[2009] UKFTT 342 (TC)

TC00283

Appeal number MAN/2007/0117

VAT ASSESSMENT AND REGISTRATION –appeals dismissed on the facts.

FIRST-TIER TRIBUNAL

TAX 

	DANIEL JOHN CURRIE	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS 	Respondents

				TRIBUNAL: 	Judge Richard Barlow
						Member Roland Presho

Sitting in public in North Shields on 12 May 2008, 3 November 2008, 14 July 2009 and 15 July 2009.

Mr Stephen Graham of Ward Haddaway solicitors for the Appellant on 3 November 2008 only and the appellant in person on the other hearing dates.

Mr David Mohyuddin of counsel instructed by the General Counsel and Solicitor to HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2009

DECISION

1.	This appeal is lodged by a letter dated 3 April 2006 as an appeal against the respondents’ decision that the appellant was liable to register for VAT from 1 April 1996 and against an assessment of VAT for the prescribed accounting period beginning 1 April 1996 and ending 31 August 2002 in the sum of £42,257.  Strictly speaking the registration was as a result of the appellant’s own application, as we shall explain, but the respondents do contend that he was liable to register from 1 April 1996 and we will proceed on the basis that the appeal does lie to the Tribunal under section 83(1)(a) of the VAT Act 1994 which refers to an appeal with respect to the registration of any person without distinguishing whose decision prompted it.
2.	The appellant was the proprietor of a taxi business at the material times and it is in respect of that business that the appeal arises.
3.	Hearings in respect of this appeal were on 12 May 2008 when Mrs Orr (Customs officer) gave evidence and 3 November 2008 when Mr Stephen Graham, solicitor of Ward Haddaway & Co appeared for the appellant but the case was adjourned at Mr Graham’s request and directions given that witness statements should be prepared by the appellant and his witnesses.  It was intended that the case would re-start on the resumed hearing because Mr Graham had not been present on 12 May 2008 (as he had not been instructed by then) but when the appeal resumed on 14 July 2009 Mr Graham was no longer instructed and Mr Currie agreed that the case should continue rather than re-start and on that day and the next we then heard further evidence from Mrs Orr and evidence from Mrs Mooney (Customs officer) and Mr Paul (Inland Revenue inspector) for the respondents and from the appellant, and his witnesses Mr Tindle (chartered accountant) and Mr Cooney (accountant).  
4.	The appellant became the subject of a joint Inland Revenue and Customs and Excise enquiry in January 2002.  The Inland Revenue had been enquiring into his affairs first and Customs and Excise became involved in January 2002 making it a joint enquiry.
5.	In 2002 Mr Currie was being represented by an accountancy firm trading as AWS and Mr Cooney was dealing with the matter.  There is a single letter in the bundle dated 7 February 2002 from Mr Tindle of Bell Tindle Williamson chartered accountants who certainly became involved later but at that time AWS were the appellant’s representatives.  Bell Tindle were not otherwise involved until 6 May 2003.
6.	Mr Currie’s recollection of the events in early 2002 was not very clear when he gave evidence and presented his case which is not surprising after the lapse of time but the correspondence makes it clear that the following sequence of events occurred.
7.	On 5 March 2002 Mrs Orr of Customs and Excise wrote to the appellant a letter including the following:
“I have spoken to Mr Paul of HM Inspector of Taxes and your accountant, Mr Cooney.
I understand that certain additions have been identified and made by Mr Paul and these have rendered you liable for VAT registration.
Mr Cooney is awaiting certain papers from Mr Paul, and once he has received these, he will be calculating when you became liable to be registered for VAT; however this will be a retrospective registration date and you will have accrued VAT arrears.
Once your liability has been established, you may wish the Commissioners to consider a Time to Pay proposal in order to clear your debt. …”.
8.	Mrs Orr wrote to Mr Cooney in much the same terms on the same date and enclosed an envelope for him to return an Application for Registration form and Schedule of Effective Date of Registration Calculation.  It is unclear whether those forms were enclosed or whether Mrs Orr knew Mr Cooney already had them but nothing turns on that.
9.	After some prompting letters to Mr Cooney about the need for Mr Currie to submit an application to register Mr Currie did submit such an application on 24 May 2002 which he signed and in which he stated that his estimated taxable supplies in the next 12 months would be £60,000 and that he wanted to be registered from 1 April 1996, as had been envisaged in a letter from Mr Cooney dated 26 April 2002.  Next to the box on the form in which the registration date is stated someone has written “See JOSET letter”, JOSET being the Joint Enquiry Team of the Inland Revenue and Customs and Excise.  We do not doubt that Mr Cooney completed the form for Mr Currie but equally Mr Currie must have realised that he was asking to register from an earlier date than the date of signature of the form and he had been warned, in the letter of 5 March 2002 already referred to, that this would lead to a retrospective liability.  It is also likely that Mr Cooney had explained that to him.
10.	The VAT registration limit on 1 April 1996 was £47,000 and in a letter dated 26 April 2002 Mr Cooney had stated that Mr Currie’s turnover in 1995/6 was £55,423 and that the threshold had been exceeded in February 1996.  It is true that Mr Cooney based that turnover figure on a method of calculation used by Mr Paul of the Inland Revenue in his enquiry but the evidence of Mrs Orr was that that calculation had been agreed with Mr Cooney and the evidence of Mrs Orr and Mrs Mooney was that Mr Currie’s records were wholly inadequate and indeed, when Mr Tindle later became involved, Mrs Mooney stated that he had been “very candid regarding the poor state of the records produced by his client, and the lack of detail contained in them”. 
