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United Kingdom VAT & Duties Tribunals Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> Crestar Global Ltd v Revenue & Customs [2007] UKVAT V20258 (18 July 2007)
URL: http://www.bailii.org/uk/cases/UKVAT/2007/V20258.html
Cite as: [2007] UKVAT V20258
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20258
Zero Rating: conditions; export of goods: whether satisfactory proof of export: whether CMR documents produced satisfactorily established export: onus on Appellant: no obligation on HMRC to investigate whether goods remained in UK: VATA 1994 s. 30(8) VAT Regulations 1995, reg 134: Public Notice 725 paras 3 and 18.
EDINBURGH TRIBUNAL CENTRE
CRESTAR GLOBAL LIMITED Appellants
- and -
THE COMMISSIONERS FOR
HER MAJESTY'S REVENUE & CUSTOMS Respondents
Tribunal: T GORDON COUTTS, QC, Chairman
Members: W Ruthven Gemmell, WS
R Ahmad, BA., LLB., CA
Sitting in Edinburgh on 14th, 15th and 31 May 2007
for the Appellants M Iqbal
for the Respondents R N Thomson, Advocate
© CROWN COPYRIGHT 2007.
DECISION
INTRODUCTORY
The appeal before the Tribunal was against the Respondent amending by letter of 5.7.06 a repayment claim by the Appellant on a return seeking a repayment claim of £91,720.20p to a payment demand of £3,752,723.34p. That was later amended to £3,009,517.10p on 24.11.06.
The ground of appeal as presented by the Appellant's Notice of 17 August 2006 contended that certain goods, hereafter described, were as a matter of fact removed from the UK and that it had produced satisfactory proof of removal in accordance with Notices 703 and 725 and accordingly satisfied the conditions for zero-rating. They went on to contend in the Notice of Appeal that if there was any irregularity in respect of the supply the Respondents ought to take the matter up with the person to whom the goods were supplied or alternatively the person in whose possession the goods were found and critically investigate the matter in accordance with the mutual assistance directive. They had, it was said, acted disproportionately and unreasonably in the Wednesbury sense.
Matters became somewhat extended and more complicated prior to and during the hearing of the appeal principally it must be said in connection with the Appellant's attack on the bona fides of the Respondent.
At the lodging of the Notice of Appeal the Appellant was represented by Solicitors but he ceased to be so and the Tribunal ordered a preliminary hearing. At that hearing the Tribunal required an Agreed Statement of Facts to be produced. That Statement was only agreed on the morning of the hearing and from it, certain other acceptable documentary evidence, and parts of the oral evidence of the Appellant's Mr Iqbal (their Director and Principal shareholder); John Vincent Holden and Paul Skirving, Officers of the Respondents; and an unchallenged witness statement from another Officer, Paul Christopher, the Tribunal were able to find some facts admitted or proved. The Appellant led Mrs Irene Parkes, another Officer of the Respondents, but about matters of procedure relating to the progress of the appeal and the conduct of the Respondents, which evidence did not assist the Tribunal in relation to the undernoted issue. The Tribunal was not satisfied as to the reliability of the Appellants' evidence and could not accept it unless corroborated.
THE ISSUE
The issue before the Tribunal and the only relevant issue, was whether the Appellant had established or had provided sufficient evidence from which it could be inferred that the Respondents should have been satisfied that various goods hereafter mentioned had left the UK to another Member State.
THE LEGAL REQUIREMENTS
In order to focus the matters which require to be established and were in dispute it is necessary first to consider the terms of the legislation and requirements.
Section 30(8) VATA 1994 provides that:
Regulations may provide for the zero-rating of supplies of goods, or of such goods as may be specified in the regulations, in cases where
(a) the Commissioners are satisfied that the goods have been or are to be exported to a place outside the Member States or that the supply in question involves both –(i) the removal of the goods from the United Kingdom; and(ii) their acquisition in another Member State by a person who is liable for VAT on the acquisition in accordance with provisions of the law of that member state corresponding in relation to that member state, to the provisions of section 10; and
(b) such other conditions, if any, as may be specified in the regulation or the Commissions may impose are fulfilled.
Secondary legislation at Regulation 134 of the VAT Regulations 1995 provides that:
Where the Commissioners are satisfied that –(a) a supply of goods by a taxable person involves their removal from the United Kingdom,(b) the supply is to a person taxable in another member State,
(c) the goods have been removed to another member State, and
(d) the goods are not goods in relation to whose supply the taxable person has opted, pursuant to section 50(a) of the Act for VAT to be charged by reference to the profit margin on the supply.
The supply, subject to such conditions as they impose, shall be zero- rated.
Secondary legislation further permits the Respondent to impose conditions which it has done by Public Notice 725.
