[2009] UKFTT 149 (TC)

				TC00117	
Appeal numbers: LON/03/279 & LON/06/0754
					       	 LON/05/0971, LON/07/1403 &
				              	               LON/08/1486 & late admitted appeals
				                             LON/08/0255 & LON/08/1386
				                             LON/05/0475

Value Added Tax – Input tax – Whether evidence of supplies as invoice and of payment of VAT on invoiced supplies sufficient to meet requirements of sections 26 and 26A of Value Added Tax 1994 - No

FIRST-TIER TRIBUNAL
TAX CHAMBER

	APS-CENTRILINE LTD	Appellant
	- and -
	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS (value Added Tax)	Respondents

	ENVIRO ENGINEERING LTD	Appellant
	- and -
	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS (Value Added Tax)	Respondents

	PSI ENGINEERING LTD	Appellant
	- and -
	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS (Value Added Tax)	Respondents

	WILLIAM NORMAN LEWIS T/A	Appellant
WILLIAM N LEWIS ASSOCIATES
	- and -
	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS (Value Added Tax)	Respondents

				TRIBUNAL: 	DAVID WILLIAMS (Judge)
						MISS ANGELA WEST FCA
						
Heard in Cardiff on 2,3,4,5 and 6 March 2009

All Appellants were represented by Mr Lewis
Sarabjit Singh, instructed by the Solicitor to HMRC, for the Respondents

© CROWN COPYRIGHT 2009

DECISION

1	This is a single joint decision dealing with eight appeals by Mr Lewis and companies with which he is associated against decisions of the Respondents (“HMRC”, which includes its predecessors in title the Customs and Excise Commissioners and Commissioners of Inland Revenue). These appeals follow several other appeals against other decisions by the Respondents concerning Mr Lewis and companies with which he is associated over the last few years. The tribunal decided that all the outstanding appeals sh`ould be listed and heard together. The appeal hearings took place over five days in Cardiff. It became clear to the tribunal as these appeals proceeded that there was much common ground between the appeals. At that hearing Mr Lewis asked for additional appeals for one of the companies he represented to be admitted for consideration. This was not opposed by HMRC. The tribunal admitted the appeals and deals with them at the end of this joint decision. 

2	As all the appeals were brought before the tribunal by Mr Lewis, and he represented them all and gave the only evidence for them in the appeals, the tribunal considered it both fair and efficient to issue a single joint decision for all the appeals save one. 

3	The one appeal not covered by this joint decision is appeal LON/01/1133. It was agreed by the tribunal with the parties that the only outstanding issue was costs.
An oral direction was given to progress that appeal, which was not otherwise discussed.  

4	That apart, this decision applies to all the appeals. That is expedient for two reasons related to the evidence. Mr Lewis asked that evidence submitted by the parties in connection with some of the appeals should also be considered in connection with others of the appeals. In addition, Mr Lewis has himself submitted documents that deal with two or more appeals at the same time, and has referred to evidence in some of the appeals as explaining the context of others of the appeals. The tribunal therefore took the approach, with the consent of both parties, of treating all the evidence submitted for any of the appeals as potentially relevant to all the appeals.   

The background to the appeals
5	Mr Lewis, now of retirement age, is an expert engineer. He ran successful businesses in the past as an expert in pipe lining, involving major contracts both in the United Kingdom and in several other countries. Those successes were receding into the past at the times relevant to these appeals. Unfortunately, as those contracts were completed or otherwise ended his businesses became engaged both in litigation and arbitration over a number of matters arising from the contracts. For example, a foreign concern went bankrupt holding equipment that belonged to Mr Lewis’s businesses and not to the bankrupt concern. It took time to prove title to that equipment through arbitration. There were also county court proceedings against a former associated company for conversion. At the same time, no new major contracts were entered. It would therefore be fair to comment that these appeals concern the twilight of his business activities. That is a reason for most of the appeals. A core question arising in different ways in each of them is whether the relevant businesses were still trading, or were registered for value added tax (VAT), or were even in existence at the times relevant to the individual appeals. 

6	Before the decline in the success of the businesses, Mr Lewis, with his family and others, ran the businesses through a series of companies. He gave evidence, which the tribunal broadly accepts, that he learnt of the wisdom of operating overseas through a corporate group and a series of companies rather than a single company in his previous career with major British export companies.  His experience working in major international companies was that there was a need to protect the core businesses from litigation and other threats arising from major overseas contracts. His businesses had, for example, been forced by potential sovereign action to sell shares in one company to an overseas operator so losing ownership of it. The structure he used was intended to prevent the core companies behind his businesses being at risk of foreign sovereign action or of foreign litigation or demands. 

The structure of Mr Lewis’s business activities
7	While the tribunal accepts that as a general explanation of the corporate structure it found existing between Mr Lewis’s businesses, it does not accept that to be a full or adequate explanation for the particular form the structures took. Nor does it fully explain the representations made by Mr Lewis about some aspects of the structures and the companies involved. 

8	Mr Lewis conducts his business activities through a series of vehicles or structures. Of those based or operating in the United Kingdom, not all are registered for VAT. Nor is there a group registration for those businesses that are registered for VAT. When asked why there was no group registration for those businesses trading in the United Kingdom, he made the point that different companies had different shareholders. He also gave evidence that in the past he had been discouraged from group registration by HMRC. That is not a matter before this tribunal. 

9 	The core criticism by HMRC of the structures in use by Mr Lewis was that at the times that the events occurred that gave rise to these appeals the businesses were purporting to trade with themselves. They were not trading outside the structure. There were no genuine trades. There was merely the creation of invoices within the group of businesses all of which were controlled by Mr Lewis. HMRC raised questions about whether some of the entities had any existence in law at the relevant times. HMRC also questioned the status of parts of the business structure and the extent to which the parts were linked through Mr Lewis or otherwise.  

10	The tribunal notes representations by Mr Lewis implying that he was not involved in some of the businesses save in limited ways. For example, in a letter to HMRC on 23 02 2007 Mr Lewis stated about PSI Engineering Ltd  (on which see further below) on its notepaper that “ I am not a director of PSI Engineering Ltd, but W. N. Lewis Associates have been retained by them to handle their UK VAT affairs.” And on 1 04 2007, again writing on that company’s notepaper, Mr Lewis stated: “PSI-Engineering, a company of which I am NOT a director …”. Later in that letter Mr Lewis, writing “for and on behalf of PSI Engineering Ltd” contends (at paragraph 6):

“HMR&C must be careful not to link the companies just because W N Lewis Associates have been retained by the Directors and/or the Members of the individual companies to handle their various problems with the Commissioners”. 

11	Mr Lewis was challenged about the way he wrote to HMRC about that company as long ago as 2003 (in a letter from Customs and Excise officer Mr Conyngham on 14 08 2003 as follows:

“You have advised me that you are a consultant for this company and I have sought, without success, to speak to someone with actual responsibility for the business affairs of PSI and indeed its very existence.

My information is that ME Ltd is the company secretary and that APS Ltd is a director of PSI Engineering Ltd. Further enquiries indicate that APS Ltd is also a director of ME Ltd and that you, Mr Lewis, are the company secretary of ME Ltd and a director of APS Ltd. Whether you choose to call yourself a consultant or not, I consider PSI Engineering Ltd to be your business and that you are primarily responsible for its actions. You eventually admitted to being the author of letters purported to have been written by the company and in which you refer to yourself in the third person. I consider that this was a deliberate attempt on your part to mislead me. For example, the letter dated 19 05 2003 states in the second paragraph “we have been given to understand by William N Lewis Associates…” but when challenged as to who “we” actually are, the only name I am given is your name, Mr Lewis.” 

12	The tribunal finds that William N. Lewis Associates was at all relevant times Mr Lewis. The director of PSI Engineering Ltd is Amalgamated Pipelining Services Ltd (APS Ltd), and the company secretary is Maywood Estates Ltd (ME Ltd). Mr Lewis is the director of APS Ltd, with ME Ltd as its company secretary. The company secretary of ME Ltd is Mr Lewis. The tribunal concludes from this that in terms of the power to do so, it was Mr Lewis who had the power to appoint Mr Lewis to represent PSI Engineering Ltd in its VAT affairs, and it was Mr Lewis who had control over the position of director of that company. While Mr Lewis might consider his comments technically correct, there are strong grounds for the view that he was a/the shadow director of PSI Engineering Ltd at least for the purposes of the appointment of himself to deal with VAT matters. Further, the tribunal saw no evidence that anyone else acted in that capacity at any relevant time. The tribunal finds that the approach taken by Mr Conyngham was entirely reasonable.

