[2010] UKFTT 620 (TC)

TC00620
Appeal number:  EDN/09/59

Value Added Tax – Repayment Supplement.  Value Added Tax Act s79.  Whether period exceeded or covered by period for raising and answering of reasonable inquiries – meaning of inquiry – determining period of inquiry.  Whether supplement due.  Appeal allowed.

FIRST-TIER TRIBUNAL

TAX 

	RAPTOR COMMERCE LIMITED	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

		 		TRIBUNAL JUDGE: W Ruthven Gemmell, WS 						MEMBERS:		   Ian Shearer
							   Peter R Sheppard, ATII			

Sitting in public in Edinburgh on Friday 7 May 2010

Keith Hobson, iTax UK LLP, for the Appellant

Richard Mansell, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2010

DECISION
Introduction

1.	This is an Appeal by Raptor Commerce Limited (“Raptor”) against a decision by the Commissioners of HM Revenue and Customs (“The Commissioners”), by letter dated 11 December 2008 and confirmed by a further letter of 16 February 2009, that a repayment supplement was not payable to Raptor in the sum of £39,144.77 in respect of the VAT accounting period 01 December 2005 to 28 February 2006 (“Period 02/06”).
2.	A repayment supplement is a form of compensation paid in certain circumstances when the Commissioners do not authorise payment of a legitimate claim within 30 net days of the receipt of a VAT return.  The 30 day repayment supplement clock starts on the date of receipt by the Commissioners of the return as long as this is after the last day of the accounting period to which the return relates and ends when a written instruction directing the making of the payment or refund is issued by the Commissioners.  In computing the period of 30 days, periods may be left out of account to allow for the raising and answering of reasonable inquiry relating to the requisite return or claim.
3.	Essentially, the issue in the Appeal is the extent to which the time taken for any Commissioners’ inquiries can be left out of account in determining whether the period for making the payment exceeded 30 days.
Legislation
4.	Value Added Tax Act 1994, Section 79 provides Repayment supplement in respect of certain delayed payments or refunds -
(1)     In any case where—
(a)     a person is entitled to a VAT credit, or
(b)     a body which is registered and to which section 33 applies is entitled to a refund under that section, [or
(c)     a body which is registered and to which section 33A applies is entitled to a refund under that section,]
and the conditions mentioned in subsection (2) below are satisfied, the amount which, apart from this section, would be due by way of that payment or refund shall be increased by the addition of a supplement equal to 5 per cent of that amount or £50, whichever is the greater.
(2)     The said conditions are—
(a)     that the requisite return or claim is received by the Commissioners not later than the last day on which it is required to be furnished or made, and
(b)     that a written instruction directing the making of the payment or refund is not issued by the Commissioners within the relevant period, and
(c)     that the amount shown on that return or claim as due by way of payment or refund does not exceed the payment or refund which was in fact due by more than 5 per cent of that payment or refund or £250, whichever is the greater.
(2A)     the relevant period in relation to a return or claim is the period of 30 days beginning with the later of—
(a)     the day after the last day of the prescribed accounting period to which the return or claim relates, and
(b)     the date of the receipt by the Commissioners of the return or claim.
(3)     Regulations may provide that, in computing the period of 30 days referred to in subsection (2A) above, there shall be left out of account periods determined in accordance with the regulations and referable to—
(a)     the raising and answering of any reasonable inquiry relating to the requisite return or claim,
(b)     the correction by the Commissioners of any errors or omissions in that return or claim, and
(c)     in the case of a payment, the following matters, namely—
(i)     any such continuing failure to submit returns as is referred to in section 25(5), and
(ii)     compliance with any such condition as is referred to in paragraph 4(1) of Schedule 11.
(4)    In determining for the purposes of regulations under subsection (3) above whether any period is referable to the raising and answering of such an inquiry as is mentioned in that subsection, there shall be taken to be so referable any period which—
(a)     begins with the date on which the Commissioners first consider it necessary to make such an inquiry, and
(b)     ends with the date on which the Commissioners—
(i)     satisfy themselves that they have received a complete answer to the inquiry, or
(ii)     determine not to make the inquiry or, if they have made it, not to pursue it further,
but excluding so much of that period as may be prescribed; and it is immaterial whether any inquiry is in fact made or whether it is or might have been made of the person or body making the requisite return or claim or of an authorised person or of some other person.