11.	In addition, Mr Currie had submitted a declaration of Trading Particulars to Customs and Excise on 26 April 2002 in which he stated in reply to a request about “your average weekly takings” that they were £850 though the average weekly wage bill was stated to be £1,200.  The wage bill alone suggests that the appellant was above the then applicable registration limit of £55,000.  The conflict between those two figures may be explained by Mr Currie’s confusion about what should be included in turnover for VAT but we do hold that that document is relevant corroboration of the other evidence about the liability to register.
12.	Mr Currie’s case about his liability to register is bound up with his evidence about the assessment and we will deal with those aspects of the evidence together later.      
13.	A separate issue was raised by Mr Tindle in a letter dated 26 November 2004, by which time the assessment had been made and explained to him by a letter of 19 November 2004, though the assessment was not formally notified to Mr Currie until 26 November and was presumably not received until a day or two after that.  Mr Tindle said:
“I do have, as you appreciate, serious doubts about your claim.  Unfortunately Mr Ian Cooney has so far been unable to help me with the tax background.  However, what I can show you is a letter dated 1 July 2003 accepting payment of £6,407.  Mr Currie and myself were of the opinion that this was to bring everything up to date and therefore to now re-open this case seems inappropriate”. 
14.	 The reference to £6,407 is a reference to the balance due in respect of a return made by Mr Currie on a duplicate return form for the period ending August 2002 being the long period for which Mr Currie was directed to make a return following his registration.  The return had declared a liability of £8,407 but only £2,000 was paid at the time the return was made.  On 1 July 2003 the respondents wrote to Mr Currie agreeing to a request he had made for time to pay the £6,407 and setting out a timetable for payments.  The relevant wording of that letter is as follows:  
“With reference to your request dated 1 July 2003, I am writing to advise you that after careful consideration payment of your outstanding debt of £6,407 will be accepted as follows:”.
15.	That debt had arisen because the appellant had rendered a return which was clearly based on estimated round figures.  The tax exclusive value of sales was stated to be £70,000 and the tax exclusive value of purchase was stated to be £20,000.  The output tax was shown as £10,000 and input tax as £1,093.  Not only were the round tax exclusive figures clearly estimates but also the output tax and input tax figures were not correctly calculated from the tax exclusive estimated figures and cannot be reconciled to them even if they were taken to be tax inclusive rather than exclusive.
16.	The debt arose under paragraph 5(1) of Schedule 11 to the VAT Act 1994 and by reason of the provisions about making returns in the Act and Regulations made under it because the return had been rendered.  Although the return was obviously incorrect and the respondents took no immediate action about it, any return stating a positive liability gives rise to a liability to pay the declared tax.  The reference to “your outstanding debt” in the letter of 1 July 2003 can only be taken to refer to the £6,407 then payable because no assessment had been made by that date.  An assessment was later raised, in November 2004.  We hold that there is nothing in that letter that could be taken either to be a promise by the Commissioners not to raise an assessment or an acknowledgement that they accepted that declaration as being correct.  Nor is there any suggestion in that letter that they were agreeing to any compromise or settlement of any kind in respect of any liability.  All they did was to allow time to pay.  The promise of time to pay would have been enforceable as long as the appellant complied with its terms but it cannot be said to have affected his potential liability to a further assessment.  
17.	We therefore reject the argument that the assessment was invalid because of an agreement by Customs and Excise to settle for the figure declared.  
18.	We also hold that the assessment was based on the Commissioners’ best judgment.  Mrs Mooney raised the assessment and based it on the £60,000 annual turnover declared on the application to register for VAT from 1 April 1996 which was made in May 2002 but she took that turnover figure as having applied to the year ending March 1997.  Mr Cooney had agreed a figure of £55,423 with the Inland Revenue for the previous year (1996) and we hold that although the £60,000 referred to on the application form may not have been intended to relate to the period ending March 1997 it was as close to an accurate figure for that year as the appellant’s failure to keep records would have allowed.  In addition, because Mr Tindle, who was by then representing the appellant, was also arguing that the appellant’s turnover had fallen below £60,000 by March 2002; it seems probable that the £60,000 was intended to refer to an earlier year rather than the year in which the form was completed.  That also justified Mrs Mooney’s decision to read the application form as referring to the turnover figure being achieved at the time from which the appellant agreed he needed to register rather than the time when he completed the form.