13	Therefore, before turning to the individual appeals, the tribunal must examine the business structures behind these appeals and identify the separate entities involved. The following are the findings of the tribunal.

14	The tribunal examined the evidence in all the appeals to find how the details of the various businesses in which Mr Lewis is involved and how they were linked together. It finds that there are six businesses based in the United Kingdom that form a closely organised structure. This includes the four appellants in the appeals heard by the tribunal and two others. Attention must also be paid to an Isle of Man company and to other players.

15	The four appellants, all registered for VAT, are:

APS-Centriline Ltd
Enviro Engineering Ltd
PSI Engineering Ltd, and
W N Lewis Associates.

16	Two other companies are also in the structure. Neither have been registered for VAT in the United Kingdom at any relevant time:

Maywood Estates Ltd
Environmental Engineering Ltd.

17	A seventh company existed, or was said to exist, alongside these companies, although it had been deregistered for VAT:

	Associated Pipelining Services Ltd.

18	An eighth, separate, company that the tribunal must examine is:

	Associated Pipelining Services Ltd (Isle of Man)

19	There is also passing reference to a ninth company involving Mr Lewis, APSE Ltd. Although the tribunal saw evidence that this was receiving relevant funds through a bank account in 2006, it appears neither to be registered for VAT nor to be active in any of the direct issues before the tribunal in these appeals. 

20	Finally, the tribunal must look at a tenth company that was at one time linked with Mr Lewis and his activities but now has no links with them:

	Enviropower Ltd.

21	With the exception of Enviropower Ltd, the tribunal finds that on the evidence below these entities are all closely interlinked and involve only themselves, Mr Lewis, and his wife in the multiple capacities of shareholder, director and company secretary. 
The tribunal was not aware of any other investors in the businesses.

The individual businesses
22	At the heart of the structure are two companies that are completely linked together. These are:

Maywood Estates Ltd  (ME Ltd).
The corporate core of the structure is Maywood Estates Ltd.  ME Ltd was registered as a company in England and Wales as company 175202 on 19 03 1996. It had paid up capital of £2. At the time of these appeals, one share was held by Amalgamated Pipelining Services Ltd (APS Ltd) and the other by Sheila A Lewis. She is Mr Lewis’s wife. 

The director is APS Ltd, and the company secretary is Mr Lewis. (It appears that APS Ltd was the only director at the relevant times.) 

ME Ltd has never been registered for VAT in the United Kingdom. 

Amalgamated Pipelining Services Ltd (APS Ltd).
This company name was previously used by another of Mr Lewis’s group of businesses. The appeal papers confuse matters by failing to distinguish the two adequately. Confusion is increased because it is also used for the Amalgamated Pipelining Service Ltd (Isle of Man). See below. That company is referred to as APS (IOM) in this decision to avoid confusion. 

This company (APS Ltd) was registered in England and Wales as 2324186. It was originally a deadlock company of which 50 per cent of the share capital was owned by Mr Lewis (or his companies) and 50 per cent by an independent public company. Before the period relevant to these appeals, Mr Lewis or his companies purchased the full share capital. Since then it is the financial core of the business structure as it has paid up capital of £500,000. Of these shares, 499,000 are held in the name of ME Ltd, and 500 each in the names of Mr Lewis and his wife. 

Mr Lewis is the director and the company secretary is ME Ltd. 

The company has never been registered for VAT in the United Kingdom, leading to confusion at HMRC and in the papers with APS (IOM) (see below). 

23	The tribunal notes a most unusual corporate structure linking these two companies. ME Ltd is in full control of APS Ltd. But APS Ltd shares deadlock control of ME Ltd with Mr Lewis’s wife. APS Ltd is director of ME Ltd while ME Ltd is the company secretary. This means that, leaving aside the validity and effectiveness in company law of such a structure, the reality of the structure presented by Mr Lewis is that APS Ltd controls itself jointly with Mrs Lewis, while the direction of APS Ltd is in the hands of Mr Lewis and the direction of ME Ltd is in the hands of APS Ltd. In other words, in practical terms, the direction of both is in the hands of Mr Lewis. 

24	ME Ltd is in full control of a second subsidiary company alongside APS Ltd. It is:	

PSI Engineering Ltd (PSIE Ltd). 
Originally registered as Pipelining Services International Ltd this company was renamed in March 2001, and had other names including Amalgamated Pipelining Ltd and Amalgamated Pipelining Services Ltd. But it is not the same company as either of the companies now registered under the last of those names in England and Wales and separately in the Isle of Man. It is the same company as Pipelining Services International Ltd, the name under which it was originally involved in some of these transactions. It is registered in England and Wales as 2323827 on 1 12 1998. There are 1000 issued shares. 998 are held by ME Ltd, and one each by Mr and Mrs Lewis. 

The director is APS Ltd and the company secretary ME Ltd. 

PSIE Ltd was registered for VAT under number 713 7248 42 from 1 04 1997.
It was deregistered in 2003 with effect from 1 08 2001. By published direction of the Value Added Tax and Duties Tribunal released on 13 12 2005 in appeal LON/03/0879 the Tribunal directed that the company’s appeal against a decision of HMRC to deregister it with effect from 1 08 2001 be allowed with costs. It has therefore been continuously registered under this number.  

25	APS Ltd has two fully controlled subsidiary companies. The first is:

APS-Centriline Ltd (APSC). 
It was registered in England and Wales as 3230638 on 29 07 1996. APSC was used to purchase the assets of another company originally in this structure but now defunct, Centriline International Ltd. That company plays no part in these appeals save to explain part of the background to the present corporate structure. 

APSC has 100 issued shares, of which 98 are in the name of APS Ltd, and one each in the names of Mr Lewis and Mrs Lewis. 

APS Ltd is listed as its director and ME Ltd as its company secretary. 

APSC was registered for VAT from 1 05 1997 under number 685 5351 06.

26	The other APS Ltd subsidiary is:

Environmental Engineering Ltd (Env Eng Ltd). 
It is registered in England and Wales as 3984421 on 2 05 2000. It has 1000 issues shares. 998 are held by APS Ltd, and one each by ME Ltd and Mrs Lewis. 

The director is APS Ltd and the company secretary ME Ltd. It is stated in 2000 to be a management holding company that held at that time several other companies. None of those subsidiaries play any major part in any of these appeals, most being overseas subsidiaries. However, Env Eng Ltd also serves as a director of companies that are involved in the appeal.

Env Eng Ltd has never been registered for VAT in the United Kingdom. 
 
27	Alongside these companies is another member of the structure:

Enviro Engineering Ltd (E E Ltd). 
This company is also styled Enviroengineering Ltd and EnviroEngineering Ltd. It was originally registered under number 3403260 in England and Wales as Calypso Import & Export Ltd on 14 07 1997, with one official name change on 25 09 1997 to Enviro Engineering Ltd. 

E E Ltd was deregistered by Companies House in May 2000 after a Gazetted warning. It was re-registered at Companies House by order of the court in 2004. That was confirmed by Companies House. The tribunal has not seen the order of the court and was not informed of the precise terms of that order. 

Two £1 shares are issued, one each to ME Ltd and to Mrs Lewis. 

The directors are Env Eng Ltd and Mr Lewis and the company secretary ME Ltd. That is the formal finding of the tribunal based on the official record maintained at Companies House. Mr Lewis stated in evidence that he resigned from the company in 2006. The tribunal saw no minutes or other formal company record of this fact. Having noted the officially recorded position, and in the absence of formal confirmation of his evidence, the tribunal does not accept it.  

E E Ltd is therefore a deadlock company in the joint control of Mrs Lewis and the shareholders of ME Ltd, itself a deadlock company in the joint control of Mrs Lewis and APS Ltd.  It is directed by Mr Lewis and by a controlled subsidiary of APS Ltd. 

E E Ltd was registered for VAT on 1 10 1997 as 701 2048 94.  Following deregistration, the company lost its VAT registration. Upon being put back on the register, it was reregistered for VAT from 1 11 2000 as 851 4432 40. Subsequent correspondence shows that officers of HMRC accepted that this issue of a new number was erroneous, and steps were taken in 2003 to sort out the problem caused by this, which one official letter referred to in the following terms: “the amalgamation of the above VAT registrations has been fraught with difficulty and remains unresolved” (letter from HMRC of 26 10 2003). The intended effect was to reinstate the original VAT number.  The reallocation of the original VAT number was notified to the company by HMRC on 10 10 2005. 

