[2010] UKFTT 48 (TC)

					TC00361
Appeal number: LON/2009/0002
						
VAT- Input tax- whether purported VAT invoice represented supply of goods- held no.
VAT-section 60 VATA penalty for dishonest evasion of VAT-appeal dismissed

FIRST-TIER TRIBUNAL
TAX CHAMBER

Appellant

ACTIV8 ALARMS LIMITED

	- and -

Respondents

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS (VAT)	

			Tribunal:	CHARLES HELLIER (Judge)
					RAY BATTERSBY

Sitting in public in London on 23, 24 and 25 November 2009

John Radley, Director of the Appellant for the Appellant 

Sarabjit Singh, counsel, instructed by the Solicitor for HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2010

DECISION
I Introduction
1.	This is a decision in respect of two linked appeals. The first is against the Respondents’ decision of 14 October 2008 to deny input tax claimed by the appellant company the period from its initial registration on 16 March 2007 to 31 March 2008. The input tax the Respondents decided to disallow was £88,305.
2.	This denial related to three documents the appellant relied upon to support a repayment claim of £ 89,336 in that return. The first, from "TLC" bore £455 VAT, the second from RBWM Web Design indicated £1225 VAT, and the third bore the name, address and VAT number of Sensor technologies UK Ltd ("ST ")
3.	This appeal revolved principally around the ST document (the ST Invoice”)which the Respondents contended had been falsified.
4.	Following their decision to deny the input tax, the Respondents, on 17 November 2008, wrote to the appellant to impose upon it a penalty under section 60 VAT Act 1994 of £73,631: equal to the VAT claimed by reference to the ST Ivoice of £86,625 reduced by mitigation of 15%. The appellant appeals against that penalty.
5.	In broad outline the appellant's case was this. It was in the business of supplying and fitting alarm systems. It obtained those alarms from ST in the relevant period. It entered into a contract to supply alarms to a Cyprus company, and acquired the alarms to export to the Cyprus company from ST. In November 2007 and January 2008 it exported a total of 200 alarms to that Cyprus company. In August 2008 its people had gone to Cyprus to program the alarms and to train the Cypriot company’s employees. It says it was invoiced by ST for alarms which it used to make those exports. That invoice, the ST Invoice showed £86,625 VAT which the company included as deductible input tax on its VAT return. The invoice had been miscalculated: the VAT should have been shown as £43,706. That was the VAT in respect of the supply made to the Appellant by ST for which the appellant had paid. The appellant had made payments to ST in cash and cheques for the supply evidenced by the invoice.
6.	HMRC argued that the ST Invoice was manufactured by the appellant with the intention of claiming input tax to which it was not entitled. It referred to a supply of 500 alarms. HMRC say that there was no such supply and that the appellant’s conduct in relation to the ST invoice was dishonest conduct designed to secure a credit and repayment to which the appellant company was not entitled.
7.	The remainder of this decision is divided into the following sections:
	II Mr Radley's representation of the appellant.
	III The Relevant Law
IV The Evidence before Us:
(a)	HMRC's investigation;
(b)	The Appellant’s business: the ST 2600 alarms;
(c)	The Cyprus connection;
(d)	The Formal Agreement with A Team;
(e)	Delivery of alarms to Cyprus; 
(f)	Cyprus: August 2008;
(g)	Numbers of alarms;
(h)	Payment;
(i)	Mr Snell;
(j)	The ST invoice;
(k)	The Appellant’s recognition of problems with the ST Invoice
V The Parties' Contentions
VI Conclusions on the Input Tax Appeal 
VIII Conclusions on the Section 60 Appeal (Including Mitigation)
	IX  Costs
II Mr Radley's Representation of the Appellant
8.	Mr Radley was the sole representative of the appellant company at the hearing. Ranged against him were Mr Singh and his assistant, and between three and five persons from HMRC. From time to time Mr Singh took instructions from his clients' representatives; Mr Radley had no one to discuss the conduct of his case with. Mr Radley was outnumbered and alone.
9.	Mr Radley faced this adversity with determination. We have no doubt that this was hard. Mr Radley gave evidence and was cross-examined by Mr Singh. Mr Singh attacked Mr Radley's honesty. He accused him of fraud. After that cross-examination Mr Radley returned from the witness box to continue to conduct the case. He returned to sit at the bench at the front of the court separated from Mr Singh only by Mr Singh's assistant. That required courage and control in significant measure.
10.	Mr Radley remained of civil and moderate tone throughout although he gave some sharp responses to Mr Singh's questions during cross-examination, and on one occasion fairly and properly took time to compose himself.
11.	During the first day of the hearing the tribunal heard evidence from HMRC's officers. Mr Radley cross examined them. The tribunal noted a tendency to attack the officers rather than their evidence of facts relevant to the tribunal's determination, and, at the beginning of the second day, we advised Mr Radley generally "to attack the ball and not the person". Mr Radley heeded that advice but it was difficult advice to heed when HMRC's case was a direct attack on Mr Radley's honesty.
12.	Mr Radley's properly focused on the need for the Respondents to prove their case (since they have the onus of proof in relation to the section 60 penalty) and asked well formulated and pertinent questions. He assisted the witnesses called upon behalf of the appellant to give their evidence without leading them, and formulated his cross-examination questions and his submissions clearly and generally relevantly. The tribunal had seen worse advocates.
13.	But Mr Radley had not, so far as we could tell, expert advice in the preparation of the appellant company’s case. And we do not know whether he had received advice on what evidence he should adduce on behalf the company or as to whether it would be advantageous for him to give evidence himself on its behalf.
14.	In relation to Mr Radley's own evidence the tribunal adopted the following course. We started by asking Mr Radley to set out the appellant company's case and tell his own story while he was sitting on the advocate's bench. We asked Mr Radley questions to develop his account. This took the majority of the morning of the second day of the hearing.
15.	In the afternoon Mr Radley moved to the witness box, took the oath and confirms the truth of his morning statements. He was then cross-examined by Mr Singh. Thereafter we asked whether he wished to amplify or rectify anything he had said and we also asked a couple of questions.
16.	There was one episode in the conduct of the hearing which was unfortunate. It was however in our view the best that could be done in the circumstances. It happened in the following way.
17.	Mr Singh had indicated at the start of the hearing that he wished each of the appellant witnesses not to be present in court until they had given their evidence, and acknowledged that the same procedure should fairly apply to the Respondents’ witnesses. We agreed that this would be fair. During the majority of the first day we then heard the Respondents’ witnesses in the absence of those who followed them.
18.	Close to the end of that day the last of HMRC's witnesses completed her evidence. Mr Radley then indicated that he wished to call Mr Donald Bent, the first of his witnesses to give evidence. Mr Bent, we were told, would not be available on subsequent days of the hearing. Mr Singh was embarrassed because he had questions he wished to put to Mr Radley without his having heard other witnesses' evidence, but if Mr Bent gave evidence in the presence of Mr Radley, he felt his cross-examination of Mr Radley would be less valuable (in our opinion it could also have devalued Mr Radley's later evidence in our eyes if he had heard the cross-examination of Mr Bent). Since Mr Bent’s availability meant that Mr Radley’s evidence could not be heard before Mr Bent’s, Mr Singh objected to Mr Radley hearing Mr Bent. Mr Radley then said that there was always a solution -- he would leave the court during Mr Bent's evidence. We acceded to this. We then examined Mr Bent and permitted Mr Singh to cross examine him. At the end of Mr Bent's evidence Mr Radley returned with and we adjourned for the day.
19.	The next morning we indicated to Mr Radley our concern that neither he nor any other representative of the appellant had had the opportunity to hear Mr Bent's evidence, we then outlined the evidence Mr Bent had given and indicated that, absent other evidence, we were prepared to accept it. After the luncheon adjournment we provided Mr Radley with our summary of Mr Bent's evidence. That summary is incorporated into this decision (see para [88] below) in the form we provided it to Mr Radley. We asked Mr Radley whether he was concerned in any way about these findings. At the end of the hearing we asked him if he wished to recall Mr Bent: he said, on the basis of our summary, that he did not.