Paragraph 3.1 thereof, which has the force of law, provides that a taxpayer may zero-rate a supply provided all of the stipulated conditions are met. These are
| Condition | Description |
| 1 | you obtain and show on your VAT sales invoice your customer's VAT registration including the 2 letter country prefix code – see paragraph 12.16 |
| 2 | The goods are sent or transported out of the UK to a destination in another Member State |
| 3 | You hold satisfactory commercial documentary evidence that the goods have been removed from the UK. Guidance on proof of removal of goods is contained in Section 18. |
Paragraph 3.2 of the Notice directs taxpayers, that, in the event they are not able to meet all of the above conditions, they must account for VAT at the correct rate for the same supply of goods in the UK.
Section 18 of Notice 725 details the evidence that must be held to provide entitlement to zero-rating, the time limits in which the goods must be physically removed from the UK to another Member State and the time limits in which the taxpayer must obtain evidence of removal to support zero-rating.
Paragraph 18.8. of Notice 725, sets out what constitutes valid documentary evidence of removal and includes inter alia
- customer's order (including customer's name, VAT number and delivery address for the goods);
- packing list
- commercial transport documents from the carrier responsible for removing the goods from the UK
- details of insurance or freight charges;
- receipted copy of the consignment note as evidence of receipt of goods abroad; and
- any other documents relevant to the removal of the goods in question which you would normally obtain in the course of your intra-EC business
The taxable person may use a combination of items described in paragraph 18.8, provided that when taken together they provide clear evidence that the particular goods in question have been removed from the United Kingdom and not just that the sale has taken place. Paragraph 18.9 of Notice 725 details the information that must appear on documents used as proof of removal. This includes;
- the supplier;
- the consignor (where different from the supplier);
- the customer;
- the goods;
- an accurate value;
- the mode of transport and route of movement of the goods and; and
- the EC destination.
Paragraph 18.5 provides that for a supply of goods to another EC Member State to be zero-rated, the trader must obtain and keep valid commercial evidence that the goods have been removed from the UK within the time limits set out in paragraph 18.6. The time limit in paragraph 18.6 is 3 months from the date of supply.
Under the Carriage of Goods by Road Act 1965 there are issued international consignment notes ("CMR"). In normal circumstances the Respondents will accept such as evidence of removal of goods from the United Kingdom. They are however not obliged to do so.
HISTORY OF APPELLANT COMPANY
The Appellant was incorporated about 9 December 2004. As of the date of the Tribunal no accounts had been filed. The Appellant registered for Value Added Tax with effect from 1 October 2005 and when so doing described the nature of its business as "general trading wholesale of electrical goods to market traders and retail outlets". Its principal place of business was registered at 272 Bath Street, Glasgow. The only presence in Glasgow has consisted of a telephone number and mail fax and e-mail forwarding facilities with no real office space there or anywhere else. There were no staff at Glasgow. The Appellant's Director said that its first transaction related to software and was conducted in November 2005. However there were documents available purporting to show a course of trading in computer chips only between 15 February 2006 and 13 March 2006. From virtually no trade the Appellant, according to Mr Iqbal, between 15 February and 13 March carried out 30-40 deals related to software, CPUs and similar computer items and worth in the region of 10-13 million pounds. That was what Mr Iqbal told Mr Skirving, an Officer of the Respondents on 14 March 2006. Before the Tribunal there were produced documents which bore to relate to a turnover of £4.7 million in the first week and £55 million pounds in the period of the month above referred to. These bore to be 62 deals. The accuracy of the information supplied to the Respondents' Officer can be gauged when the stated total figure of £10-£13 million is set against the alleged activities between 8 and 13 March, amounting to £15 million the previous week.
In some way in March 2006 the Appellant had come to the attention of the Respondents and Mr Iqbal was contacted by the Respondents and asked about his trading and his records. The Respondent was sufficiently concerned about the pattern of trading activities of the Appellant to demand a VAT return, having shortened the period during which it was due, and on 15 March intimated that the Appellant would be deregistered.
A return was produced next day, as demanded, in which a refund claim of £91,720.20p was made.
Five CMR documents were produced from the Appellant's Glasgow Office, timeously in terms of the legislation, on 31 March 2006 which, ultimately, after investigation were accepted.
The Appellant produced a spread sheet which he said detailed all his transactions.
An appeal was lodged on behalf of the Appellant but only in relation to the demand for payment. No appeal was lodged against deregistration despite a Solicitor being involved at that time. (Much of the time before the Tribunal was spent by Mr Iqbal discussing the circumstances of deregistration and the alleged iniquities thereof but he was directed that the Tribunal was concerned and concerned only with whether there was evidence of removal of the goods from the United Kingdom which could have been established to the satisfaction of the Respondents).