28	The APS Ltd/ME Ltd control link therefore applies to APSC Ltd, Env Eng Ltd and PSIE Ltd. E E Ltd stands slightly apart but is under deadlock control of ME Ltd and Mrs Lewis. In effect, the only independent shareholder of any of the companies is Mrs Lewis and the only individual acting as director is Mr Lewis. This is shown in the diagram below, in which the names of the individuals involved are emboldened: 

                  E E Ltd     ------------------◄------------------    ME Ltd
(deadlock ME Ltd and Mrs Lewis)              (deadlock APS Ltd and Mrs Lewis)	
         (director Mr Lewis)                                       (director APS Ltd)		 	
			   	               ▼ ▲	                                  ▼
		                                   APS Ltd	                PSIE Ltd
		                         (full control ME Ltd)         (full control ME Ltd)	
				  (director Mr Lewis)            (director APS Ltd)
                     ▼            ▼	
              APSC             Env Eng Ltd
                         (full control APS Ltd)            (full control APS Ltd)
                              (director APS Ltd)             (director APS Ltd)    

The tribunal heard no arguments from the parties about the validity of this structure by reference to the Companies Acts. Its understanding is that no company can be a member of its holding company, so that APS Ltd cannot be a shareholder in ME Ltd. If so, then under section 136 of the Companies Act 2006 (previously section 23 Companies Act 1985) the APS Ltd shareholding in ME Ltd is void. If that is so, then Mrs Lewis is the sole shareholder in ME Ltd, and therefore has complete control of all the companies controlled by ME Ltd. Section 155 of the Companies Act 2006 requires that all companies have at least one natural person as a director. However, that does not apply to existing companies until 2010, so is not yet relevant to this group of companies. The tribunal received no evidence from Mrs Lewis directly or indirectly. Not only did she not give evidence about her companies but also she does not appear in any active role in any of the appeals. There is no evidence in any of the appeals of any direct action taken by her relevant to any aspect of the current appeals. The most recent document appears to be an invoice from her to APSC on 5 03 2000 for the sale of various items of equipment. This absence of other evidence is despite the fact that she has joint – or perhaps, sole - control of both the key companies of the group. However, given this absence of evidence, and the fact that the Companies Act issues were not put in issue before the tribunal, the tribunal rests its findings on the structure as presented by Mr Lewis. But it adds the observation that its findings would be strengthened rather than weakened had it rested them on a finding that the APS Ltd shareholding in ME Ltd was void. 

29	The tribunal was offered little of the evidence about the conduct of the business of these companies that it might normally expect, such as minutes of annual meetings or directors meetings, or records of company resolutions passed. What it does see in that evidence is that the individual with any active official role in the structure is Mr Lewis variously acting as director, company secretary, and VAT representative. It also sees that, despite the comments of Mr Conyngham in 2003, Mr Lewis continued in correspondence to act in various capacities as though there were no common link in those capacities. This includes action by WNL Associates, to which we now turn. 	 

30 	The final part of the structure is:

William N Lewis Associates (WNL Associates). 
Sometimes also Lewis Associates. It took over the activities of the firm or partnership formed by Mr Lewis, his wife and a daughter under the name APSE that ceased trading in December 1998. WNL Associates is the trading name under which Mr Lewis conducted activities directly from that time. It is not a separate entity in law or for tax purposes. Nor is there any evidence before the tribunal of any associates. It started in December 1998. 

It may be that the body previously called APSE has now been turned into the company named APSE Ltd (the name of the company is itself in abbreviated form). 

On formation, WNL Associates was given VAT registration number 736 8407 11. Currently WNL Associates is registered for VAT under number 840 9767 94 on 08 06. The papers show that the body was deregistered for VAT in 2003. The tribunal’s attention was drawn to an internal note of HMRC of 24 01 2003 from officer Casey agreeing to the deregistration of this and other businesses “with which Mr Lewis is involved”. This deregistration was reversed by a tribunal following an appeal in decision LON/2003/1025. 
The tribunal assumes from this that WNL Associates has been registered for VAT on a continuing basis since first registration.

The tribunal found that WNL Associates was Mr Lewis in connection with the correspondence above. It makes this finding generally for all relevant dealings with WNL Associates. 

31	The last of what we might term the Lewis businesses that we need to examine falls outside the structure but, according to Mr Lewis, is linked with it in a different way. This is

	Amalgamated Pipelining Services Ltd (Isle of Man) (APS (IOM)).
APS (IOM) was registered in the Isle of Man on 26 October 1994 under company number 070601C. It was formed as a joint venture company between APS Ltd and a foreign company. In 1997, after APS (IOM) was registered for VAT in the United Kingdom, the foreign company acquired the whole shareholding of APS (IOM).   

Evidence from the Isle of Man Companies Registry and the Financial Supervision Commission shows that no official returns had been made by the company since 1998. Further, all directors of APS (IOM) had resigned on or before 11 November 1999. Further records showed that the company had been removed from its registered address by its “landlord”, the leaseholder of the relevant property. The company was compulsorily dissolved on 1 December 2002.

Mr Lewis represented that, under powers in the Memorandum and Articles of the company, he acted for the company in the absence of directors from 1999 to part way through 2003. This was his explanation for actions taken by him in the name of APS (IOM) after it had ceased to have any directors. HMRC refused to accept his analysis of events. The tribunal observes that it rests on what appears without full argument to be an arguable but unlikely interpretation of provisions in the company’s formal documents that must, if properly analysed, be decided by Isle of Man law. It was given no evidence of Isle of Man law, but in the event did not need to make any final decision about the continuing corporate status, if any, of APS (IOM). 

APS (IOM) was registered in the United Kingdom and not the Isle of Man for VAT on 1 January 1997 under number 713 7249 40. APS (IOM) was deregistered by HMRC with effect from 1 12 1999, this being confirmed to the company by a letter sent by Mr Jenkins, now an officer of Revenue and Customs on 6 09 2002. This was confirmed by him in evidence to the tribunal. It is contended in the papers that this registration was required by the UK VAT authorities, although the company wished to register in the Isle of Man. 

The tribunal is satisfied that APS (IOM) was not and is not registered for VAT in the United Kingdom at any time relevant to these appeals. The tribunal has no appeal in front of it, nor was there any made, raising the question of the deregistration of APS (IOM) from United Kingdom VAT registration with effect from 1 December 1999. That issue is therefore closed.     

32	One other company plays a part in these appeals although the tribunal finds as follows that it is not part of the Lewis business structure:

	Enviropower Ltd
Enviropower was registered as a company with directors and shareholders that did not include either Mr Lewis or any of the businesses associated with him.
At one point money was put into the company from sources linked to Mr and Mrs Lewis but that did not make it part of the Lewis business structure. The company was renamed E P Caldicott Ltd in 2005 and was put into compulsory liquidation as a result of petitions by businesses associated with Mr Lewis in May 2006. This followed actions in the county court by E E Ltd and other companies that resulted in judgment against this company. It is contended that these actions resulted from the consequences when this company took over from E E Ltd its employees and some of its equipment at the time when E E Ltd was put into liquidation in 2000. The disputes started when E E Ltd was restored to the register and asserted rights to have assets returned and other matters honoured.  

So far as relevant to these decisions, the tribunal finds that there was a previous working relationship between Enviropower Ltd and companies in the Lewis business structure but that there was a breakdown in the working relationship at some point. It is clear from the documents produced to the tribunal that different participants had different views about why this occurred. The tribunal takes no view on those issues. But it does find that the relationships between this company and Mr Lewis’s activities was a trading relationship. It is the view of the tribunal that the litigation between the parties in the county court followed from that trading relationship. 

The specific appeals
33	The tribunal was reminded by both parties, and was in any event aware, of a number of previous appeals involving Mr Lewis and the companies with HMRC and its predecessor. It notes that the appellants were successful in some of the appeals and succeeded in part in others. This is not therefore a history of a vexatious litigant constantly raising hopeless appeals. 

34	On the contrary. This tribunal had in mind an issue on which a previous tribunal commented in a previous appeal by PSIE Ltd, where the appeal was allowed in case LON/2003/0879 on 13 12 2005. In its reasons in that case, the tribunal found “that Mr Lewis was an honest witness. There had appeared to be some prejudice against him in the minds of Customs who had initially considered him to be engaged in tax evasion … a view which the officer in the case retracted in the course of his evidence.” And in a decision on other appeals by E E Ltd concerning periods in 1998 to 2000 in LON/2001/0071 a tribunal, in allowing some of the appeals, commented in paragraph 1 of its decision that “Unfortunately … for reasons not directly connected with the issues in dispute in this case, a level of distrust amounting at times to animosity built up between various people involved.” 