20.	Whilst hearing evidence in a penalty appeal in the absence of a representative of the appellant is to say the least undesirable, in our view it was better to hear Mr Bent than not to do so, and at that stage there appeared to us to be an advantage (in terms of the weight we might later attached to Mr Radley’s later evidence) in being able to hear Mr Radley's evidence without having his having heard Mr Bent's cross-examination.
III The Relevant Law
(a) the penalty
21.	Section 60 VAT Act 1994 provides that: --
"(1) in any case where:
(a)	for the purposes of evading VAT, a person does any act or omits to take any action, and
(b)	his conduct involves dishonesty (whether or not it is such as to give rise to criminal liability),
he shall be liable, subject to subsection (6) below, to a penalty equal to the amount of VAT evaded, or as the case may be, sought to be evaded, by his conduct."
22.	Subsection (2) provides that “evading” VAT includes obtaining a refund or a VAT credit to which a person is not entitled. Subsection (6) is not relevant- it provides that if a person is convicted of an offence by reason of contact with in subsection (1) that conduct shall not also give rise to a liability to a penalty.
23.	In this appeal HMRC allege that for the purposes of obtaining a VAT credit and the consequent repayment of VAT in respect of the ST Invoice, the appellant company represented to HMRC that such credit (and consequently such repayment) was due in respect of transactions represented on that invoice, and that such representation was conduct which was dishonest.
24.	Subsection 60 (7) provides:
"(7) on an appeal against an assessment to a penalty under this section, the burden of proof as to the matters  specified in subsection (1) (a) and (b) shall lie with the Commissioners."
25.	The standard of proof however is the normal one in civil proceedings, namely proof on the balance of probabilities. The Respondents do not have to prove dishonesty beyond all reasonable doubt. In considering evidence in relation to a claim that a person has been dishonest the tribunal will generally start from a presumption that people are normally honest, and therefore would require cogent evidence to tip the scales in favour of dishonesty. That approach is also inherent in the presumption of innocence derived from the Convention imported by Human Rights Act 1998.
26.	Section 70 VAT Act permits the Commissioners, or on appeal this tribunal, to reduce a penalty under section 60 to such amount as they think proper. But section 70(3) provides that none of the following matters may be taken into account in determining such a reduction: 
(a)	the insufficiency of funds available to any person to pay any VAT due or the penalty;
(b)	the fact that there has been no loss of VAT;
(c)	the fact that the relevant person has acted in good faith.
27.	These are the only factors to be ignored. All other relevant factors may be considered by the commissioners and the tribunal.
28.	In Customs and Excise v Han, [2001] STC 1188 the Court of Appeal held that  penalty proceedings in relation to section 60 VAT Act were to be regarded as "criminal" for the purposes of the Convention for the Protection of Human Rights and Fundamental Freedoms 1950 because the purpose of the penalty was punitive and deterrent. The effect of this classification is to engage article 6 of that Convention which deals with the right to a fair trial:
(1) under article 6(1) there is implicit  the right to silence and a privilege against self incrimination (see Han paragraph[ 21];
(2) under article 6(2): "everyone charged with a criminal offence shall be presumed innocent until proved guilty according to law.";
(3) under article 6(3) a certain minimum rights are provided, in particular the right of a person to be informed promptly in a language he understands the and in detail, of the nature and cause of the allegations against him.
These rights apply to a legal person such as the appellant company. 
(b) the deductibility of input tax
29.	Section 26 VAT Act provides for credit of input VAT charged on the supply to a trader in relation to a supply used by the trader in making taxable supplies and supplies outside the UK which would be taxable if made in the UK (these will include zero rated exports). The section permits the making of regulations to deal with detailed conditions. Section 25(3) provides that if, at the end of a VAT period, a trader’s VAT credits exceeded his output tax, then he is entitled to repayment of the excess.
30.	Regulation 29 of the VAT Regulations 1995 sets out the detailed conditions for the making of a claim to input tax. One condition is that the trader must hold a VAT invoice in respect of the supply, but Regulation 29(2) concludes:
	“provided that where the Commissioners so direct, either generally or in relation to particular cases or classes of case, a claimant shall hold or provide such other evidence of the charge to VAT as the commissioners may direct”.
31.	In other words if the trader for some reason does not hold a proper invoice for the supply made to him by another taxable trader, the Commissioners have a discretion to permit input tax deduction. On an appeal against a failure by the Commissioners to exercise this discretion in favour of the taxpayer, the role of the tribunal is a supervisory one: it is limited to determining whether the Commissioners acted reasonably: ie whether they took into account all relevant information, excluded irrelevant matters, made no mistake of law, and did not come to a conclusion which no reasonable body could reach (see Kohanzad v CCE [1994]STC 967.)
32.	Regulation 14 deals with the contents a document must contain before it can be a VAT invoice sufficient to satisfy Regulation 29. The following requirements were relevant to the arguments in this appeal, namely that the invoiced must contain: --
the name and address of the person to whom the supply was made,
a description sufficient to identify the goods supplied,
the quantity of the goods supplied,
IV The Evidence 
33.	We had a joint bundle of documents prepared by HMRC and an additional bundle of materials presented by Mr Radley.
34.	We heard oral evidence from the following witnesses called by HMRC: (i) Elizabeth Cudd who was the officer who visited the appellant on 25 March 2008 to investigate its first VAT return, (ii) Susan Ford who was the HMRC officer to whom Mrs Cudd referred her concerns in relation to the appellant on 22 April 2008 and who subsequently carried forward the investigation and interviewed Mr Radley on 10 July 2008, (iii) Louisa Watt, who on 29 May authorised Mrs Ford to investigate the appellant giving consideration to the imposition of section 60 penalty, (iv) Neil Henderson, the officer from HMRC who joined Mrs Ford and Mr Radley at the interview on 10 July 2008, (v) Penelope Spearman, the officer from HMRC who decided upon the imposition of the penalty and the mitigation percentage, and (vi) Ian Rawlinson, the officer from HMRC who signed, on Mrs Spearman's behalf, the letter of 17 November 2008 notifying the appellant of the section 60 penalty. Each of these witnesses provided a witness statement.
35.	We heard oral evidence from the following witnesses called by the appellant: (i) Mr Radley, (ii) Donald Bent, who gave evidence of his visit to Cyprus in August 2008, (iii) Jason King who likewise gave evidence of his visit to Cyprus in August 2008, and (iv) Anthony Rogers, who gave evidence of funding he had arranged for the appellant. Each of these witnesses also provided a sworn statement.
36.	There was also a sworn statement by Lee Justice in which he described his delivery of 100 alarm systems to Alpha Team Security in Cyprus in February 2008. 
(a) HMRC's investigation
37.	Mrs Cudd told us that she made a prearranged visit to the appellant at 21 Broadway on 25 March 2008 to verify its first VAT return. There she saw Mr Radley and also an Alex Whitbread from the appellant's accountants, Alexander Michael. During the meeting she said that Mr Radley was present for about half the time. She examined the appellant’s purchase invoices and found problems with three documents which had been tendered to support input tax deductions:
(1)	the document from TLC of 8 September 2007 referred to in paragraph 2 above;
(2)	the document from RBWN Web Design referred to in paragraph 2 above;
(3)	a document dated 4 January 2008, which, in her manuscript notes, Mrs Cudd records as being from Sensor Tech UK Ltd for “500 X Activ8 alarm systems@£990= £495,000+ VAT £86,625” with "no VRN on invoice. No invoice no.” VRN stands for VAT Registration Number.
38.	Mrs Cudd says that she explained to Mr Radley and Mr Whitbread that she needed to see a copy of the proper tax invoice for the supply from ST. She wrote on 27 March 2008 confirming her request.
39.	On 31 March she received a letter from Alexander Michael which she said  appended” a copy of the” ST Invoice. The covering letter from Alexander Michael said "please find enclosed as requested the invoice". The invoice number was 3690.