19.	Mrs Mooney also accepted Mr Tindle’s calculations, based on better records that were by then being kept as a result of Mr Tindle’s advice, that showed that Mr Currie had fallen below the de-registration threshold by December 2003.  For the assessment of the long period which is the subject of this appeal Mrs Mooney therefore scaled down the turnover figures from £60,000 by instalments assuming a steady decline in that period and indeed the subsequent periods, until the de-registration point had been reached.  She made the necessary allowance for the £10,000 output tax that had been declared for the long period and assessed the additional tax due.
20.	The burden of proof lies upon the appellant to show that the amount of tax assessed for the period in question was not correct and we will examine all the evidence to decide whether the assessment should stand as issued or whether a different figure should be substituted. 
21.	Mr Currie’s case is, in part, that there was a settlement of liability with Customs and Excise, as already mentioned, and although we accept his evidence that he believed there had been a settlement and Mr Tindle’s evidence that he also thought that was the case; we find as a fact that no such settlement was reached.  We have already held that the documents do not amount to any such settlement and the fact that the appellant believed one had been reached is not sufficient to make it so.
22.	Mr Currie’s business is that of a taxi firm and it consisted of providing a service to self employed owner drivers who paid “bit money” for what is essentially a booking service and Mr Currie’s own driving services direct to customers.  The services to customers provided by Mr Currie himself included a regular contract with a particular customer.
23.	In evidence, Mr Currie claimed that the turnover of the business had not been the £60,000 put forward in the application to register and that that figure had only been put forward to achieve the settlement with the Inland Revenue about his personal tax because the inspector had insisted he should register for VAT as part of the deal to settle the income tax.  Mr Paul denied that he had insisted that Mr Currie should register for VAT and said that he had no recollection of VAT being discussed.  He agreed that a deal had been agreed more or less based on what Mr Currie could afford to pay.  We find that there is no evidence to support Mr Currie’s contention that the figure of £60,000 was put forward at the suggestion of the Inland Revenue.
24.	Mr Currie challenged the figures used by the Inland Revenue in their enquiries which had to some extent influenced Customs and Excise in reaching their assessment because, as already explained in paragraph 7 above, the two departments were working together.  In particular Mr Currie said that the number of drivers paying bit money was not ten as had been suggested by the Inland Revenue (or nine as he said when making his closing submissions) but was an average of eight and that they would not all work 52 weeks of the year.  Mr Paul was unable to recall these details which is not surprising.  Mr Currie also challenged Mr Paul about the mileage attributed to his own driving.  The mileage of the cars had been obtained from Local Authority records but Mr Currie said that his driving included most of the contract with the customer mentioned in paragraph 22 above but because that was contract work he was not paid for travelling from his home to the point where he picked up the passenger or goods he was contracted to carry and so a deduction of 15% should be made from the mileage for what he then termed private use, though it might be more accurate to say it was non-productive of income rather than private.  Again, Mr Paul was unable to recall the details.  Even if we accept those contentions in their entirety it is clear that the difference they would make to the amount assessed would be fairly small.  The evidence confirms without any doubt at all that the appellant’s records were wholly inadequate to arrive at an accurate figure.  His own accountants agreed with that in evidence.  We find that the appellant put forward the figure of £60,000 as his best estimate of his turnover and, as we have already found, we are satisfied that that figure is materially corroborated by the facts set out in paragraphs 10 and 11 above.  In those circumstances even if the drivers’ bit money and the non-productive mileage is as stated by Mr Currie that comes nowhere near refuting the assessment or even establishing that it should be reduced.      
25.	Mr Currie also challenged Mrs Orr about the weekly amounts the bit money came to.  She had used £60 as the appropriate figure based on what Mr Paul told her he had been told.  Mr Currie stated when making his closing remarks, that he accepted that the bit money was £60 in 1999 though Mr Cooney said in evidence that he thought it could have been anything between £60 and £90 though he was not very specific about precisely which period he was talking about.  Mr Currie said it might have been £50 in 1997 but again we are not satisfied that that evidence proves that to be the case or that it refutes the estimate of £60,000 turnover even if it is the case. 
26.	Mr Curie’s evidence was mostly directed to his contention that there had been an agreed settlement which we have already dealt with.
27.	We hold that the evidence as a whole does not support any contention that the assessment under appeal should be reduced.
28.	Had the assessment been reduced that might have affected the date from which Mr Currie should have been registered but nothing in the evidence suggests that the date of registration applied for by Mr Currie was wrong.
29.	It follows that the appeals against the liability to register and the assessment are both dismissed in their entirety and the assessment is upheld in full.

RICHARD BARLOW

TRIBUNAL JUDGE
RELEASE DATE: 3 December 2009