35	Against that background, the tribunal decided that the most efficient way forward was to list all the outstanding appeals between Mr Lewis and the businesses identified above of which it was aware for hearing together. It also directed both parties to confirm to it whether they agreed that the list of appeals was a full list of the extant appeals between them. The parties identified one of the appeals as no longer having any issue to be resolved within it. It was removed from the list at the start of the hearing and was not considered at all by the tribunal. As noted above, the only issue in one other appeal related to costs. 

36	Aside from those appeals, the following appeals, in chronological order were still before the tribunal, and the tribunal considered them all:

LON/2003/0279
Appeal by APSC against an assessment raised by HMRC disallowing input tax on invoices from APS (IOM) in the quarters 11/00 to 05/01.

LON/2005/0475
Appeal by WNL Associates against an assessment raised by HMRC disallowing input tax on invoices from APS (IOM) in the period 11/04.

LON/2005/0971
Appeal by E E Ltd against an assessment raised by HMRC disallowing input tax on an invoice from APS (IOM) dated 31 03 2001.

LON/2006/0754
Appeal by APSC against an assessment raised by HMRC for the tax period 05/04 in respect of sums shown on a credit note issued by E E Ltd to APSC.

LON/2007/1403
Appeal by E E Ltd against a refusal by HMRC to repay sums claimed in the VAT returns for 01/07 and 04/07 by way of bad debt relief.
 
LON/2008/0255
Appeal by PSIE Ltd against a decision by HMRC to amend the VAT return for the period 10/06 reducing a repayment claim in respect of transactions with APSC and WNL Associates to nil. 

LON/2008/1386
Appeal by PSIE Ltd against a decision by HMRC disallowing input tax in respect of an invoice from WNL Associates in the period 10/07

LON/2008/1486
Appeal by E E Ltd against a decision by HMRC refusing to repay VAT for the period 01/08 in respect of an invoice from WNL Associates.   

Several other unnumbered late admitted appeals by E E Ltd are dealt with at the end of the decision.

The evidence
37	The listing of all the appeals together enabled the tribunal to take an overall view as well as to test the evidence of the individual appeals. It received significant bundles of documentation from both parties. The bundles showed the interactions between the various parties involved with Mr Lewis’s business activities, and the tribunal has drawn from all of them in making the findings about the individual businesses set out above.

38	The tribunal received oral evidence from Mr Lewis. The tribunal echoes the previous tribunal in broadly accepting the evidence from Mr Lewis as evidence honestly given of the events as he saw and understood them. But it also found that his evidence suggested that he set up these arrangements, and then dealt with the VAT affairs of the various component parts of the arrangements, with limited, if any, professional advice and without a full understanding of the corporate, tax and VAT implications of the actions he undertook or authorised. Indeed, Mr Lewis freely confessed his ignorance about certain issues of law before the tribunal. It also found that he was confused at times about who did what, and which piece of information related to which of the various appeals. It considered that his approach was idiosyncratic in the sense that he had his own view of the way he considered his businesses should be run and did not always see why these needed to conform with the approaches that HMRC considered he should take. It also found that he was firmly in day-to-day control in running the various businesses associated with him. 

39	Accordingly, his approach reflected in the way in which each of those businesses had dealt with the issues relevant to these appeals and with the appeals themselves. This was reinforced by the absence of any other professional representative handling the appeals either for Mr Lewis or for any of the businesses. Whether Mr Lewis fully intended this or not, the result was that all the appellants were presented to the tribunal as sharing Mr Lewis’s views of events and of the relevant law. 

40	The tribunal heard oral evidence from a number of officers of Revenue and Customs involved with the appeals. It heard full evidence from Mr White, an officer based at Stroud. This was focussed on appeals LON/2007/1403 and LON/2008/1486 but included wider evidence as well. The tribunal considered Mr White to be a reliable, dispassionate and helpful witness, and put weight on his evidence. He gave evidence that he took over responsibility for some of these appeals in 2007. This caused him to visit Mr Lewis and to discuss with him several of the appeals and the backgrounds to them. This led him to form a view that he put to Mr Lewis in a letter in the following terms on 27 07 2007:

We, therefore have companies in dire financial straits, with no customers, little or no money in the bank and possibly even no bank account, agreeing “to buy” drawings/incur debts to the tune of hundreds of thousands of pounds, with no ability to pay. We also have you, the director and controlling influence, in similar dire financial straits.
	
The “selling” companies do not get paid by the “purchasing” companies. The “buying” companies claim VAT refunds at the time and the “selling” companies claim bad debt relief 6 months later. The consequences of the above are continual VAT refunds/VAT repayment claims and losses to the Exchequer.”

The tribunal finds that Mr White acted reasonably in forming those conclusions. So far as relevant it indicates its own findings on the issues below. 

41	The tribunal heard evidence from Mr Casey, an officer of Revenue and Customs based at Llanishen, and from Mr Jenkins, also an officer from Llanishen. These were of more limited assistance to the tribunal, aside from the evidence about the deregistration of APS (IOM) . 

42	Witness statements from officers Deacon and Jennings were admitted without objection. Officer Deacon gave evidence about invoices received from APS (IOM) by WNL Associates and the reasons why he decided not to allow them to be included in the relevant returns. Officer Jennings gave evidence about invoices sent to APSC by APS (IOM). Both gave evidence that they had considered the relevance of Extra-Statutory Concession 3.9 in respect of claims made about invoices issues when a trader was no longer registered for VAT. The tribunal confirms the view it took at the hearing of these appeals that it is not able to look at the question of the operation of any extra statutory concession. It can look only at the law. 

The invoices from APS (IOM)
43	The tribunal has little hesitation in dismissing the three appeals that were based on invoices presented to the traders by APS (IOM). These are:   

LON/2003/0279 (Appeal by APSC against an assessment raised by HMRC disallowing input tax on invoices from APS (IOM) in the quarters 11/00 to 05/01).

LON/2005/0475 (Appeal by WNL Associates against an assessment raised by HMRC disallowing input tax on invoices from APS (IOM) in the period 11/04).

LON/2005/0971 (Appeal by E E Ltd against an assessment raised by HMRC disallowing input tax on an invoice from APS (IOM) dated 31 03 2001).
 
44	In each case the appellant based its claim in the relevant VAT return on an invoice issued by APS (IOM) when APS (IOM) was not registered for VAT either in the United Kingdom or the Isle of Man. It was not therefore entitled to invoice anyone for VAT at that time. 

45	These appeals raise a single straightforward issue that the tribunal can decide without elaborate analysis in the light of the evidence before it. The law has been set out in the papers on more than one occasion and does not need to be repeated here. It is not in dispute. A trader that is not registered for VAT cannot issue a valid VAT invoice. As the tribunal found above, the VAT registration of APS (IOM) was cancelled with effect from 1 12 1999, and that cancellation was not reversed or appealed. The tribunal had its attention drawn to the appeal of PSIE Ltd where it successfully appealed against a deregistration decision. So it was known by Mr Lewis that it was necessary to appeal against such a decision. 

46	It follows that - whether or not APS (IOM) could as alleged retain the services of WNL Associates and issue invoices – APS (IOM) was not legally able to charge VAT on the invoices that form the basis of these three appeals. The tribunal cannot enquire further about the application of any extra statutory concession to the decisions by HMRC. It must therefore dismiss each of these appeals. 

47	The tribunal comments more generally of this group of appeals that the common approach taken by the three appellants, and in particular their common approach in ignoring the reality that APS (IOM) simply was not part of the VAT system at the relevant times, confirms the tribunal in its general views about Mr Lewis’s approach both to the activities of his businesses and to these appeals.  

The credit note appeal
48	The next appeal in chronological order is appeal LON/2006/0754 by APSC concerning a credit note issued by E E Ltd to APSC. 

49	E E Ltd issued a short series of invoices to APSC in May 2000. They included VAT of £51,748.46. A credit note was issued on 30 03 2002 to cancel those invoices as VAT invoices. This was because the supplies in question were supplies out of the jurisdiction and were either outside the scope of VAT or zero-rated. The note was posted on 20 05 2004 and should have been accounted for VAT in the period 05/04. It was included in a VAT account only for the period 01/05. 

50	The tribunal approaches this appeal from its above findings that APSC and  E E Ltd are both wholly owned subsidiaries in the APS/ME central structure of Mr Lewis’s businesses. The tribunal finds that both are under the management of Mr Lewis, as he manages the companies involved in the somewhat complex structure that links APSC and E E Ltd. So each should be fully aware of the formal position of the other at any particular time. 