40.	On 2 April 2008 Mrs Cudd rang ST and asked to speak to the person who dealt with the VAT returns. She spoke to a Steve Jepson. She asked about invoice 3690. He told her that they had issued invoice 3690 on 4 January 2008 to the appellant, but it was for only five security systems at £105 each: a total of £525 plus £91.88 VAT. He expressed surprise at Mrs Cudd’s suggestion that ST had invoiced 500 systems. He said that on 11 September 2006 ST had issued a pro forma invoice to the appellant for 5000 alarms at £99 each (rather than, we interpose,  500 alarms at £499.50 each as detailed on the ST Invoice) which was for a total of £495,000 + £86 625 VAT.
41.	There was no challenge to this evidence save in relation to the question as to whether the original ST Invoice or a copy of it had been sent by Alexander Michael to Mrs Cudd: the accountants’ letter could be read as indicating that the original invoice rather than a copy was enclosed. Mrs Cudd told us that the incoming post was scanned into HMRC’s computer system, and that she saw a scanned version of the documents which had arrived. She could not say whether the original document had been sent. She understood that original documents were returned to the senders. The appellant had no record of the return to it of the original document. We were not persuaded that the uncertainty and possibly mild inaccuracy in Mrs Cudd’s statement casts any shadow on her evidence, which we accept.
42.	We asked Mrs Cudd about her perceptions of Steve Jepson. She said she gained the impression that he gave her honest details of ST's actions and nothing he said gave her cause for concern. We accept that that is the impression which Mrs Cudd obtained.
43.	Mrs Ford told us that she had been authorised to assume the enquiry into the appellant on 29 May 2008 after the referral of the matter to her by Mrs Cudd on 22 April 2008. She had arranged a meeting with Mr Radley on 10 July 2008. Mr Henderson kept a note of that meeting. The note was typed and sent to Mr Radley who signed it confirming that it was a true account of the meeting. We refer to that meeting later. Mr Radley did not challenge the note. We conclude that it was an accurate note of what was said.
44.	After the 10 July meeting Mrs Ford telephoned ST. Graham Wild of ST phoned her back. He asked whether she was ringing about the matters Mrs Cudd had raised earlier. She arranged to visit ST's premises on 14 August 2008. There she met Steve Jepson and Graham Wild. She sensed a degree of loyalty between the two. She obtained responses from them to a typed schedule of questions prepared in advance. Graham Wild signed the schedule to confirm its accuracy. Among their answers are the following:
(1)	Mr Wild had no recollection of saying to Mr Radley ( as Mr Radley had said at the 10 July meeting) that he was in serious trouble with his VAT and had to protect himself.
(2)	The only product they had supplied to Mr Radley was the ST 2600 alarm Kit. The price charged to him was between £99 and  £120 per unit.
(3)	They never used the same invoice number more than once.
(4)	When shown a copy of the ST Invoice they denied that it had been issued by ST to the appellant.
(5)	They said that the goods on the pro forma invoice described at [40] above were not supplied and would not have been imported from China because the order would not be placed without a 50% deposit.
(6)	They had two addresses on their system for the appellant, namely 21 the Broadway, and Marlborough Road. (Marlborough Road is the home address of Mr Radley).
(7)	The occasions on which Mr Radley had paid in cash were: once £2,500 for 50 units, and some small amounts of about £100.
45.	Mrs Ford was given a debtor's report, showing the appellant’s account with ST, and copies of all the invoices which Mr Wild and Mr Jepson said had been sent by ST to the appellant since March 2007. Those documents were available to us.
46.	We asked Mrs Ford about her impression of Mr Wild and Mr Jepson. She said that Graham Wild and Steve Jepson gave no indication of dishonesty or that they were suppressing facts, and to appeared to have command of their accounting system. We accept that this was her impression.
47.	Following the 10 July 2008 interview, Mr Radley wrote to Mrs Ford with a copy of an invoice dated 21 January 2008 from the appellant to "Alpha Team Security" in Larnaca Cyprus for the supply to that company of 250 alarm systems. The invoice indicated an “Initial Payment” of €100,000. We refer to this as the "Alpha Invoice". Mrs Ford then made enquiries of the Cypriot authorities and was told that there was no trace of a company under that name on the Cypres Companies Register nor any trace of a Cypriot VAT number for that company.
48.	Mrs Ford told us however, that under the mutual assistance procedure, her experience was that the Cypriot authorities would not go beyond the questions asked. They would not therefore have searched for a company with a name similar to that of Alpha Team Security.
49.	Whilst we accept that there was no Cypriot VAT number or companies Registry entry for Alpha Team Security, we are not convinced that there was not an entity trading in Cyprus with a name similar thereto.
50.	There was no real challenge to the evidence we record here from Mrs Ford and Mrs Cudd. We accept it. 
51.	(We record here our recollection of a comment made by Mrs Ford about serial numbers. Mrs Ford told us that she was told by ST that serial numbers were only on the boxes.) 
IV (b) The business of Activ8: the ST2600 alarms
52.	Mr Radley told us that over the last nine or 10 years his occupation had been, alongside Graham Wild of ST to market alarm systems. Initially four or five different systems had been marketed, but latterly his efforts had been concentrated on the ST2600. He had provided the ST 2600 alarm system initially to customers in the UK and then in the EU.
53.	The ST 2600 alarm system consisted of sensors (which would be positioned in different parts of a house) which communicate by radio signals the central box. The box was connected (by telephone link) to a remote alarm receiving centre - a monitoring centre - which in emergencies could contact the householder to obtain further details or contact the emergency services. The remote monitoring centre’s software identified the alarm system by its serial number. Mrs Cudd’s note indicates that she was told that the monitoring centre was in Manchester (which is close to ST’s place of business).
54.	Mr Radley said that ST was the only UK importer of the system. He regarded ST is the owner of the intellectual property in the alarm system. ST imported the alarms from China. He told us that the appellant did not itself provide the monitoring service. It was instead subcontracted to, and run by, ST. ST made a charge to the appellant of £60 per annum per household for running the monitoring service.
55.	He said that ST generally charged the appellant between £90 and £120 for each alarm system, depending on exchange rates. The appellant installed the alarms, charging householders £499 for installation and the first year’s monitoring, and £280 per annum for monitoring thereafter.
56.	This evidence was broadly consistent with the record of what Mr Radley had said at the meeting on 10 July 2008.
57.	Mr Radley told us that in the period up to April or May 2008 the appellant had installed about 200 alarms at Wimpey Homes properties, about 20 alarms at Antler homes properties and a handful of alarms in private homes. In his evidence to the tribunal Mr King confirmed that he had installed about 200 ST 2600 alarms for the appellant in UK properties in 2007.
58.	Mr Radley told us that problems had emerged with the alarm systems in early 2008. The radio frequency at which the remote sensors communicated with the central box was the lower of two possible frequencies and as a result the remote sensors "dropped out". There were also problems where householders had broadband connections. Mr King confirmed to us that problems had been experienced. He asid that the range or strength of the signal system was insufficient, door contacts kept going wrong and the aerials on the sensors made them difficult properly to position.
59.	As a result of these problems Mr Radley told us that no further UK installations had been done after the early spring of 2008.
60.	This evidence was broadly consistent with Mr Radley's statements is recorded in the notice of the meeting of 10 July. But in that note Mr Radley is also recorded as saying that he had sorted out the problems with the Chinese directly. He made no reference to this in his evidence to us.
61.	The invoices from ST which were given by Graham Wild to Mrs Ford recorded the sale of a total of 109 ST2600 security systems to the appellant in the period March 2007 to June 2008. Mrs Ford told us that her recollection was that Graham Wild had told her at the meeting that ST had supplied only 50 alarms to the appellant. Mrs Ford’s recollection was consistent with a statement she made in an internal HMRC Offence Report dated 23 September 2008.
IV (c) The Cyprus connection
