[2010] UKFTT 330 (TC)

TC00615

Appeal number: TC/2009/10033

VAT – input tax – insufficient proof that the claiming party received a supply – appeal dismissed.

FIRST-TIER TRIBUNAL

TAX 

	BELTON ESTATES PLC	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

DECISION NOTICE: full findings of fact and reasons for the decision

TRIBUNAL:	Richard Barlow (Judge)
		Mr Roland Presho FCMA (Member)

Sitting in public at Leeds on 19 November 2009 and 22 June 2010

Mr Ian Lomas of Messrs Smith Craven for the Appellant on 19 November 2009 and no appearance by the appellant on 22 June 2010

Ms Jennifer Newstead of counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2010

DECISION

1.	We commenced hearing this appeal on 19 November 2009 and heard submissions from Mr Lomas but during the course of those submissions he asked for an adjournment to find out whether the appellant had documentary evidence to support some of its assertions of fact and we allowed that adjournment in the interests of justice.  On 22 June 2010, when the case was called on again, no-one appeared for the appellant but as Smith Craven had given details to the Tribunal of the appellant’s dates to avoid on 2 December 2009 and had been notified of the hearing date on 22 December 2009, when that firm were still acting for the appellant (though it appears from a telephone enquiry made on 22 June that they may no longer be acting); we are satisfied that due notice of the hearing had been given and that it would be appropriate to proceed in the appellant’s absence in accordance with rule 33 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.
2.	The decision under appeal is whether or not Belton Estates PLC (Belton) is entitled to a claim for input tax in the sum of £63,000 which was the major part of a slightly larger sum claimed in the prescribed accounting period ending 31 January 2009.
3.	That amount was claimed as the VAT charged by a company called Purearth PLC (Purearth) as the tax on a supply of services allegedly rendered by Purearth to Belton described by Purearth on its invoice date 5 November 2008 to Belton as a management charge.
4.	The service alleged to have been provided by Purearth was that of consultancy advice and other services in connection with a planning application in respect of land owned by Halldale Properties Ltd (Halldale).  It was claimed that that land had £1,800,000 added to its value as a result of Purearth’s services because that company had been instrumental in securing planning permission for the development of a quarry on the land.  Purearth was said to have been entitled to a management charge of 20% of any such enhanced value and that as that was £360,000 the VAT to be charged was £63,000.
5.	At first sight it would appear that Purearth’s supply was to Halldale as the latter was the owner of the land and that therefore any input tax claim would fall to be made by Halldale.
6.	The appellant owned a 50% shareholding in Halldale and was due to benefit considerably from the enhanced value of those shares as a result of the increase in value of the land.
7.	When Belton applied to register for VAT it had been asked for information in which it then described its own business as that of “consultancy advice in maters of development, planning design etc”.  The form giving that information was signed by Mr W G Smith.
8.	Following the adjournment of the hearing, the appellant sent to the Tribunal a document described as a minute of a board meeting of the directors of Halldale and those present were Mr W G Smith (from which we conclude he held some position with that company as well as with Belton) and Mr P Barringer of Purearth.
9.	Although that document was described as a board minute of Halldale its main purpose appeared to be to record an agreement involving Purearth relating to the services in question.  The document stated that “Halldale would employ [Belton] to commission the work required for the planning permission using Purearth PLC as the contractor”.  It also stated that “the costs involved in gaining the planning permission would be charged to Belton who would have the funds to pay for the work completed”.    
10.	That document therefore raised a possibility that Belton had become or would become obliged to provide a service to Halldale.  So that in principle Belton might have received a supply from Purearth as a means of fulfilling its obligation to Halldale rather than carrying out the work itself.
11.	 Mr Lomas had told us that Halldale did not have the funds to pay Purearth and that is borne out by the second quotation from the board minute.
12.	When Mr Wayman, officer of HMRC, visited the appellant in March 2009 to enquire into the repayment in dispute he was shown a copy of Purearth’s VAT return for the period ending 31 January 2009 which purported to declare output tax sufficient to include the output tax on the alleged supply to Belton.  Despite that, Mr Wayman subsequently made a statement, which was produced at the second hearing, which stated that the return had not in fact been received so that no payment of that output tax had been made.
13.	We have taken the above facts from what we were told by Mr Lomas at the first hearing supplemented by the board minute and from the respondents’ evidence consisting of the visit report and correspondence.
14.	Before a registered person can claim input tax it is necessary for him to show that the input in question is directly linked to a taxable supply or supplies he has made or intends to make.   
15.	Two possible interpretations of the nature of the transaction between Belton and Purearth arise.  One is that Belton was obliged to provide a service to Halldale and secured the supply from Purearth in order to satisfy that obligation.  That would be a possible basis for Belton to argue that it had made a taxable supply to Halldale that would entitled it to claim input tax.  The other interpretation is that Purearth made a supply to Halldale and Belton simply paid for it without receiving a supply or at least without receiving a supply which was directly linked to any taxable supply Belton intended to make and that Belton paid for the supply made to Halldale to safeguard its investment. 
16.	Questions arise about the true nature of the supply and about Belton’s assertions about it.  The board minute is by no means sufficient in itself to satisfy us that the transaction was as Belton may now be asserting it was and some degree of scepticism must arise from the fact that that document was not produced at the first hearing.  We say Belton “may be asserting” that is the nature of the transaction because apart from the production of the board minute we have heard no explanation of its effect.
17.	The burden of proof is upon the appellant and, at the very least, in the absence of any direct evidence that a supply which had a direct link with any supply Belton made or intended to make was actually received by it that burden has not been satisfied.  For that reason we have to dismiss the appeal but we would add that, on the basis of what we have been told and have seen in the documents; unanswered questions arise.  As Purearth appear not to have accounted for output tax and as that may be because they were not paid by Belton we would need to have evidence of payment to avoid the conclusion that input tax was not recoverable in any event because of section 26A of the VAT Act 1994.   The true status and effect of the board minute would need to have been established.  Evidence would have been needed to determine whether Belton simply financed a supply by Purearth which was made to Halldale or whether Belton received anything by way of a supply from Purearth.  
18.	Belton has a right to apply for permission to appeal against this decision pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.   The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

RICHARD BARLOW

TRIBUNAL JUDGE
RELEASE DATE: 13 July 2010