51	At the time E E Ltd issued the credit note to APSC, E E Ltd had been struck off the register. E E Ltd must be assumed to know that and, on the facts found by the tribunal, that knowledge would be available to APSC also. So it is clear, in the view of the tribunal, that both parties knew that the credit note could have no effect at the time of issue. 

52	HMRC gave effect to its view that the credit notes should not have effect for VAT by issuing an assessment on 14 07 2005 for the VAT period to 31 05 2004.  
On review, it was considered that the decision was consistent with regulations 34 (correction of errors) and 38 (adjustments in the course of business) of the Value Added Tax Regulations 1995 because the credit note did not identify any change in the underlying consideration, and because of the three year time limit in both regulations: regulations 34(1A) and 38(1A). 

53	Mr Lewis put forward in argument that it was agreed that the note could not have effect when received, because E E Ltd did not exist. So the credit note was put into the accounts of APSC later.  In his view, regulation 38 was not relevant. Accordingly, there was no three year time limit on the claim, as provided in regulation 38(1A).  It could be made later. This was because the credit note was for considerably more than the original invoices and was not to be identified with them. 

54	The tribunal accepts the view of HMRC that, whatever its content, the credit note could not have been issued as such on the date on which it was purported to have been issued. Whatever the retrospective effect of the re-registration of the company either at Companies House or for VAT purposes, the fact remains that it had no status either as a company or, more to the point, as a trader for VAT purposes at the date stated to be the date of issue of the credit note.  The failure of the recipient to account for the credit note when received is in the view of the tribunal confirmation that that is so. 

55	It may be – the tribunal makes no finding on this – that there was an erroneous attribution of VAT to previous supplies. And it may be that a properly issued credit note was the appropriate way forward to correct that error if such a procedure was available within the time limits of regulations 34 or 38 or other relevant legislation. But that does not alter the fact that this particular alleged note could not be a valid note at the date of issue. And it does not alter the fact that the original errors, if that is what they were, occurred in 2000 and the attempted correction or restatement by APSC occurred over three years afterwards. In the view of the tribunal the appeal must fail for both these reasons. 

The bad debt relief appeal
56	The next appeal, in chronological order, is LON/2007/1403. It involves the links between E E Ltd and the company previously known as Enviropower Ltd.

57	The appeal concerns two decisions notified to E E Ltd by letter dated 27 07 2007. HMRC decide to withhold repayment of VAT of £31,755.69 in respect of the return made by E E Ltd for the tax period 01/07 and £927.50 in respect of the following period, 04/07. 

58	Officer White gave evidence of the reason for the decision. In its VAT return for the period to 07/06 E E Ltd had accounted for the VAT on a series of invoices to Enviropower Ltd dates 1 05 2006. At the same time it had accounted for a series of purchases, all of them from businesses that were part of Mr Lewis’s businesses (specifically APSC and WNL Associates).  As the declared inputs exceeded the declared outputs, E E Ltd had claimed a repayment of over £50,000. In the return for 01/07 E E Ltd then claimed bad debt relief for the sums for which it had accounted (but had not had to pay) in the 07/06 return. The effect was to make all the sums put in the 07/06 return both as purchases and sales (the tribunal’s emphasis) become the basis for repayment claims. Officer White gave evidence that at the times of the invoices by APSC and WNL Associates to E E Ltd, for which E E Ltd had claimed the input tax, no output tax had been paid by either APSC or WNL Associates. One owed HMRC sums of around £240,000 and the other owed HMRC sums of around £130,000. Officer White concluded that the businesses were not actually trading and that no VAT was due either by them or to them. 

59	The three main invoices included in the 07/06 return are as follows:

Invoice 213 dated 1 05 2006. This is for labour and materials used in the manufacture of CHP units and not previously invoiced. VAT £11,444.10

Invoice 214 dated 1 05 2006. This is for payment for tools in respect of a payment from an insurance company for tools and plant stole from the factory and covered by a joint policy. The supply is stated to be already delivered and the VAT is £15,768.64.

Invoice 215 of 1 05 2006. This is said to be for the supply of all plant listed in letters in October and November 2001, supplies already delivered. The VAT is £17,273.61.

The other invoices, numbered 210, 211 and 212, all bore the same date, 1 05 2006, and in total involved VAT of less that £1,000. The tribunal was not given copies of those invoices but has no reason to believe that they raised any different issues to those raised by the above three invoices which were copied to the tribunal and on which it heard evidence.  

60	These invoices were submitted shortly before the bankruptcy of Enviropower Ltd, an impending bankruptcy of which Mr Lewis and E E Ltd were clearly aware. The bad debt claim was made after the bankruptcy. 

61	Aside from the interactions between those involved in the transactions other than Enviropower Ltd itself, HMRC took the view that the payments did not qualify for bad debt relief under section 36 of the Value Added Tax Act 1994.

62	Put at its simplest, Mr Lewis’s argument was that E E Ltd had paid the VAT on the invoices to Enviropower Ltd. Enviropower Ltd was now bankrupt. The necessary six months had elapsed. So E E Ltd was entitled to have its payment of VAT back.  
  
63	Section 36 of the Value Added Tax Act 1994 deals with bad debts. Subsection (1) states the basic requirements for a claim to be:

“(a) a person has supplied goods and services and has accounted for and paid VAT on the supply

(b) the whole or any part of the consideration for the supply has been written off in his accounts as a bad debt, and

(c) a period of 6 months …. has elapsed.”

64	For HMRC, Mr Singh contended that neither (a) nor (b) were met. The tribunal was given no clear evidence that (b) was met and accepts that contention. The argument for (a) relied both on the view taken by Officer White that the only offsets to the VAT in 07/06 were not really trading offsets and on the view that there had been no supply.

65	The tribunal was presented with bundles of documents by both parties for this appeal. Both bundles ranged far and wide in their contents, as both the officers for HMRC and Mr Lewis thought it appropriate to bring in many strands of activity from other traders linked with Mr Lewis in making their cases for this appeal. The result, frankly, was that the tribunal was confronted with a factual morass. It would be totally disproportionate for the tribunal to try and pick apart every strand of the evidence and the tribunal does not attempt to do so.

66	The key issues were whether the invoices in question were actually new invoices for new taxable supplies of goods and services to Enviropower and whether the further conditions of section 36 were met when the further claim was made. 

67	The appeal is not concerned with the other items on the 07/06 return. If HMRC wished to call those into question then it had the powers to do so by the appropriate method. Failing such a challenge, the appellant is entitled to offset any genuine output tax against the input tax claimed and to the extent that it has done so, the output tax was paid.

68	The tribunal is not persuaded that the invoices issued on 1 05 2006 were new invoices for new taxable supplies. E E Ltd knew or should have known, through its officers, of the precise status and likely future status of Enviropower Ltd at the time.  What the tribunal does not understand is how, given that businesses associated with E E Ltd had taken action against Enviropower Ltd, E E Ltd had not also done so if it had made supplies for which it had not been paid. Invoice 213 very briefly states that it is for labour and materials not previously invoiced. There is no itemisation on the bill. The documents and history in the evidence strongly suggest that these supplies, if they were made, were made some years before. The invoice itself indicates that they were made under the agreement between the parties in 1998. 

69	The standard rules for invoicing a supply are that it must be invoiced by reference to the time of supply. That is defined by section 6 of the Value Added Tax Act 1994. In the case of a supply of services (such as a supply of labour) the supply occurs at the time when the services are performed. There are, of course, rules about the issue of invoices linked to supplies, but it is not necessary to set these out here. The situation here is that this invoice was issued by E E Ltd to Enviropower Ltd a few days before associated businesses linked to E E Ltd were moving to make Enviropower Ltd bankrupt but without reference to when the supplies occurred. It was foreseeable that when the invoices was issued the recipient would be in no position either to process it through its VAT accounts or to question it. 

70	Further, the tribunal was not given evidence of any details to justify the invoice. There were assertions about work being done and materials supplied, but no accounts of such efforts or identification of the supplies. Applying the test of the balance of probabilities to the evidence before it, the tribunal is not satisfied that this invoice is for supplies made that were not otherwise invoiced and that could be invoiced in a timely way at the time this invoice was issued.