62.	Mr Radley told us that through an old friend (and fellow director of the appellant) he had been put in contact with a Mr Lugar, who ran Alpha Team Security in Cyprus. (“Alpha Team Security” was also referred to a “A Team Security”. We use the terms interchangeably below.) He met Mr Lugar in Cyprus in 2006 and on several occasions in 2007. Alpha Team’s business was the monitoring of security offices and homes on the island. Mr Radley said that he explained the ST 2600 product to Mr Lugar and that Mr Lugar expressed an interest in installing them as part of his business. He told us that in late 2006 Mr Lugar placed an order for 500 alarm systems - he indicated that this was an oral agreement which was not reduced to writing.
63.	Then he said in early 2007 he met Graham Wild and placed an order with ST for 500 alarms. He told us that three matters arose in relation to this order. First Graham Wild said that he could only order 200 to 250 alarms from China initially and that it would take a number of months to deliver them. Second, ST would not receive the £60 per annum monitoring fee. Graham Wild thus wanted to charge £499 per alarm to the appellant (the price the appellant normally sold for ). Third Graham White wanted to 50% of the price paid up front. Mr Radley said he asked for £200,000.
64.	The figure of £200,000 fits ill with this narrative. 250 alarms at £499 each is some £125,000. With a VAT that would be about £147,000, not £200,000. In the Particulars of Case Mr Radley says that payment terms were 50% on order and 50% on dispatch. He ordered 500 and agreed a delivery of 200 initially. The cost he says was £235,570 including VAT. We comment on these figures in section IV(g) below.
65.	In turn Mr Radley decided that the appellant would charge £999 per alarm to Mr Lugar (this broadly represented his normal £499 installation charge plus the monitoring profit for 3 years at £220 per annum).
66.	The record of Mr Radley's evidence set out above extends beyond what he is recorded as having said on 10 July but is broadly consistent with it.
67.	Mr Radley was asked why, in 2008, he was happy to supply to A Team alarms which he knew did not work well. He said that they worked better in Cyprus because of the hot weather. However, Mr King, the alarm fitter, said that he could see no reason why they should work better or worse in Cyprus.
IV (d) The Formal Agreement with A Team
68.	During the course of Mrs Cudd’s visit to the appellant we find that Mr Radley provided her with a copy of an agreement headed "Agreement – Activ8 -- A Team Security". Mr Radley told us that the form of this agreement had been provided by ST after his discussions with Graham Wild. It had been on Graham Wild's system. Graham Wild wanted him to get the Cyprus company to sign.
69.	The agreement is dated 1 January 2008 and is stated as made between the appellant (defined as the Distributor) and "Alfa team Securities Larnaca (Cyprus) Ltd” (defined as the Supplier). We noticed the following features:
(1)	 the agreement is for the sale of alarm systems. Clause 1 provides that: " The Supplier  shall sell and deliver to the Distributor the alarm systems at  the minimum quantity of 500 units per month.". In the context of sales by the appellant to A Team, and the definitions at the opening of the agreement, this clause should instead provide that the distributor shall sell to the supplier the alarm systems. The minimum quantity of 500 units per month is also far greater than the number which Mr Radley said was agreed with Mr Lugar;
(2)	 the particular spelling of Alpha –“Alfa”; and
(3)	 certain clauses in the agreement which are consistent with Mr Radley's description of the relationship between ST and the appellant, and which are inconsistent with Mr Radley's description of the deal between the appellant and A Team: we deal with these below.
70.	Mr Radley's additional bundle included a copy of an e-mail dated 16 January 2008 to himself from himself and copied to "alfateamsecurities.com". The e-mail appended an undated version of the agreement. He told us that A Team had wanted a copy and that he had sent it to them via e-mail in that way. We noted:
(1)	the e-mail address for A Team was an Internet address rather than an e-mail address: it contained no "@";
(2)	clause 1 of the e-mail contract differed from that in the document given to Mrs Cudd: it read: "The Supplier shall sell and deliver to the distributor the alarm systems at the prices set out in the schedule, (item 2) hereto on the demand and order of the distributor" rather than “at the minimum quantity of 500 units per month”.
71.	Several clauses of the agreement referred to a schedule. The schedule was not provided to us in either of the forms of the agreement before us.
72.	The following clauses of the agreement indicate to us that this was originally an agreement between ST and the appellant for the supply of alarms by ST (as the supplier) to the appellant (as the distributor):
(1)	clause 4 provides that the supplier will not appoint any distributors other than the appellant and Activ8 (Scotland) Ltd (a company run, Mr Radley told us, by a friend of his);
(2)	clause 7 provides that the distributor will supply a 24 hour monitoring service to its customers and in return for each monitoring service that the supplier provides the distributor will pay a sum set out in the schedule;
(3)	clause 12 provides that in relation to the alarm and monitoring services supplied by the distributor the distributor shall pay to the supplier sum set out in the schedule.
73.	These provisions are broadly consistent with Mr Radley's evidence as to the way in which the appellant (as the distributor) provided monitoring services by subcontracting to ST (the supplier) for which ST charged. They were not consistent with the arrangement with A Team Security described by Mr Radley because under that arrangement A Team would be doing its own monitoring. Indeed the evidence called by the appellant of the training given to A Team confirmed that was the case.
74.	We conclude that it is unlikely that A Team entered into the agreement in the form which was provided to Mrs Cudd. We believe it is unlikely that the agreement appended to Mr Radley's e-mail of 16 January 2008 -- with its different clause 1 -- was sent to A Team or entered into by that company. 
75.	We noted that this agreement was available to Mrs Cudd at the time of her visit but that's the ST invoice was not.  Given our conclusion that it is unlikely that Alpha Team Security entered into this agreement and therefore that is was unlikely to have been signed on behalf of that company, we strongly suspect that the document was given to Mrs Cudd  with the intention of misleading her.
IV(e) Delivery of alarms to Cyprus.
76.	The appellant maintains that 200 alarms were transported on its behalf to A Team in Cyprus: 100 by Mr Radley and 100 by Mr Justice. In his Particulars of Case Mr Radley says "I initially ordered 500 alarm systems and agreed a delivery of 200 systems to be received immediately. The cost to Activ8 alarms Limited was £235.530 including VAT. During November 2007 and January 2008 we took delivery of 200 alarm systems from Sensor Technologies ... I personally took 100 systems to Cyprus during December 2007 ...".
77.	Mrs Cudd’s manuscript note of the meeting of 25 March 2008 records "100 have been sold to Cyprus. Awaiting 250…Mr Radley drove over to Cyprus with the product" In her later formal note Mrs Cudd records "the first 100 units were recently (February 2008) transported by road and ferry to the distributor in Cyprus by Mr Radley.".
78.	The note of the meeting of 10 July 2008 records Mr Radley as saying that 500 units had been ordered for Alpha Team and that "he had done these himself.". There is no other reference in that note to delivery of alarms by Mr Radley to Cyprus. We note however that at one stage Mr Radley indicates that he had sourced his own units from China (although in his oral evidence Mr Radley indicated that this would not have been  ST 2600s).
79.	In a draft letter of 22 May 2008 to HMRC referred to in paragraph [132(7)] below, it is said that "out of the 500 alarms Activ8 have purchased at present, 300/200* have been delivered to Alfa Security Ltd in Cyprus. A further 150 were delivered to Mr Radley's home ... the remaining 50 have yet to arrive from China." (*in the copy of the letter in Mr Radley's additional bundle that typewritten figure of 300 has been crossed out and 200 written in manuscript).
80.	In his sworn witness statement Mr Radley says that "during November 2007 and February 2008 both I and Mr Lee Justice respectively delivered 100 alarm systems to Alpa(sic) Team Security Cyprus.". 
81.	In his evidence to the tribunal Mr Radley said that in November 2007 100 units were delivered. Some went to his house some went to the office. He took them by car to Cyprus in November 2007. The note of the meeting of 10 July records Mr Radley as saying that all the goods came to his home address. When this was put to Mr Radley he said that he didn't mention it at that meeting, but some of the Cyprus alarm systems came to his office address and some came to his home address.