THE TRADING PATTERN
The spread sheet produced which was claimed to be accurate showed transactions in the said four weeks and bore to be a record of import and export transactions in high value low volume goods i.e. computer chips and mobile phones, in the main and predominantly the item INTELP4SL7X9. It also showed that involved in all but one of the transactions either as buyer or seller was a Polish firm Komidex Spolska Zoo as appeared on the Appellant's documents but as "Spolka 200" on invoices which seemed to originate from Poland. That firm appeared to sell in the first two weeks and buy in the second two weeks. There were other firms but only three of significance; Bluestar Trading UK Ltd., Tau Aspects Ltd and Bullfinch Systems Ltd. All the UK companies and Komidex had accounts in the First Curacao International Bank, NV, a company which subsequently, was stopped trading as a bank by the Dutch authorities. That bank, we find, was described as one which, unlike UK Banks, would not question large sums of money going in and out of the accounts on the same day.
These UK companies, like the Appellant, were all incorporated in 2004, Bullfinch is in liquidation, Bluestar is subject to a proposal to strike off, Tau Aspects is dormant and has produced no return or accounts.
The Appellant provided no evidence of any working capital. Nonetheless it was involved in these trades involving buying and selling goods to the value of millions of pounds. It did not have sufficient working capital even to pay bills sent by freight forwarding companies.
The Appellant would have the Tribunal believe that all these trades involving massive sums of money were conducted on credit and "a basis of trust". Mr Iqbal admitted he had said (Joint Minute 10(e))
"that the Appellant did not need to finance these deals as short-term credit was given in that the goods were held by freight forwarders; foreign customers paid a broker; and the broker paid the Appellant's supplier."
The major contact would seem to be Komidex. Mr Iqbal said he met their Mr Slowamir Mazur at the 2005 Spring Trade Fair at the NEC. Komidex also banked with First Curacao. The contact with Bluestar was with a Mr Patel and according to the Appellant was an encounter on a website for general traders and on many other websites. He said he talked to Mr Patel and they shared mutual friends. The representative from Tau Aspects one Denis was said to have been contacted at a venue frequented by business men and people in the upper earning bracket. All these people it was said were prepared to finance and trust the Appellant with millions of pounds worth of goods.
It is against that background that the Tribunal examines the issue of whether specific goods left the United Kingdom.
The onus of establishing that specific goods left the United Kingdom is firmly on the Appellant and further, from the authorities (below) it is also clear that it is no part of the duty of the Respondent to establish that goods did not leave the United Kingdom, The Respondent is entitled to have regard to the whole circumstances of the trading and conduct of the companies involved in determining whether they can be satisfied which they could be even if there may be defects in the CMR or they have not been produced in time.
In relation to the disputed transactions remaining for the attention of the Tribunal the legislative requirements were not met in the first place because CMRs were not produced within the time limit in relation to the trades still outstanding. Failure to comply with the Notice gives rise to liability to pay VAT whether the goods were exported or not.
The above propositions all derived from: Henry Moss of London Ltd v Commissioners [1981] 2 AER 86: Grunwick Processing Laboratories v Commissioners [1987] STC 357 and the summary of the scheme set out by Advocate General in Teleos & Others v Commissioners Case C-409/04.
The Tribunal were presented with an analysis showing three groups of transactions derived from the Appellant's trading of which two were in contention. In relation to CMRs which were produced on or about 31 March, namely 5 CMR consignment notes, these were after enquiry accepted as evidence that goods had existed and had left the United Kingdom in the manner indicated in the documentation produced to them. However there are two further groups.
The 4 CMR documents produced November 2006 comprise deals in respect of which the Appellant by letter of 23 November 2006 (a substantial time after the prescribed limit) produced four CMR consignment notes suggesting that the goods mentioned therein left the UK by lorry travelling through France to Spain. The Respondent was not satisfied that they did provide such evidence and the other documentation produced in relation to them were some invoices and the like. The Tribunal itself examined the consignment notes and the relevant surrounding documentation and found nothing therein to cast any doubt upon the attitude taken by the Respondents.
Each consignment note itself bore that the Appellant was the sender, Komidex Spolska (sic) Zoo was the consignee, that the carrier was a company IMEX Logistics of Stoke on Trent, that the designated place for delivery of the goods was Gina Logistics in Spain. The CMR bore that it had been completed by IMEX Logistics at Stoke on 13 March 2006, it bore a stamp bearing to show that the goods had been received by a firm Gina Logistics SA, and that the carrier was one D Farrar in a lorry YJO4 YUV.