71	Invoice 214 purports to be an invoice by E E Ltd to Enviropower Ltd for moneys payable under a joint insurance policy. The policy was not put in evidence to the tribunal and nor were the itemised elements that lay behind this invoice. If the sums were related to a joint policy, why were they being invoiced between the two parties to the invoice? Why was the claim not paid either direct to E E Ltd by the insurance company or forwarded on to E E Ltd without an invoice? What was being supplied by E E Ltd to Enviropower Ltd that constituted a taxable supply?  Rather than itself analyse the law, the tribunal adopts the guidance published by HMRC on the issue as the simplest statement of the relevant rules:
“If an insurer settles an insurance claim by paying money by way of financial indemnification to the insured party, no supply has taken place for the purposes of VAT. The money paid by the insurer in settlement of the claim is therefore outside the scope of VAT. (Notice 701/36, paragraph 5.5).”
While the tribunal did not hear argument on this point, it does not consider this issue arguable. The tribunal is unable to see, from the evidence before it, that a taxable supply was made here. 

72	Invoice 215 is for a supply of plant as listed in letters in October and November 2001. The contention, as the tribunal understood it, was that Enviropower Ltd had taken control and, in effect, ownership of the assets previously held by E E Ltd when E E Ltd was removed from the register. The invoice states that the details are confirmed by a letter to a named person. The letter was not produced to the tribunal nor the individual identified. The tribunal is prepared to accept that the equipment listed was in existence. But it does not see how this can be the subject of an invoice in 2006 for equipment apparently taken over when E E Ltd went out of existence in 2000. There is no evidence before the tribunal of any supply by E E Ltd. Indeed, the evidence is that the removal of E E Ltd from the register took place without any of those involved in E E Ltd being aware that it was to happen. The tribunal does not accept on the evidence that this invoice represents a supply. It may be that there was a claim for goods taken by Enviropower that should have gone to any administrators of E E Ltd but that is another matter.

73	Having taken a detailed look at the evidence before it about each of these three invoices, the tribunal finds that it is unable to accept any of them, although for different reasons in each case.  On the details available to it, it does not see any evidence that the other invoices to Enviropower Ltd made at the same time were for supplies properly invoiced on 1 05 2006. 

74	It therefore finds that the invoices are, as was contended for HMRC, not invoices for supplies on which a proper claim for bad debt relief could be made. It therefore does not need to enter into the wider arguments put before it by Mr Singh or raised by the evidence, which it otherwise accepts, of Mr White. 

Buying the drawings
75	The next appeal, in chronological order, is LON/2008/0255. This is an appeal by PSIE Ltd against a decision of HMRC made on 3 12 2007 amending the VAT return of the appellant for the period to 10/06 from a repayment claim of £56,525.00 to nil. The reason given for this in the letter was that “whether or not you are actually trading is in doubt and if you were to receive repayments you would be unjustly enriched”. 

76	The return in question – made, like all the other VAT returns during this period, by Mr Lewis on behalf of the trader – returns no sales for the period but records purchases of £323,000 on which the reclaim is made. 

77	The sum of £323,000 was made up of four invoices. Three of the invoices were sent by APSC dated 30 06 2006 and were respectively:

Invoice PSI-498 from APSC dated 30 06 2006 in response to a verbal order. The invoice was for specification and technical drawing to be shipped to Hong Kong. There were two sets of specifications and drawings identified. Both were priced at £40,000 so showing total VAT payable of £14,000. The terms were said to be 14 days from date of invoice.

Invoice PSI-534 from APSC dated 30 06 2006 in response to a verbal order. This was for drawings, again to be shipped to Hong Kong, for further specifications and technical drawings priced at £120,000 with VAT of £21,000. Again the terms were 14 days from date of invoice.

Invoice PSI-625 followed the same pattern as the other invoices of this date. This was for two sets of specifications and technical drawings priced respectively at £40,000 and £80,000, with VAT totalling £21,000.  

These invoices were the invoices recording and charging the supply, or alleged supply, of drawings and technical specifications priced at, and said by Mr Lewis to be worth, £320,000 before VAT. In evidence, Mr Lewis made it clear that this price was not merely for the drawings themselves but for the technical specifications and recorded knowhow – in other words the intellectual property and associated knowhow behind the drawings and specifications. Yet these supplies were, on their terms, all based on verbal orders, which the tribunal understands to mean oral contracts. No written agreements or other relevant correspondence between the parties to these invoices was produced. This absence means that no specific provision was made between the parties about intellectual property. Nor was there any documentation to show that the supplier had the rights to the intellectual property or the extent to which it was transferred to the recipient. Nor was the tribunal shown how that was handled for accounts or direct tax purposes.

78	The other invoice, dated 31 07 2006, was from WNL Associates for £3,000. 

79	As the tribunal has already noted, in a letter dated 23 02 2007 on PSIE Ltd notepaper, and written “for an on behalf of PSI Engineering Ltd” Mr Lewis asserted that “I am not a director of PSI Engineering Ltd, but W N Lewis Associates have been retained by them…”. A letter on the same notepaper and signed in the same way on 22 04 2007 states at paragraph 9:

“I felt it correct to say that any personal indebtedness to HMR&C by WNLA should not prohibit ore delay the correct handling of the PSI 10/06 VR as since WNL resignation from PSIE and the sale of his shares in the company, WNLA was only acting as an agent on behalf of PSIE for their VAT returns.” 

80	In one sense those statement may appear correct. But they only tell part of the story. PSIE Engineering Ltd was at the time a subsidiary controlled by ME Ltd, with APS Ltd as its director. Mr Lewis was the director of APS Ltd. APS Ltd was the director of ME Ltd as well. So Mr Lewis, as the only individual acting in any way with the responsibilities of a director of any of these companies, and as the only individual evidenced in the papers produced to the tribunal as active in the management of these companies, must in the tribunal’s view be regarded as the individual acting as director.  The same is true at that time for APSC. APSC was fully controlled by APS Ltd like PSIE Engineering Ltd. APS Ltd was the director of APSC as well as of PSIE Ltd. ME Ltd was the company secretary of both companies. And, as noted above, neither ME Ltd nor APS Ltd were registered for VAT.  So these were transactions between two almost wholly owned subsidiary companies of a common parent with common control and common administration such that the transactions were within the VAT system but the network of control was not. Further WNL Associates was Mr Lewis. The tribunal does not accept that Mr Lewis “was only acting as an agent” either in his own name or using his trading name.
It finds that HMRC was fully justified in raising the points it did about these links.  

81	Mr Lewis explained that the reason for the invoices was prospective work possibly to be undertaken with machinery held in Hong Kong. His evidence was that “To do this PSIE requires all the original drawings that were used in the manufacture of the plant, these of course are the property of APSC.”  

82	The “of course” was explained in part by production of an invoice dated 1 06 2000 from APSC to PSIE Ltd for the supply of “all equipment sufficient to carry out” a contract in Hong Kong as delivered to Hong Kong in the three months before the invoice, for £315,314.89. No VAT is charged on that invoice, presumably because it was regarded as a zero-rated export.  That invoice puzzles the tribunal. It is sent to “PSI Engineering Ltd” at an address in Kowloon with the date stated. But, as the tribunal has found above, the recipient was not called PSI Engineering Ltd at that time. It was given that name only in the following year, as the sender would know. 
The tribunal is not aware of another company using that name at that time. 

83	That invoice from APSC to “PSI Engineering Ltd” is numbered 9913. It refers to the equipment used in contracts mentioned on invoices PSI-498 and PSI-534. Those invoices refer to the supply of the equipment under APS invoice numbers 994 and 2001. The APS invoices are not in the papers before the tribunal. Nor is it clear which “APS” is referred to. If these were VAT invoices, then the tribunal must assume it is APS (IOM) or another company using that name, as APS Ltd was not registered for VAT. There is evidence elsewhere in the appeal papers about some aspects of these invoices. In the HMRC bundle of papers for appeal LON/2003/0279 there is a VAT audit report compiled by HMRC on 28 10 2002 about APSC which mentions invoices recorded on these invoices. Invoice PSI-498 cites invoices APS 994 and APS 2011. APS 2011 is recorded in that report as an invoice from APS to APSC dated 1 9 2000 for £7000. PSI-534 also cites these invoices. PSI-625 cites invoice 2017. That is identified in that report as an invoice recorded as dated 30 11 2000 for £7,000.  The report also records:

“Mr Lewis made representations about invoices 2011 and 2012. He claimed that these were both second payments for contracts in June 1999 and therefore should not be included because they were prior to deregistration. The original invoices were said to be 994 and 995, and although they apparently did show the full value and part payment required VAT was only charged on the part payment. The trader operates invoice trading and I therefore considered that the correct tax point was that shown on invoices 2011 and 2012 and dismissed his claim.”