82.	In his sworn witness statement Mr Justice says that he confirms that "during February 2000 and I delivered in person 100 alarm systems on behalf of Mr John Radley of Activ8 alarms Limited to the offices of Alpa(sic) Team Security Larnaca Cyprus. There were 10 boxes each containing 10 alarm systems. I collected the alarm systems from the offices of Activ8 alarms Limited situated at Broadway House in Maidenhead.”.
83.	Mr Radley produced to the tribunal a large number of travel and subsistence receipts covering the period 2 to 5 February which indicated travel to Cyprus by Mr Justice and a Mr Hadjiphilippia.
84.	In his evidence to the tribunal Mr Radley said that Lee Justice collected 100 alarms from Graham Wild in January or February 2008 and delivered them to Cyprus. When asked by Mr Singh how this tied in with Mr Justice's statement that he had collected them from Broadway,  Mr Radley first said that Mr Justice was picking up some from Manchester (ST’s location) and some from the office; then he said that he picked them up from Manchester.
85.	Mr Radley’s evidence of his own delivery of alarms to Cyprus is broadly consistent, but he admitted ignorance of the procedures and documentation normally required for Intra Community transactions. The substitution of December for January in his Particulars of Case may well have been a slip, and the question of where delivery to the Appellant took place was not a significant feature of the meeting of 10 July. However we find it difficult to believe that Mr Radley delivered the alarms without obtaining any form of written receipt for them. On balance we conclude that he did take some alarms to Cyprus in November 2007 but cannot conclude that he took 100. .
86.	We did not hear Mr Justice in person. His evidence as to where he picked up the alarms conflicts with that of Mr Radley. But there are receipts for Mr Justice’s  travel. It seem on balance likely that he did travel to Cyprus in February 2008, but we are not convinced that he took with him alarms which had been sold by ST to the Appellant.
IV (f) Cyprus: August 2008
87.	Mr King told us that:
(1)	he had travelled to Cyprus on 5 August 2008 and had returned on 7 August. He had travelled in the company of Donald Bent and Mr Radley; 
(2)	there he had programmed 200 ST 2600 alarm systems taking 5 to 10 minutes to do each, and had trained four staff from A Team Security. He said that he had had time to go out in the evenings; 
(3)	when he had arrived the 200 alarms were already there. They were stacked up in boxes the corner of the room;
(4)	A Team Security had the presence of a large enterprise "a sentry box and guards everywhere". He saw its advertising at the airport in English;
(5)	he recalled Mr Bent having two alarms with which to conduct his training in relation to the software; and
(6)	 the alarms had serial numbers. The numbers were on the front and back of the alarms and on the box. These unique numbers were needed to identify the alarm to the central monitoring system software.
88.	Mr Bent told us (and we indicated to Mr Radley that, subject to any further evidence which cast doubt upon his testimony, we would find) as follows: --
(1)	in August 2008 Mr Bent travelled to Cyprus in the company of Mr Radley and Jason King;
(2)	he was then in Cyprus for three days;
(3)	he was an IT specialist and had been engaged by Mr Radley to train people in Cyprus in the software for the ST 2600 alarm system;
(4)	he did this work at the premises of a company which operated under the Alpha team logo;
(5)	he saw adverts at the airport in Cyprus advertising Alpha team. The adverts looked at first sight like “A – Team” since the letters “lpha” were less prominent. The adverts indicated that Alpha Team was "for your security needs". He gained the impression of a substantial company with many employees;
(6)	while he was there he saw two alarm systems only. These were the ones which he used for training;
(7)	he saw some boxes which could have contained more alarms, but he could not say whether or not they did. His concern had been training: he needed only two sets of alarms; he was not concerned with installation;
(8)	he gained the impression that Alpha Team would be installing hundreds of alarms in Cyprus and presumed that the alarm systems would be delivered; and
(9)	the alarms had serial numbers on them. The serial numbers were needed properly to set up the IT operating system to interface with the alarms.
89.	In addition we had evidence from Mr Radley of his trip to Cyprus in August 2008.
90.	There was  also produced to us a document said to be a copy of a fax dated 2 June 2009 on A Team Security notepaper addressed to Mr Radley which indicated that the appellant supplied 200 alarms, 100 having been delivered by Mr Radley in November 2007, and 100 having been delivered by Lee Justice in February 2008, and that "during July 2007 Mr Radley attended our offices with two engineers in order to train our fitters and install our monitoring stations." Mr Radley could not identify the signatory. We were therefore unwilling to place weight on this document.
91.	We were shown no documentary evidence of the costs of the trip to Cyprus. In contrast we had before us voluminous receipts in relation to Mr Justice’s trip to Cyprus in February 2008. 
92.	Mr Singh urged us to treat Mr Bent's and Mr King's evidence with some caution. He pointed to some differences between Mr Bent's and Mr King's description of A-Team Security's adverts, and to the presumption by Mr Bent that the alarms would arrive in due course compared with Mr King’s evidence that they were already there. He suggested that Mr King's evidence as to the time it would take to programme the alarms did not hang together.
93.	We were not persuaded by all Mr Singh's criticisms. The detail of an advert is not always remembered in the same way by each viewer; and Mr Bent's interest was not in whether or not 200 alarms were there, but whether two alarms were there. However, even if Mr King's lower estimate of 5 minutes for the preparation of each of the 200 alarms systems is used then he would have spent at least 16 -17 hours on programming the alarm systems, leaving little time for training four people and the other activities he told us about. As a result we doubt his evidence as to the presence in Cyprus of 200 alarms.
94.	We conclude that in early August 2008 Mr Bent, Mr King and Mr Radley went to Cyprus to train A-Team's workforce, and to program alarms. We find that when they got there there were some boxed alarms already there but we find that there were probably less than 200.. We make no finding at this stage as to how they arrived. We find that A Team Security was an enterprise of some substance.
IV (g )Payment
95.	The evidence before us in relation to payments received and made by Mr Radley and the appellant was somewhat confused. The appellant says that it paid for the supply to be made under the ST Invoice. By implication therefore it says that the invoice represents a real supply. The appellant adduces evidence of such payment by adducing evidence of the funding of such payment.
96.	We start with the Particulars of Case prepared by Mr Radley. There he says he initially ordered 500 alarms from ST and agreed a delivery of 200 to be received immediately. Payment terms were 50% on order, and the remainder on dispatch from China. It is there said that the cost to the appellant, including VAT, was  £234,530. (We find it difficult to reconcile this figure. 500 alarms at £499 each is £249,500. 50% of that is £124,750. If one adds to that the remaining 50% payable on the 200 which would be received immediately, that is £49,000, and the total is £173,750, which together with VAT makes  £193,732.) To raise the funds to make this payment it is said that:
(1)	£25,000 was borrowed from a colleague of Mr Radleyin Cyprus;
(2)	£100,000 was an investment by Tony Rogers for a 30% stake in the appellant;
(3)	£20,000 came from Mr Radley's own Cyprus account;
(4)	a further £60,000 came from Mr Radley's bank account.
97.	In the notes of the meeting of 10 July 2008 Mr Radley is recorded as saying that he had paid Graham White £250,000 in cheques and cash but "was not sure". Some £25,000 of it may have been paid before VAT registration
98.	In a letter to Mrs Ford of 8 August 2008 Mr Radley says that he paid ST:  £45,000 from Cyprus (which comprised £20,000 which had been received from A Team by way of deposit, and £25,000 from a Nick Nicolai), £50,000 from his own Barclays Bank account (that was his army pension payment), and £100,000 from Tony Rogers.
99.	In Mr Radley's witness statement he says that he paid ST: £60,000 from his army pension, £100,000 from Tony Rogers, £20,000 from his Cyprus account, and £30,000 from his associate in Cyprus (we assume Nick Nicolai). (The statement also refers to £25,000 from Paul Wiggins but Mr Radley told us in evidence that this was a mistake -it had nothing to do with the Cyprus venture.)
100.	The table below illustrates these varying sources:
	Particulars of Case	8August Letter	Witness Statement	Comments	
Nick Nicholai	£25k	£25k	£30K	Para 101	
Army Pension	£60k	£50k	£60k	Para 102	
Tony Rogers	£100k	£100k	£100k	Para 103	
Cyprus Account	£25k	£20k	£20k	Para 104	
Total	£205k	£195k	£210k		