However the invoice bearing to be from the Appellant, the purchase order bearing to be from Komidex and the instructions to Bluestar who were the supposed sellers all indicated that delivery should be made to AFI Logistique Rossy, France. It can be seen therefore that the surrounding documentation does not support the detail on the international consignment note and there is no other documentation of any kind whatsoever to indicate that there had been a change of the consignee from that on the order and invoice.
Matters however did not end there. There is a space in the consignment note for successive carriers which is blank. Enquiries by the Respondent and examination of the tachograph of the lorry YJ04 YUV indicated that it never went to Spain. There is no record of any successive carrier although at a very late stage IMEX claimed that because of a mishap first said to be with the driver and the second later reported to be with the lorry, the goods were transferred to another vehicle and so sent on to Gina. There is no record of such a transfer and it further appeared that instead of the carrier indicated in the CMR being IMEX Logistics it appeared that a firm Tranzfast Logistica UK Ltd owned and operated the lorry. Their name appears nowhere on the CMR and would not have emerged save for the enquiries of the Respondent in relation to the registration number of the vehicle. In any event the carrier was not D Farrar but his employing company. Further the goods were disclosed on the CMR to be in Stoke on Trent where the CMR was completed but in fact were alleged to be uplifted from premises in Kent and thence transported over the channel.
FINDINGS IN RELATION TO THE "IMEX TRANSACTIONS" AND CMRs
The Tribunal were not satisfied that there was any satisfactory "paper trail" or any adequate recording of any sort in relation to the alleged departure of the goods from the United Kingdom from which the Respondent, even if the CMR had been produced timeously, should have been satisfied. The very fact of the non-timeous production would in any event be enough to refuse the appeal in relation to those goods, but the detail disclosed on them and elsewhere was not accurate. Whether this be the fault of IMEX does not concern the Tribunal – it would appear to be the case that they constructed the CMR, the consignor appears as the Appellant. The Appellant never saw any goods.
REMAINING GROUP OF GOODS
The CMRs which bore to be relating to the remainder of the goods were produced a day or so before the Tribunal hearing. It appeared that there were such documents that they had been uplifted by the Respondents acting on behalf of the Dutch authorities and transmitted to Holland. There was some delay therefore in their being available and the Appellant sought to make much of this. He however did not avail himself of the opportunity of an adjournment offered by the Respondent preferring to have the hearing continue with such evidence as had been produced by both parties, instead of seeking to add to it by of evidence from any of the companies involved.
As above noted it is for the Appellant to produce the relevant documentation vouching the departure of the goods and that within three months. Plainly he did not do so. He said that he didn't get them because the forwarder would not release them until his bill had been paid for the freight. Apart from the fact that the CMRs themselves indicate that freight had been prepaid it would appear from Mr Iqbal that Twins Logistics later had made an agreement to write off the debt "because they were going into liquidation."
Whatever be the truth of the CMR documentation being retained by Twins Logistics and when and for what reason it was uplifted by the Respondents, the basic fact is that it is for the Appellant to produce the CMR. If it did not get them because it was unable to pay the freight, then that's no-ones fault but its own and the fact of its under capitalisation. In any event the Tribunal was at a loss to understand why withholding a CMR would be of the slightest benefit to the transmitting company because unless the Appellant was able to establish its entitlement to a VAT refund for Zero-rating, a circumstance which we believe they would well know, they would not be paid for their freight if it was not actually prepaid. How withholding the CMR benefited the freight forwarder is not clear. However, in any event, there are three copies of the CMR (no doubt in different colours) but all the Tribunal were provided with were photocopies and it is plain that the first copy is for the sender, the second for the consignee and the third for the carrier. For matters to work properly the consignee should have been in possession of the top copy.
In the boxes in such CMRs as were available in relation to the Twins Logistics consignments, the seller is given as Peat UK Limited trading as Twins Logistics, Heathrow, on behalf of Crestar Global (misspelt). On those particular CMRs the carrier was supposed to be completed as to name, address and country, but the relevant box merely gives the letters GBA, in the boxes relating to the driver and the signature of the carrier, the squiggle is indecipherable and in any event is not the same throughout.
There is nothing in that bundle of CMRs and nothing in the produced invoice documentation to indicate any order or direction of the goods to be sent to a firm known as MSG.
There is accordingly before the Tribunal no acceptable evidence to show exports.
For all these reasons the Respondents were entitled not to be satisfied that there was sufficient evidence of these goods leaving the United Kingdom not merely on non-timeous production but also on such facts as there were otherwise nor could the Tribunal be satisfied on its part on what it heard.
DECISION
It follows from the above findings that the appeal is dismissed in toto.
T GORDON COUTTS QC
CHAIRMAN
RELEASE: 18 JULY 2007.
EDN/06/68