This suggests that evidence had been available about a contract transferring relevant supplies from APS (but it is not clear which APS) to APSC. These were not in evidence before the tribunal. The tribunal can see only that the invoices in 2000 were invoices about partial supplies and invoiced relatively low sums as compared with the invoices in question in these appeals. It also notes the dates of these invoices, suggesting transactions in 1999 or 2000.  

84	Correspondence and visits continued between the parties. These led to a letter sent by Mr White for HMRC on 27 07 2007. This stated a number of conclusions formed by him and other HMRC officers from the visits and correspondence. It identified doubts about the identity of the plans and drawings, their locations and their values. HMRC asked for proof of identity, of export as stated, and of value. 

85	In the further correspondence that followed, some copy drawings were included in letters sent by Mr Lewis. These bear the label “Amalgamated Pipelining Services Ltd.” In small print they carry intellectual property reservations that is, unfortunately, barely readable. It appears to refer to a company not known to the tribunal, Tau Pipe Lining Processes Ltd, which is said to be the “proprietors” of the rights. The diagrams showed the dates of drawing as being in 1984. The tribunal saw no documentation recording any arrangement with that company, or assignment by that company, involving PSIE Ltd, APS Ltd, APS (IOM), APSC or any other relevant company. In other words, the tribunal had no documentary evidence (as against assertion and Mr Lewis’s oral statements) that any person other than the person named on the diagrams had any rights in the intellectual property behind the diagrams, although standard practice would suggest that there should have been some documentary evidence. 	

86	Mr Singh put the case for HMRC in these appeals to the tribunal on several grounds. He drew attention to the reality of the structures behind the alleged supplier of the drawings. He emphasised the evidence from HMRC that its officers had seen no evidence that the drawings that were the subject of the invoices had any real value or how the value was established. He suggested that, on the evidence, the drawings may never have been supplied by the appellant company. The evidence was also, he submitted, that there was no genuine trading going on at the time. The context was that there were no taxable supplies recorded by PSIE Ltd as made by it either in the tax period 10/06 or in the preceding 39 months. In addition, the company was recorded as a dormant company at Companies House for the years ending 31 05 2003 and 31 5 2004. Finally, there was no evidence that payment for the supplies had been made within six months or at all.

87	The tribunal accepts the evidence that the company had recorded no trading supplies either to HMRC in its VAT returns or in its accounts in the relevant period or for at least two years before that. It also finds no evidence of payment for these supplies either within the period stated on the invoices or at all. Accordingly, it accepts that there was no significant evidence of ongoing trading by this company of which these supplies formed part at the relevant times. In addition, it is not enough for it to be shown that an entity is trading, or is engaged in an economic activity. It must also be shown that a supply is undertaken in the course of furtherance of – that is, as part of - that activity. The tribunal finds that these invoices have not been shown to relate to supplies as part of any ongoing trading activity by the appellant. It also finds that Mr Lewis failed to satisfy it on the balance of probabilities that the alleged supplier of these plans and specifications had title to supply the intellectual property in them to the company invoiced. The only evidence in the papers suggests that the intellectual property was vested in a company that was not part of Mr Lewis’s businesses and about which the tribunal was offered no evidence. It further finds that it is not satisfied that the value of the plans themselves, as against the intellectual property in the designs and other matters represented in them, was other than minimal as compared with the amounts invoiced. The tribunal has also indicated above other concerns it has with the evidence presented to it in this appeal.

88	The tribunal also accepts the argument of Mr Singh that the appeal fails by reason of section 26A (disallowance of input tax where consideration not paid). This provides:

	(1) 	Where –
	(a) 	a person has become entitled to credit for any input tax, and
(b) 	the consideration for the supply to which the input tax relates, or any part of it, is unpaid at the end of the period of 6 months following the relevant date, 
he shall be taken, as from the end of the period, not to have been entitled to credit for input tax in respect of the VAT that is referable to the unpaid consideration or part.

(2)	For the purposes of subsection (1) above the “relevant date”, in relation to any sum representing consideration for a supply, is –
(a) 	the date of the supply, or
(b) 	if later, the date on which the sum became payable.”

89	The tribunal saw and heard no evidence of payment in respect of the invoices for the supplies of drawings and specification either at the time of the invoices or at any time since. It finds that the invoices state that the date of payment is to be “14 days from date of invoice”. It finds no clear evidence of a supply or of the date of a supply. But in any event it is clear that if the supply was as alleged by Mr Lewis, then the supply must have taken place (on Mr Lewis’s own evidence in a letter to HMRC on 1 04 2007) before the date of that letter. So the six month period would have started at the latest before that date.   

90	Mr Lewis represented at various times in these appeals that the companies were unable to trade, and were unable to settle their invoices, because HMRC had refused to make repayment claims to them. The tribunal did not ask Mr Singh to deal with this argument. It is without substance in this context. Various applications for hardship were made in the process of bringing these appeal forward, and some were granted. That is the extent to which these problems are relevant to these appeals. 

91	It simply is not relevant to section 26A that traders related in the way these traders are related fail to pay invoices within the time limit set to each other because of tax bills or outstanding VAT repayments. The law is entirely clear on this. The six month time limit applies regardless of the reason for it. And there is a simple factual answer to Mr Lewis’s arguments in these appeals. Mr Lewis was the individual who both issued and received the invoices. He set the terms of the invoices and chose both when to issue them and whether and when to pay them. On the facts found by the tribunal, he must be taken to know, when issuing the receipts, if they would or could be paid at that time by the recipient. He had it entirely in his own control to pay the invoices if the recipients had the means to pay them, and to do so within the six month time limit. If he either chose not to do so or could not do so then he cannot complain about this rule being applied. 

92	Thus, on any interpretation of the evidence before the tribunal, the claims must fail under section 26A. 

93	Even if the tribunal was wrong on that, it also finds that the appellant company has failed to satisfy it on the balance of probabilities that the input tax is allowable under section 26 of that Act that the supplies were taxable supplies, that is, supplies made for consideration in the course or furtherance of the business of the supplier. The tribunal is not able, on the balance of probabilities, to satisfy itself on the evidence that the supplies stated in the invoices were supplies actually made of items that the supplier was in a position to supply in the context of an ongoing trade for the considerations stated. There are too many inconsistencies in the evidence presented by Mr Lewis. The tribunal found that several of the doubts expressed in correspondence and in his evidence by Mr White were doubts that the tribunal shared, and that Mr Lewis had failed to remove those doubts. 

The storage and services invoices
94	The next appeal is LON/2008/1386. This is an appeal by PSIE Ltd. The decision for HMRC, in a letter dated 22 04 2008, was to amend the return made by PSIE Ltd for the VAT period to 10/07 from a repayment of £131.25 to nil. That sum is the sum shown as VAT on an invoice from WNL Associates to PSIE Ltd dated 30 10 2007 for the continuing costs of storing effects and the continuing costs of recovery of plant from Hong Kong. The repayment claim as rejected because HMRC did not accept that it was a trading input by PSIE Ltd.

95	Mr Lewis stated that the output was declared by him through WNL Associates in the VAT return of 11/07. He gave no evidence of payment.  

96	This is a small appeal compared with others on which the tribunal has focussed in more detail. And it can be dealt with adequately without reciting the background set out above in the context of this appeal. For HMRC Mr Singh argued that section 26A of the Value Added Tax Act 1994 applied to this appeal also. There is no evidence that any payment was made either at the time of the invoice or later. The tribunal finds that the date of the invoice was given only as the date of supply, 30 10 2007. There is no time frame identified for the “continuing costs of the storage” and no agreement or other evidence was produced about storage costs. In the absence of other evidence the tribunal finds that the invoiced sum was payable on receipt of the invoice, and that this was the same date as the stated date of supply. 

97	As Mr Lewis produced no evidence of payment either then or later, the tribunal finds that he has not discharged the burden on him of showing that payment was made within the time limit of section 26A. 

98	If the tribunal is wrong on that, it also finds that Mr Lewis failed to satisfy it that there was any continuing supply made by him (in his trading name) of storage in Monmouth, the alleged supply. It has some sympathy with the other aspect of the invoice, namely work undertaken in recovery of plant. But it would need to be satisfied, and is not, that the work undertaken by Mr Lewis in that capacity is a genuine supply between taxable persons in the course or furtherance of business from him to a company of which, on the tribunal’s general findings, he was effectively the director and the company secretary. It has not seen any relevant agreements about the relationship between him and the company, and it is not satisfied that there was a supply here of a service by him as an independent business.    