101.	In support of the receipt from Nick Nicolai Mr Radley showed us a printout of an e-mail from Mr Nicolaou (sic) to Mr Radley dated 13 August 2008 requesting repayment of a loan of €30,000 lent over six months previously.
102.	As evidence of the receipt of his army pension. Mr Radley produced a letter from the Service Personnel and Veterans Agency dated 17 November 2009 and headed "War Pension Acknowledgement” thanking him for his recent communication and saying that they would write again if necessary or if they needed any further information. It made no reference to a pension having been paid, nor could that be deduced from its contents.
103.	In support of the Tony Rogers’ payment of £100,000 we had two sources of evidence. The first were copies of Lloyds TSB bank statements for the appellant showing the receipt of £96,500 on 4 January 2008, and the payment out by "Bankers Cheque" of the same amount on 16 January 2008. We also heard evidence from Mr Rogers who told us that he had transferred close to £100,000 to Mr Radley for a 30% share in the appellant. The payment had been made in January 2008. (Mr Rogers witness statement said " £100,000"  but his oral evidence was  “close to £100,000"). Mr Rogers said that he has coordinated the raising of these monies from six different people around the world (one in each of New Zealand, Australia, and Saudi, and two in Spain) and himself, to invest in Mr Radley's business. Since making the investment he had seen no accounts and had received no return. He had a letter from Mr Radley indicating that he had a 30% share. He treated this is held for himself and the other investors.
104.	In relation to the Cyprus account Mr Radley produced his personal passbook for an account at a bank in Cyprus. This showed receipt of €21,500 on 24 November 2007, and a payment out of €20,000 on 17 December 2007.
Evaluation
105.	Mr Radley is either careless about figures or seeks by slightly differing accounts to muddy the waters. We prefer the former view. He did not appear to us to be a man of precise expression.
106.	As regards the Nick Nicolai amount, it seems that in his witness statement it is likely that Mr Radley wrote £30,000 when he should have written €30,000. The figure of €30,000 is consistent with the earlier figures of £25,000. There was however no evidence before us (other than that of Mr Radley) as to how this money was received and how or to whom it was paid.
107.	As regards the army pension amount, the variation between £50,000 and £60,000 reflects in our view some imprecision. However there was no evidence at all of its receipt or of its onward payment, or of to whom it had been paid - other than Mr Radley's assertion that that money had been paid to ST.
108.	The accounts of Mr Rogers’ investment are each consistent with the £96,500 passing through the company's bank account and with Mr Rogers evidence. However, whilst there is evidence of receipt and payment, there is no supporting evidence of to whom it was paid. The bank account indicates that it was paid by Bankers Cheque. There must have been an instruction to the bank to indicates to whom that cheques should be made payable. None was produced us.
109.	So far as payments in and out of the Cyprus account are concerned there is evidence of the movement of €20,000 rather than £20,000. In his letter of 8 August Mr Radley refers to £45,000 coming from Cyprus. That is potentially is consistent with the €20,000 we saw move to the account together with the €30,000 from Nick Nicolai. The Cyprus bank account however provided no evidence of the Nick Nicolai payment. Again there was no evidence, save for that of Mr Radley, as to whom the €20,000 had been paid.
110.	The note of the 10 July meeting records Mr Radley as saying that he paid ST by cheque and in cash, and later as saying that ST never gave a receipt but that Mr Radley always paid in cash because Graham Wild insisted on cash. He later says that he did not know what proportion of the “£250,000 had been paid in cash. In his witness statement Mr Radley says that ST refused to accept cheque payment from him after two of his cheques had bounced, and accepts that he has no written record of payment to ST. In evidence before us Mr Radley at one time likened that bankers’ Cheque referred to at para [103] above to cash, and at another time to a cheque. We thought that quite reasonable: there is little legal difference between a banker’s draft and a cheque, and in normal circumstances little economic difference between an IOU on the Bank of England and one from an authorised bank.
111.	Mr Radley accepts that he received no receipt for any of the payments he said were made to ST. In relation to Mr Justice’s trips to Cyprus he had kept receipts for small amounts. We find it unbelievable that he would have paid close to £200,000 to ST without requiring some sort of written receipt. We are not persuaded that these sums were paid to ST as is alleged even if they were all received by Mr Radley or the Appellant.
IV(h) Numbers of Alarms
112.	There was the following, somewhat contradictory, evidence in relation to the numbers of alarms bought and sold:
(1)	the ST Invoice was for 500 alarms.
(2)	In Mr Radley’s witness statement he says that during 2006 he entered into an agreement "to supply Alpa (sic) team security ... with the ST 2600”. The order was for a quantity of 500 alarm systems to be delivered over a period of time to be dictated by the manufacturer.
(3)	Mrs Cudd’s manuscript note of her meeting on 25 March 2008 indicates that she was told that 100 alarms had been sold to Cyprus and 250 were awaited. Mr Radley did not challenge this while Mrs Cudd was giving evidence but later said that he had told her that it was 200 alarms that had been delivered.
(4)	In a draft letter of 22 March 2008 (see [132(7)] below) it is said that out of the 500 alarms the appellant had purchased, 300 (amended in manuscript to 200) had been delivered to “Alfa Security Ltd” in Cyprus, and a further 150 were delivered to Mr Radley's home; the remaining 50 had yet to arrive from China. In the context of 500 alarms the manuscript amendment of 300 to 200 would leave 100 alarms unaccounted for. This made us doubt the story told in this letter.
(5)	The note of the 10 July 2008 meeting reports Mr Radley as saying that in total he had received about 600 alarms from ST. Before us Mr Radley indicated that this figure may have included supplies made to him before the ST 2600 alarm came on the scene. He told us that of the 600, 200 had gone to A Team, and that some 220 had been installed in the UK in 2007 or early 2008. That left 180 unaccounted for.
(6)	Later at that meeting Mr Radley is recorded as saying that of the 500 units on the ST invoice there were 250 still to come. (There is also an indication that he sourced alarms directly from China.)
(7)	At the 10 July 2008 meeting Mr Radley is reported as saying that there was a contract with Alpha Team and that 500 units had been ordered for them.
(8)	There was a copy of an invoice to Alpha Team from the appellant dated 21 January 2008 for 250 alarm systems for an initial payment of €100,000.
(9)	Mr Radley gave evidence at the delivery of 100 alarms to Cyprus, Mr Justice's statement indicated the delivery of further 100 alarms, and Mr King gave evidence that there were 200 alarms in Cyprus (we have set out our conclusions on this  evidence above).
(10)	Mr Radley produced a copy of a letter or fax on A Team notepaper which indicated that the appellant had supplied A Team with 200 alarms in two stages 100 in November 2007 and a further 100 in February 2008. In addition there was a copy of a letter (or fax) on A Team notepaper which was produced by Mr Radley during his interview on 10 July 2008 and which indicated that the appellants supplied A Team with alarm systems. The typeface of this letter was different from that already mentioned and was signed by "A.S.T. Company Ltd ".
(11)	Mrs Ford's recollection was that Graham Wild and Steve Jepson had said that they had supplied only 50 alarms to the appellant. That recollection is consistent with the statement she makes, two months later, in section 5.3 of the Offence Report dated 23 September 2008.
(12)	The copies of the invoices provided by ST to Mrs Ford indicate a supply of 109 alarms. Of these: (i) 29, invoiced between March and August 2007 , are invoiced to the appellant at an address in Glasgow, but delivered to Marlborough Road,  (ii) 30, invoiced between August 2007 and January 2008 are invoiced to the appellant at Marlborough Road, and (iii) 50, invoiced in April 2008, are invoiced to the appellant at Broadway.
(13)	Mr King told us that he had installed ST 2600 alarms for the appellant in 2007. He produced job sheets showing the installation of some 14 alarm systems and the replacement of 2 others in November of that year, and indicated that in all he had installed 200 systems in that year, but none in 2008.
Evaluation
113.	We have already concluded that Mr King exaggerated the number of alarms he saw in Cyprus. We think it likely that he also exaggerated the number of alarms he installed in the UK in 2007: the tenor of Mr Radley’s evidence was that there had been more installation activity in the later months of 2007. We suspect that no more than 100 were installed by the appellant in the UK in 2007. We find that none were installed in the UK 2008.
114.	We believe that some alarms were supplied to Cyprus. We think that less than 100 were supplied by the appellant. That is for the following reasons.
115.	Mr Radley was asked how he could sell to A Team alarms which he knew did not work well (see [67] above) . He said that they worked better in a hot climate. Mr King could not confirm that this was the case. This made us doubt Mr Radley’s evidence in relation to the sales he said had been made to A Team. The conflict between Mr Radley’s evidence in relation to whence Mr Justice had collected his alarms and the account in Mr Justice’s statement made us doubt Mr Justice’s account of his delivery. Mr Radley’s statement on 10 July 2009 that he had sourced alarms from China made us wonder whether, if more alarms had been delivered than we thought, whether these alarms had been sourced directly from China rather than from ST; that doubt was not dispelled by Mr Radley’s evidence. Whilst the slightly varying accounts of the numbers of alarms have a fairly consistent core of the delivery of 200 alarms to Cyprus, the inconsistencies surrounding that core make us unwilling to accept that 200 alarms were supplied.
116.	We were unwilling to place much weight on the statements reported as made to Mrs Cudd and Mrs Ford by Graham Wild and Steve Jepson. Neither of them were called to give evidence before us and we had no opportunity to evaluate their truthfulness, their accuracy or the completeness of their statements.  The seeming inconsistency between Mrs Ford’s account of their report of ST’s sale of 50 alarms to the appellant and ST’s invoices for 109 alarms also made us cautious about accepting the accuracy of their reported statements.  Nevertheless, the overall impression we eventually obtained from the evidence of Messrs King and Radley was that it was more likely that ST’s supplies to the appellant were limited to those shown on the invoices provided to Mrs Ford, than that there had been supplies on the scale contended for by Mr Radley.
IV(i) Mr Snell
