[2009] UKFTT 132 (TC)

TC00100

SECURITY – involvement of director in earlier company with poor compliance record – reasonableness of Commissioners’ decision – appeal dismissed   

FIRST-TIER TRIBUNAL (TAX CHAMBER)

 
 	
					DRIVERS DIRECT (2008) LTD	Appellant

- and -

THE COMMISSIONERS FOR
				HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

Tribunal: 	Lady Mitting (Judge)
		Robert Grice (Member)

Sitting in public in Birmingham on 9 June 2009

The Appellant did not appear and was not represented

Kim Tilling, instructed by the General Counsel and Solicitor to Her Majesty’s Revenue and Customs for the Respondents 

© CROWN COPYRIGHT 2009
DECISION

1.	The Appellant appeals against the decision of the Commissioners contained in a letter dated 23 September 2008 and being a Notice of Requirement to give Security under schedule 11, paragraph 4(2)(a) VAT Act 1994.  Security was required in the sum of £27,500 if quarterly returns were submitted and £18,300 on monthly returns.
2.	The case was due to be called on at 10.30am.  At 9.25am Mr. Josh Hanson of the tribunal centre in Manchester received a phonecall from a gentleman representing the company to inform him that Mr. Peter Holden who would have been attending the hearing was not able to as he was tending a sick relative.  The gentleman went on to say that he had only heard about the hearing today as he had just opened a letter from the tribunal centre dated 4 June 2009.  The gentleman went on to say that he had been trying to contact Mr. Holden on his mobile but had been unable to reach him.  Mr. Hanson asked if a fax could be sent through to the tribunal centre confirming this information.  This was promised but was never received.  Mr. Hanson attempted to telephone the company several times but on no occasion was there any answer.  The hearing notice first went out on 21 January 2009.  It was correctly addressed and was not returned to the tribunal.  On 4 June 2009 a further notice went out confirming the date and time of the hearing but merely amending the venue (to premises no more than a few minutes’ walk away).  It was the view of the tribunal therefore that abundant notice of today’s hearing had been given to the company and even if Mr. Holden was unable to attend there had been ample opportunity for him to arrange alternative representation or indeed to contact the tribunal at a much earlier stage.  It was also noted from Companies House that active within the company was Mr. Timothy Guy, who was described as company secretary and manager.  The facility was obviously therefore there for someone else to attend the hearing.  The tribunal also takes into account that this case concerns a Notice of Requirement to give Security.  It is alleged that the Appellant is a risk to the Revenue.  However, pending the hearing of the appeal the company continues to trade.  It is therefore in our view imperative that such a case is heard speedily.  The interests of the Commissioners also have to be considered and balanced alongside those of the Appellant.  In accordance with Rule 33 of the Tribunal Procedure (First-Tier Tribunal) (Tax Chamber) Rules 2009, we are satisfied that the Appellant received notice of the hearing in good time and that it is in the interests of justice to proceed with the hearing today.  The case was therefore heard in the absence of the Appellant.
3.	On behalf of the Commissioners we heard oral evidence from Mr. Ian Pumfrey, the officer who raised the Requirement.  The Appellant was registered with effect from 21 July 2008 as an employment agency.  Its trading address was 38 Riley Crescent, Penn Fields, Wolverhampton.  One of its named directors and company secretary was Mr. Timothy Guy.  Mr. Guy had been the director and secretary of an earlier registration, Driver Direct (Midlands) Ltd.  This company was also registered as an employment agency and traded from the same address.  Its dates of registration were 18 November 2001 to 11 September 2008.  This company went into insolvency in September 2008 owing the Commissioners £125,866.15.  It was the view of Mr. Pumfrey that the Appellant was a phoenix of Drivers Direct (Midlands) Ltd in that they carried on an identical trade from the same address and were controlled by one consistent individual, namely Mr. Guy.  The earlier company had a very poor compliance record.  From the outset there were consistent, but not excessive delays in the submission and payment of almost every return.  From April 2006, compliance worsened considerably with several returns ranging from 149 to 422 days late.  The Commissioners had considered raising a Notice of Requirement against this company in April 2007 based on its poor compliance.  At that time there were four outstanding returns and a debt in excess of £40,000.  The company rendered the returns but made no payment and a Notice of Requirement was therefore raised on 15 August 2007.  Subsequent to that, discussions took place between the Commissioners and the company and the Notice of Requirement was withdrawn when the company made a lump sum payment of £30,000 in January 2008 and continued to discuss repayment of the balance.
4.	In raising the current Notice of Requirement, Mr. Pumfrey had before him the VAT1 and the first period VAT return for 08/08 (a 51 day period).  This showed a low VAT liability of £518.30.  Experience suggested to Mr. Pumfrey that first returns were very rarely representative of future trading and he thought the more accurate basis of calculation was the projected turnover given in the VAT1.  The Requirement was therefore based on this figure with notional input tax taken from the records of the earlier company.
5.	Once the Notice of Requirement had been served, the Appellant made no application for any review and entered into no correspondence with the Commissioners or gave them any further information.  Its grounds of appeal read as follows:
“The demand was unreasonable because the first VAT return was submitted on time as the demand was issued.  Given the extremely difficult trading climate the amount of security is excessive and therefore unreasonable and has been based on figures from a previous business.  The turnover levels have decreased substantially (100%) since then.  Protection of the revenue is not required in this instance as the business is not carried on in such a manner as to avoid accountability for tax.  The previous company was run by different personnel who had substantial family problems and lost 3 members of his immediate family in 3 years.  The previous company paid a substantial sum (£37,000) to HM Revenue & Customs prior to entering Administration based on historical debt demands.  The Directors of the previous company were also left with personal debts to their bankers of £20,000.”
6.	The jurisdiction of the tribunal is limited to considering the reasonableness of the Commissioners’ decision.  We consider whether Mr. Pumfrey took into account, and gave sufficient weight to, all relevant matters or whether he took into account any matters that were not relevant and indeed whether or not he made any error of law.
7.	We consider the decision of Mr. Pumfrey to be entirely reasonable for all the reasons which we have outlined above and which he took into account.  All these factors were relevant and there were no factors which he should have considered but did not.  We note the suggestion in the grounds of appeal that different personnel run the Appellant company but against this there is the consistent, and as far as we know continuing, involvement of Mr. Guy in both companies in a senior and controlling capacity.
8.	As far as quantum is concerned, again we are satisfied that Mr. Pumfrey acted reasonably and the basis of his calculation was a reasonable one.  This tribunal is not allowed to take into account matters which have occurred since the Notice was raised but in the matter of quantum, the tribunal is virtually bound to look at the trading record of the Appellant given that one of the grounds of appeal is that the amount of security is excessive given the current trading climate.  We did therefore ask for details of the trading figures returned since the Notice of Requirement was raised.  We were told that no returns had been submitted since.  We therefore have no grounds to find that the quantum is anything other than reasonable.  We stress that we have not taken this matter into account in considering the overall reasonableness of the decision to raise the Requirement.
9.	The appeal is therefore dismissed.  The Notice of Requirement is upheld in principle and in quantum.  No application for costs was made and we make no order.
MAN/2008/1370

LADY MITTING
JUDGE
Release Date: 18 June 2009