99	The tribunal therefore finds that this appeal also fails.

100	The final appeal is LON/2008/1486. This is an appeal by E E Ltd. It is from a decision of HMRC in a letter dated 23 04 2008 amending the return of E E Ltd for the VAT period 01/08 from a repayment claim of £1,688.65 to nil. The reason given by HMRC for this decision is the same as in appeal LON/2008/1386. That is not surprising as the decision was taken the day after the decision appealed in LON/2008/1386 by officer White.  

101	In substance, this appeal raises the same issues as in LON/2008/1386. The invoice issued by WNL Associates in this appeal was for “costs involved in instructing solicitors, storage costs for your equipment and general administration expenses in handling your affairs.” The invoice was for £6,650 with VAT payable of £1,688.75. The invoice was issued on 30 01 2008 under number 2118.

102	At an earlier stage of the consideration of the appeals by the tribunal Mr Lewis asked that this appeal be considered with appeal LON/2007/1403. The reason for this was that the request for repayment was rejected by HMRC for the same reason as in that appeal. Mr Lewis added that the same reason had been given by HMRC for rejecting all the E E Ltd VAT returns from 01/07. That application was overtaken by the broader initiative taken by the tribunal itself to hear all outstanding appeals together. The tribunal has given its reasons above for deciding appeal LON/2007/1403.  They do not apply here.

103	E E Ltd sought a repayment in this VAT quarter because of the only invoice it received. It confirmed that it had issued no invoices in the period, so the result was that the VAT on this one invoice was, in the view of Mr Lewis as VAT consultant of the company, repayable. The invoice was for payment to WNL Associates of £6,650 for “costs involved in instructing solicitors, storage costs for your equipment and general administration expenses in handling your affairs”.

104	According to the official records at Companies House, the directors of E E Ltd were Mr Lewis and Env Eng Ltd. Mr Lewis contended in his “reply to statement of case” in appeal LON/2007/1403 that he resigned as a director in 2006. The company told HMRC in a letter dated 21 04 2008 that Mr Lewis was a non-executive director of the company. That accords with official records, and the tribunal accepts that to be the position. It also considers it makes little difference to the situation if Mr Lewis was right, and therefore finds his contention to be at best unhelpful. If he did resign, then Env Eng Ltd became the sole director. The sole director of Env Eng Ltd was APS Ltd. The sole director of APS Ltd was Mr Lewis. If he did resign from a directorship of E E Ltd, then it would seem to the tribunal in practical terms to be irrelevant to the way the company was in fact directed. The tribunal see no relevant actions evidenced as being taken with respect to E E Ltd by any individual other than Mr Lewis. 

105	A request was made by HMRC on 16 04 2008 for more details of the supplies to which the invoice related. On 21 04 2008 the company replied that Mr Lewis had been asked to supply a more detailed invoice. Why was that approach necessary when in reality it was Mr Lewis who would ask Mr Lewis for more details?  The details were supplied, but HMRC did not alter its decision. 

106	The question in evaluating Mr Lewis’s claim for repayment of VAT for this invoice is whether E E Ltd was paying for a real supply by Mr Lewis, in the guise of WNL Associates, that it received in the course or furtherance of some business or economic activity it was conducting. That is the question posed by section 26 of the Value Added Tax Act 1994. The second question is whether the invoice complied with the necessary time limits and regulations applying to invoices, and in particular with section 26A and the six month time limit. It is also not clear to what time period this invoice related. It may have been out of time, or partly out of time, for that reason also. 

107	The invoice was dated 30 01 2008. By letter dated 10 09 2008 WNL Associates confirmed that the invoice had not been paid. The tribunal must again accept the argument by Mr Singh that the evidence put to the tribunal simply does not establish that E E Ltd paid this invoice within the time limit imposed by Section 26A or at all. Indeed, it is Mr Lewis’s own evidence that shows that the time limit was not met. That is sufficient to decide the appeal. Had evidence of actual payment been shown, the tribunal would have found that it needed to consider closely whether HMRC was right in arguing that this company was not engaged in an economic activity with regard to its ongoing legal action with Enviropower. The action was a direct consequence of genuine trading relationships and involved a genuine economic dispute between two independent companies being handled through court action followed by insolvency proceedings. The tribunal makes no finding on whether at this stage E E Ltd was still in the course or furtherance of business in engaging in these activities as the point is not relevant to the decision of this appeal.

108	The appeal must therefore also be dismissed. 

Appeals admitted on late application and without separate appeal numbers  
109 	Mr Lewis made a late application to the tribunal at the hearing for consideration of appeals with respect to the following VAT periods and repayment claims by E E Ltd:

	04/ 07		repayment of £   927
	07/ 07		repayment of £   213
	10/ 07		repayment of £   175
	01/ 08		repayment of £1,668
	04/ 08		repayment of £1,215
	07/ 08		repayment of £1,050

110	HMRC did not oppose the application to admit these appeals and the tribunal therefore admitted them. They were not assigned appeal numbers and have not been examined in detail because neither party put the detail before the tribunal. 

111	Mr Lewis asked the tribunal to admit the appeals and consider them with the other appeals because in each case E E Ltd had been refused for the same reason as in the appeals it was already deciding. It was doubted by HMRC whether E E Ltd was trading, and in any event a repayment would involve unjust enrichment. 

112	The tribunal decided the appeals fully before it without having to decide whether E E Ltd was or was not trading at the relevant time. As indicated in the final appeal, it made no finding on whether E E Ltd was still trading. It has also not had to give consideration in any of the appeals to the question of unjust enrichment. It is not therefore able to decide these appeals on the basis of the findings of fact made by it in connection with the other appeals.

113	The tribunal therefore declines to decide these appeals without proper argument and evidence. It will give separate directions to the appellant about these appeals. These directions will direct the appellant to produce evidence about the issues, such as payment of invoices within the time limits, indicated in this decision.

General comments 
114	Having examined all the above appeals, the tribunal records some general observations about elements common to the evidence put to it in each of the appeals.
The first is to emphasise a point to which the tribunal has returned several times in its considerations. It is the complete absence of evidence of any active involvement by any individual in the affairs of the various appellants other than Mr Lewis for some years past. Linked with this is the absence, in the case of most of the appellants, of any evidence of any genuine trading transactions with anyone other than other entities in the business structure through which Mr Lewis conducts his business affairs. The one element involving outside parties is the continuation of the actions taken to recover assets and compensation from Enviropower Ltd by E E Ltd. That may properly involve E E Ltd and perhaps WNL Associates. But it involves no one else.  The tribunal will have to consider those specific issues further in the further appeals admitted during these hearings.

115	The second observation is that the tribunal saw surprisingly little evidence of either the financial affairs of any of the appellants or of their formal decisions on matters relevant to these appeals. With regard to financial matters, the documents produced in evidence highlight one page of one bank account. That was the account in the name of APSE Ltd noted above, and that, as the tribunal has observed, was not a direct participant in any of these appeals. The correspondence shows that Mr Lewis refrained from supplying copies of such accounts on several occasions, although he commented in various capacities on such details being made available for officers to inspect. It is clear that Mr Lewis, in his various capacities, must have been aware of the requests by HMRC on several occasions for more financial information. Had he produced such evidence to the tribunal, then the tribunal might have been able to establish findings in his favour on both the payments questions arising under section 26A and perhaps the trading issues. Its absence was a major factor taken into account by the tribunal in evaluating the evidence in these appeals. 

116	The absence of board minutes and other formal evidence that is standard to the maintenance of the statutory records of limited companies about their actions was also a major factor taken into account by the tribunal in evaluating the evidence. There was also an absence of recent evidence of written agreements or formal correspondence where one might reasonably expect to find such evidence produced. HMRC officers repeatedly asked for original documents and relevant primary evidence. They repeatedly received secondary evidence. While this tribunal is not bound by formal rules of evidence when considering appeals such as these, and must receive evidence of any kind, it must nonetheless test and, in the usual phrase, weigh the evidence. It must also distinguish evidence from assertion. In these appeals it heard and read many assertions and statements from the appellants about facts for which there should have been primary sources evidence, but it was shown little from those primary sources. That must and did affect its evaluation of the evidence as a whole. 

117	The tribunal does not agree with all the reasons given by officers of HMRC when making the decisions against which the appellants appealed in these appeals. But it is unable for the specific reasons set out above for each specific appeal to find in favour of the appellants on any of them. 

118	It is therefore unable to determine the late admitted appeals from E E Ltd without fuller consideration. While it has admitted the appeals, it must postpone its decision on them to be dealt with separately. It will make further directions for them. 

119	In summary, the tribunal dismisses all the appeals by all the appellants that it considered fully in this decision.

DAVID WILLIAMS
TRIBUNAL JUDGE
RELEASE DATE:3 July 2009