117.	In the Particulars of Case Mr Radley says that he was approached by another company to supply alarms. During the course of the negotiations he became suspicious. He says that "I immediately contacted Mrs Ford and informed her of my concerns and suspicions. Mrs Ford put me in contact with a Mr Nigel Snell who supposedly works in the same office as Mrs Ford."
118.	The only documentary evidence of this exchange in the bundle before us was an e-mail of 22 September 2008 from Mr Radley to Mrs Ford in which he says "I have information and documentation (not related to Sensortech), which you will find very useful and interesting. I would request our VAT refund is then returned to us." Mrs Ford made a manuscript note on the e-mail indicating that she had spoken to Mr Radley on his mobile. The information and documentation he had was carousel related and nothing to do with her enquiry. Mr Radley had said that it involved many millions of pounds in VAT. Mrs Ford expressed concern that the e-mail suggested he was looking for some sort of deal. Mr Radley told her that this was not the case. She advised Mr Ramsay that this was outside her remit but that she would report it.
119.	In the Particulars of Case Mr Radley then indicates that he was contacted by Mr Snell and had a number of meetings with him which had taken place at locations in “the M4 corridor”. In the appellants bundle Mr Radley exhibits a number of copy e-mails from:
	“Nigel Snell”<merlinfinance@hotmail.co.uk
in the period 21 October 2008 to 19 January 2008.
120.	In the Particulars of Case and Mr Radley then indicates that at his last meeting with Mr Snell Mr Snell informed him that he would receive a substantial reward. Coincidentally while driving to meet Mr Snell he received a telephone call from his bank manager informing him that they had received a payment from HMRC of £92,000. Mr Snell told him that it was as a direct result of his information. On his way home he received another call from the bank informing him that the payment had been recalled. 
121.	The payment of £92,000 is acknowledged by the Respondents and evidenced as having been made (and recalled) by HMRC to (and from) the appellant’s account. Mrs Ford explained that the payment was the result of an administrative mistake.
Evaluation
122.	We can draw nothing of relevance to the matters we have to decide from this. If Mr Snell was acting for HMRC that does not affect our evaluation of the evidence as to whether, when and what alarms were supplied to or by the appellant or whether there was dishonesty on behalf on the appellant in claiming input VAT.
123.	We found Mr Radley’s description of meetings with Mr Snell at unspecified places “along the M4 corridor” unbelievable.
124.	Neither do we accept that the payment to the appellant was evidence that HMRC accepted that input tax was due; nor, even HMRC did so accept, would such acceptance have any affect upon our decision.
125.	IV (j) The ST invoice
126.	The evidence relating to this invoice was:
(1)	the evidence of Mrs Cudd that on her visit to 21 Broadway on 25 March 2008, she had been shown a document from Sensortech UK Limited dated for January 2008 for
500 alarm systems@£990 =£495,000 plus VAT of £86,625
her manuscript note records "No VRN on invoice. No invoice No." and "to be faxed over". (This document cannot have been the ST Invoice with which we are concerned.) She told us she asked to see a proper tax invoice. A letter to the appellant of 27 March records her concern and a request for a proper tax invoice.
(2)	We accept Mrs Cudd's evidence of what occurred during her visit. It is supported by the letter next referred to.
(3)	On 28 March 2008 the Appellant's accountants, Alexander Michael, wrote to Mrs Cudd and in their first paragraph said, "following our meeting earlier this week please find enclosed as requested the invoice from Sensor Technologies UK Limited for 500 security system units at £499.50 each."
(4)	attached to that letter was the ST Invoice, or a copy of it. That document:
(a)	bears ST's name, address and VAT number,
(b)	bears  the invoice number 3690,
(c)	is addressed to Broadway House, the appellant's business address, but does not mention the appellant's name;
(d)	is for “500 Security System” with a unit price of "£499.500", a net amount of "£499.500", and shows VAT of " £86,625.00".
(e)	bears a tracking number which is the same as that which appears on the invoice 3690 given by ST to Mrs Ford.
(5)	We saw copies of  invoices from ST to the appellant which Mr Radley had provided to Mrs Ford on 11 August 2008. These invoices were in a typeface and layout which was consistent with the invoices given by ST to Mrs Ford at her meeting with them. The ST Invoice used a typeface for the invoice address and for the quantity, value and description of the items which was different from that used on those other invoices. The ST Invoice carried the same date and tracking number as the invoice 3690 a copy of which Mrs Ford was given by ST.
(6)	Mrs Ford’s report of her visits to ST indicated that ST used to the SAGE accounting system for the production of their invoices.
(7)	We also noted that the typing of the customer’s address was not fully aligned with that of ST's address.
(8)	Mr Radley told us that he received the invoice. He said he opened the Appellant’s post. He said he gave the invoice to Alex Whitbread to complete the VAT return. Later in cross-examination he said the invoice was sent both to his home address (together with some alarms) and also to his office address.
(9)	Before us Mr Radley agreed that the ST Invoice was a clumsy forgery.
127.	The format and typeface of the ST Invoice indicates to us that it was not an invoice which was produced by ST's accounting system. We find that it was fabricated to look as if it had been produced by ST's accounting system. This much was accepted by Mr Radley during the course of the hearing. 
128.	We find that Mr Radley's statement that the invoice was sent both to his home in to his office address, and that he gave the invoice to Mr Whitbread fit ill together and do not make sense of the invoice not being available at the time of Mrs Cudd's visit. Why was at least one of those invoices not available to Mrs Cudd?
129.	What was available to Mrs Cudd was a document indicating the sale of 500 units at £999 each for an arithmetically correct total of £495,000. The ST Invoice was for 500 units at £490 each but the total amount was wrong -- it was for £495,000, which was the same amount as on the document shown to Mrs Cudd. How could a later arithmetical error in the invoice just happen to match the total amount in the earlier arithmetically correct document unless either the invoice had been available at the time but had somehow been wrongly transcribed in the document given to Mrs Cudd, or the invoice was in fact manufactured later. The first seems unlikely. We conclude that the latter is the case.
130.	We find Mr Radley's inconsistent account of his receipt of the ST Invoice and the subsequent production of an arithmetically incorrect invoice after Mrs Cudd's visit indicated that it was more likely that the ST Invoice had been manufactured on behalf of the appellant than by ST.
131.	We make these finding without any reliance upon the reported statements of Graham Wild and Steve Jepson. We were not willing to give any weight to their reported evidence. We could also have drawn from HMRC’s failure to call Mr Wild and Mr Jepson an inference that HMRC considered that their evidence would be adverse to their case. We did not draw that inference because our acceptance that Mrs Ford and Mrs Cudd had gained the impression that they were accurate and honest indicated that HMRC were not trying to conceal unhelpful evidence by not calling them.  
IV(k) The Appellant’s recognition of problems with the invoice
132.	There was the following evidence before us which related to the recognition by the appellant that the ST Invoice was not as reliable as it could have been:
(1)	Mr Radley told us that after the meeting with Mrs Cudd on 25 March 2008, Mr Whitbread told him that he thought that there was something wrong with the ST Invoice.
(2)	Mr Whitbread later amended the ST Invoice in manuscript identifying the arithmetical error in it. He wrote:
“SHOULD BE:
	500 x £499.50 = £249,750+
			        43.706.25 VAT…”
(3)	Mr Radley told us that Mr Whitbread had told him that he thought that the invoice was not right - that it had been manipulated or tampered with.
(4)	Mr Radley told us that Mr Whitbread advised him to take with him to the meeting with Mrs Ford (which took place three months later in July 2008) the amended invoice together with a Voluntary Disclosure form which Mr Whitbread had completed. That form effectively disclosed that only £43,706.25 input VAT rather than £86,625, should have been claimed on the return.
(5)	At the meeting on 10 July 2008 the Voluntary Disclosure form and the corrected invoice were offerred to Mrs Ford.
(6)	Under cross-examination Mr Radley said that he had not immediately volunteered his concerns about tampering with the invoice at the 10 July meeting with Mrs Ford "because in March 2008 we contacted HMRC and told them." Pressed later by Mr Singh he gave a reply which Mr Battesby recorded as "I informed Mrs Ford in March 2008”, but in which  Mr Hellier thought he had said something which shaded into “somebody”. Mr Hellier asked him to repeat it . He repeated it as “somebody”. Our conclusion is that he started to say “Mrs Ford” and ended up saying “somebody” .He then said that he had emailed Mrs Ford. The e-mail was not produced in evidence although Mr Radley volunteered during his evidence on the second day of the hearing to produce it. .
(7)	In the appellant’s bundle of documents was a document which could have been a file copy of a letter from Alexander Michael to HMRC of 22 May 2008. The document was not a photocopy of a letter, not being on headed paper, and at the paragraph numbered "4" contained a series of dots "…" for details of telephone numbers etc which had yet to be typed in. Mr Singh said that HMRC had no record of its receipt. The letter addressed  the ST Invoice at paragraph 3 saying:
"... we have uncovered an error on the invoice that Sensor Tech issued. Active8 purchased 500 alarms at £499.50 plus VAT which comes to £249,750 plus VAT, that is £293,456 .25. Mr Radley has asked Sensor Tech to re-issued the correct invoice, but they have not yet done so.”
the uncompleted details in paragraph 4 indicate to us that it was unlikely that this letter was sent in this form or in any other form.
133.	We believe that neither Mr Radley nor anyone on the appellant's behalf contacted HMRC in March 2008 to indicate concerns about the ST Invoice. Mrs Cudd's visit was on 25 March. Alexander Michael replied to her requests on 28 March: their letter made no reference to concerns about the invoice.
134.	There was no indication in the meeting note of the 10 July 2008 meeting (which was signed by Mr Radley) that Mr Radley had already indicated his concerns to HMRC about the ST invoice. It seems to us, having seen his robust approach, inconceivable that if he had already notified his concerns he would not have said anything.
135.	It is possible that when before us Mr Radley  said “March” he had in mind the draft letter of 22 May referred to above. We acknowledge that Mr Radley was under stress and could have made a mistake about the date. But the letter did not refer to concerns about tampering with the invoice, instead it referred only to its arithmetical inaccuracy. It is possible that Mr Radley might not have properly considered the difference between arithmetical concerns and concerns over falsification or manipulation, but the two issues would, in most people's minds, be quite distinct, and we think it unlikely that most minds would coalesce to the two issues.
