "that Customs were entitled to take a reasonable time to investigate claims … and to prevent refunds being made to parties not entitled to them."
19. He said that the Appellant's remedy for any excessive delay was judicial review in the High Court rather than launching a premature appeal to the Tribunal.
20. Mr Young said that it was a question of fact whether there had been a decision to be decided on the evidence. The Appellant rejected the allegation that material had not been provided.
21. He said that the Appellant relied on the direct effect of its rights under Article 17 and 18.4 of the Sixth Directive and on the right to a fair hearing under the Human Rights Convention and Community law.
22. He said that section 83 of the VAT Act 1994 provided for an appeal in respect of certain "matters" including "the amount of any input tax which may be credited". "Matter" is broader than decision. The right of appeal should be construed broadly. The appeal concerned whether input tax may be credited. The repayment had been inhibited in February. Customs were entitled to verify claims but here there was extended verification going beyond that considered in Kittel (Case C-439/04) (2006). He said that section 83(c) is wide enough to cover a situation where input tax is withheld for verification of legally irrelevant matters.
23. Mr Young said that a decision had been made to repay some £4,000 and to withhold the balance.
24. He said that the Appellant's rights under Article 22.8 had been infringed because there was not equal treatment between domestic transactions and those involving transactions between Member States.
25. If section 83(c) is not wide enough to cover a decision to withhold repayment for verification as here, his alternative submission was that the letter was a de facto refusal as in City of Sunderland College (1998) Decision No. 15701 and Colaingrove (2000) Decision No.16981. He said that it was for Customs to show that thee was no decision. No evidence had been called by Customs.

Conclusions

26. In my judgment although section 83 does not contain the word "decision" all the matters specified in fact involved decisions affecting the rights of the person appealing. In a whole series of subsections in section 84 there are references to appeals against a decision, see for example subsections (3), (7) and (10). The decision of the President in Marks and Spencer Ltd v Customs and Excise Commissioners (1997) No.15302 is in my view correct.
27. I do not accept that a decision to make further inquiries is an appealable decision. It would make the time limits for appeals unworkable unless the result was that a determination could comprise a series of decisions culminating in the final determinative decision. In my judgment in order to give rise to an appeal a decision must crystallise rights or obligations in some way.
28. In the vast majority of cases there will be no doubt that an appealable decision had been made because a formal notification will be given, as with an assessment, a default surcharge or a requirement for security, and will be accompanied by a statement as to rights of appeal.
29. However the fact that this has not been done is not conclusive since it may be that in the light of the surrounding circumstances there has been an appealable decision. In Colaingrove Customs wrote that the claim for £2 million would be withheld "until the underlying query has been resolved." There was no request for information in the letter and nothing to suggest that the "underlying query" would be resolved otherwise than by hearing the appeal.
30. It may be in some cases that although a letter states that a repayment is being withheld for further inquiries, the reference to inquiries is spurious. This however would be a serious conclusion not be drawn lightly.
31. If Mr Young had been able to make good his allegation that the letter of 5 May contained material errors as to what information the Appellant had provided that would have raised serious questions as to whether the letter could be accepted at its face value. Given the amount of VAT in issue it is surprising that Mr Saunders did not attend and adverse inferences might have been drawn.
32. The fact is however that Mr Drake's evidence did not show that the letter contained any material errors or misrepresentations. The response on 4 April as to terms of payment was to say the least uninformative.
33. Having read through the correspondence up to 5 May I am quite unable to conclude that Mr Saunders was not genuinely continuing enquiries. The sums involved were large and the increase in business was dramatic. I am satisfied that enquiries were continuing and that no final decision had been taken.
34. My conclusion is not affected in any way by directly effective rights under Community law. I am satisfied that there is no right whether in EU law or under the Human Rights Convention which overrides the entitlement of the tax authorities to satisfy themselves that the repayments were properly due. Indeed if the tax authorities were not carrying out proper checks the United Kingdom would not be performing its obligations under the Sixth Directive.
35. The application is allowed and the appeal is struck out.
36. I should finally say this. No allegation of impropriety or fraud has been made against the Appellant. I was told that the Appellant has ceased trading through lack of funds. In his skeleton Mr Facenna said that Customs hope to be in a position to reach a decision on repayment early next year. It is to be hoped that a decision will be made by then, one way or the other.

THEODORE WALLACE

CHAIRMAN

RELEASED: 26 October 2006

LON/06/557