136.	The e-mail Mr Radley referred to was not produced. We acknowledge that e-mails may be deleted from a system but no further evidence or comment was forthcoming from Mr Radley. We conclude that no such e-mail was sent.
137.	We conclude that Mr Radley was not telling the truth when he told us that HMRC had been informed of concerns about the ST invoice in March 2008.
138.	We are bolstered in that conclusion by the reference to Mrs Ford. Initially he had said in relation to the July meeting that he didn't then mention that the invoice may have been falsified because in March 2008 they had told HMRC. When later questioned again he indicated, on Mr Battersby’s note, that he had informed Mrs Ford in March 2008, or, on Mr Hellier’s note, that that shaded into saying that he had informed "somebody". That suggested that either he was giving a straightforwardly false answer; or a realisation during his answer that the answer he was giving was false -- a realisation dawning as he gave his response that he could not have told Mrs Ford in March since she was not involved in the matter until 22 April 2008 (see [34]).
139.	This lack of truth in Mr Radley's reply could be (i) due to a lack of care and accuracy, (ii) because he recalled incorrectly (faulty memory), or (iii) knowing. We do not believe that it was due to a faulty memory: the specificity of his testimony as to March 2008 indicates otherwise. It might have been due to a lack of care and accuracy but, on balance, we believe that he knowingly told us an untruth.
V The Parties’ Contentions
140.	Mr Radley made clear and well formulated closing submissions. In summary he said:
(1)	the onus was on HMRC to prove that the ST invoice had been forged by the appellant. In particular  the onus was on HMRC to show that it was not more likely that ST had forged to the invoice. They had not discharged that burden.
(2)	The evidence he had adduced showed the delivery of 200 alarms to A Team in Cyprus;
(3)	He had shown that he had received the funds. They had been paid to ST;
(4)	HMRC relied on hearsay evidence from Graham Wild and Steve Jepson at ST. There were two reasons to doubt that evidence. First Mrs Ford said that she had been told that ST had supplied only 50 alarms to the appellant and yet ST's own invoices showed 109. Second Mrs Ford also said that ST had said that the alarms themselves did not bear serial numbers; the evidence we had heard showed to the contrary.
(5)	HMRC had chosen not to investigate ST's systems or to call Graham Wild or Steve Jepson as witnesses. We should draw an adverse inference.
141.	Mr Singh says:
(1)	it was agreed by Mr Radley that the ST invoice was a forgery -- a clumsy forgery. The question is who is most likely to have forged it;
(2)	it was unlikely that ST forged it. They had the systems to make a better job of it. If that had wished to evade VAT they could have made the supply without accounting for the input tax –there was no need to issue an invoice. There was no evidence of dishonesty on their part, indeed Mrs Ford, an experienced officer, would have been likely to have been able to spot if they had been on the fiddle.
(3)	It was more likely that Mr Radley had forged the invoice. Mr Radley was not a credible witness. He had lied, was inconsistent, and had been evasive. The invoice was an amateur forgery of the real invoice 3690. The arithmetic was wrong. There were no errors in ST's other invoices. Mr Radley generally did not appear good with figures..
(4)	There was no documentary evidence of delivery to Cyprus. We should treat Mr King’s evidence with suspicion. In any event the evidence was that at most 200 alarms had been present in Cyprus.
142.	We have set out our views on most of these issues during our evaluation of the evidence set out above, but we should comment here on Mr Radley’s point about Mrs Ford and serial numbers and the number of alarms said to have been sold to the appellant. That point goes either to the credibility of Mr Jepson and Mr Wild or to the credibility of Mrs Ford. Since we have placed no weight on Mr Jepson and Mrs Wild’s reported statements issues as to their credibility are of little weight. If these issues reflected on the accuracy or truthfulness of Mrs Ford’s evidence, it would not change the conclusions we have reached above because those conclusions have not to any significant extent been dependent upon her particular evidence. 
V  Conclusions on the input tax appeal
143.	We found that Mr Radley’s evidence lacked precision (eg in relation to amounts of money), consistency (eg in relation the numbers of alarms) and clarity (eg in relation to the question of selling defective alarms to A Team). We have found that on one occasion he was untruthful. There were however parts of his evidence that we believed: eg that he had gone to Cyprus, that he had purchased alarms from ST, and that  he had some contact with A team. Overall his evidence appeared to us to consist of a number of real events on and around which a shaky story was built. We were therefore unwilling to accept his evidence unless there was substantial uncontroverted corroboration of it. 
144.	We find that:
(1)	there is a company called Alpha team Securities or A Team or Alfa Team Securities or AST, and that Mr Radley dealt with it. It is not small. It is in Cyprus.
(2)	in August 2008 there were some ST 2600 alarms  at that company's premises. But less than 100.
(3)	 Mr Radley, Mr Bent and Mr King went to Cyprus in August 2008 to programme the alarms and to train Alpha Team's staff.
(4)	it is likely that Mr Radley took some ST 2600 alarms to Alpha Team in Cyprus in late 2007.
(5)	it is possible that Lee Justice took some alarms to Alpha team in Cyprus in early 2008.
145.	We were not persuaded that 200 alarms came from ST and were supplied by the appellant to Cyprus.  Whilst some activity did take place in Cyprus, we concluded that it did not relate to the 500 alarms which were described as supplied in the ST Invoice
146.	Whilst we accept the evidence that payments were made to Mr Radley and to the appellant we do not accept Mr Radley's evidence that those payments were then made to ST for the supply stated to have been made in the ST Invoice.
147.	As a result we are unable to accept that there was a supply of alarms by ST to the appellant which was represented by the ST Invoice. Whilst the issue of an invoice, or the payment, for a supply may accelerate the time of that supply for VAT purposes, there must be a real supply. We do not believe that there was a supply of 500 alarms at any time to the appellant.  
148.	Because we find that there was no supply there can be no input tax in respect of it. Accordingly we find that no input tax credit is available in respect of any supply of alarms by ST in the relevant period to the extent that they might have been represented in the ST invoice.
149.	Further even if there had been such a supply the ST Invoice is not a valid VAT invoice in respect of it. It does not contain the name of the appellant as the recipient of the supply. It is thus does not comply with Regulation 14. Therefore unless HMRC exercise their discretion no input tax credit is available in respect of it.
150.	We asked ourselves whether HMRC were reasonable in not exercising their discretion to permit the input tax credit. We concluded that they were. Where there is no believable evidence that the purported supply has taken place any other conclusion would in our view be perverse.
151.	In relation to the TLC input tax claim and the RBWM Web design claim, the appellant offered no evidence that there had been a taxable supply. The onus was on the appellant to prove that there was such a supply. It did not discharge that burden 
152.	The appeal in relation to the input tax denied is therefore dismissed. 
VI Conclusions on the section 60 appeal
153.	There was no believable evidence that a supply of 500 alarms had been made by ST to the appellant as described on the ST Invoice. We find it proved that the ST Invoice did not represent a supply of goods made to the appellant.
154.	We find it proved that the ST Invoice was presented for the purpose of obtaining an input tax credit of £86.625. The appellant was not entitled to that credit because there had been no supply of goods as represented by that document. 
155.	We therefore find it proved that the appellant did an act for the purpose of obtaining a refund of £86,625 of VAT to which it was not entitled. That constitutes, for the purposes of section 60 (1)(a) doing an act for the purposes of “evading” VAT (see para 22 above) . We therefore find section 60(1)(a) satisfied.
156.	We do not limit our finding to that of an attempt to evade the VAT in respect of the miscalculation in the ST Invoice: the attempted evasion related to the whole of the VAT shown on that document. Although by tendering a Voluntary Declaration on 10 July the appellant accepted, through Mr Radley, that the full £86,625 was not sought, the purpose of submitting the ST Invoice in the first place was in our view to obtain the full input tax credit shown thereon.
157.	In our view Mr Radley knew from March 2008 onwards that the ST Invoice did not represent a supply to the appellant. He accepted that it had been tampered with. He must, in our view, have known that no such supply was actually made. Mr Radley was the heart and mind of the appellant: he was the only person who acted for the company. His knowledge was in our view that of the appellant.
158.	The presentation to HMRC of the ST Invoice was in our view dishonest conduct. It was dishonest to seek an input tax credit for a supply which the appellant knew had not been made, on the basis of a document which it must have known did not represent a real supply. 
159.	We believe that the presentation to Mrs Cudd of the document representing an agreement with A Team was dishonest conduct. It was designed to persuade Mrs Cudd that the goods for which an input tax credit had been sought had been received by the appellant and had been supplied to A Team. 
160.	We therefore find that section 60(1)(b) is satisfied.
161.	We see no reason to change the mitigation percentage assessed by HMRC. The appellant, through Mr Radley,  cooperated with HMRC in attending the meeting on 10 July and in providing information to them. Its conduct was not intemperate. Some mitigation is proper. But the appellant persisted in its dishonest attempt to claim input VAT which was not due.
162.	We dismiss the appeal against the section 60 penalty assessment.
VII Costs and rights to appeal
163.	Mr Singh asked for costs if HMRC were successful. He said that the appeal had been commenced under the old rules and that it was just that the old rules should continue to apply in this respect. 
164.	This appeal was “current proceedings for the purposes of para 7 Schedule 3 of the Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009. 
165.	However, the appeal was started close to the end of the old rules, and many of the steps were taken at times when the new rules applied. The appellant had little notice of the possibility of a costs order. After some deliberation we decided that it would not be just to make any order in respect of costs.
166.	The rights of the parties to appeal against this decision and the procedure for so doing are set out in the notice which accompanies this decision and which to that extent forms part of it.

CHARLES HELLIER

TRIBUNAL JUDGE
RELEASE DATE:28 January 2010