5.	Value Added Tax Regulations 1995 (No 2518) which provide –
		Regulation 198, Repayment Supplement - Computation of period -
In computing the period of 30 days referred to in section 79(2)(b) of the Act, periods referable to the following matters shall be left out of account—
(a)     the raising and answering of any reasonable inquiry relating to the requisite return or claim,
(b)     the correction by the Commissioners of any errors or omissions in that requisite return or claim, and
(c)     in any case to which section 79(1)(a) of the Act applies, the following matters, namely—
(i)     any such continuing failure to submit returns as is referred to in section 25(5) of the Act, and
(ii)     compliance with any such condition as is referred to in paragraph 4(1) of Schedule 11 to the Act.

Regulation 199, Repayment Supplement – Duration of period
For the purpose of determining the duration of the periods referred to in regulation 198, the following rules shall apply—
(a)     in the case of the period mentioned in regulation 198(a), it shall be taken to have begun on the date when the Commissioners first raised the inquiry and it shall be taken to have ended on the date when they received a complete answer to their inquiry;
(b)     in the case of the period mentioned in regulation 198(b), it shall be taken to have begun on the date when the error or omission first came to the notice of the Commissioners and it shall be taken to have ended on the date when the error or omission was corrected by them;
(c)     in the case of the period mentioned in regulation 198(c)(i), it shall be determined in accordance with a certificate of the Commissioners under paragraph 14(1)(b) of Schedule 11 to the Act;
(d)     in the case of the period mentioned in regulation 198(c)(ii), it shall be taken to have begun on the date of the service of the written notice of the Commissioners which required the production of documents or the giving of security, and it shall be taken to have ended on the date when they received the required documents or the required security.

The Facts
From the evidence before the Tribunal the following facts were found – 
6.	Raptor carries on business dealing in non specialised wholesale trade from 176 St Vincent Street, Glasgow, G2 5FG.  It had been registered as a limited company with effect from 15 July 2002 under the VAT registration number 801557940.
7.	The Tribunal had before it the witness statements of the Commissioners’ officers Hannah Martin and Rachael Jones and the written statements of the Commissioners’ officers, Paul Skirving and Mark McCoy who also gave evidence and who were examined and cross examined.  Both the witnesses who gave evidence were credible.
8.	Mr Hobson representing Raptor had also acted for Raptor at the time of the matters leading to this Appeal but did not give evidence.
9.	The Tribunal also had before it a bundle of documents and a helpful timeline showing the relevant number of days based on Raptor’s contention that the VAT return was received by the Commissioners on 16 March rather than 17 March.
10.	Mr Skirving had been employed by the Commissioners since September 2004 but his involvement in this matter began following his beginning work as a member of the Missing Trader Intra Community (MTIC) team based at Portcullis House in Glasgow in February 2006 and he remained there until 2009.
11.	On 22 February 2006 Mr Skirving accompanied another officer to Raptor’s principal place of business and spoke to Naeem Shakoor, Director and Mr Hobson who acted as Raptor’s tax representative.  At that meeting or shortly prior to that, a two hundred question questionnaire known as J & S Aide Memoire was compiled by Mr Skirving with the assistance of Mr Shakoor.
12.	Between 28 February 2006 and 16 March 2006 requests were made by Mr Skirving to Mr Shakoor for information in respect of deals carried out by Raptor and bank statements.
13.	On 27 March 2006, Mr Hobson on behalf of Raptor, made a request by telephone for a without prejudice repayment of the Period 02/06 return and a copy of the J & S Aide Memoire.  Mr Skirving requested that Mr Hobson make these requests in writing.
14.	On 28 March 2006 Mr Hobson sent a facsimile requesting a without prejudice repayment of the Period 02/06.
15.	On 29 March Mr Skirving received a letter from Raptor, containing an authority to disclose information to Mr Hobson and his firm, Halliwells, which he had also requested on 27 March.
16.	On 6 April Mr Shakoor telephoned to ask Mr Skirving how his enquiries were progressing.  On 10 April Mr Hobson asked again for repayment on a without prejudice basis and Mr Skirving stated that he was still making his enquiries and that such a repayment would not be possible.  This was followed by a letter on 10 April to Mr Hobson confirming that enquiries were “still continuing”.  This was followed by a visit to the Appellant’s principal place of business on 11 April.
17.	On 20 April Mr Skirving sent a letter to Raptor in the following terms:- “I am writing to you because as a result of our enquiries in respect of your 02/06 VAT claim we now know that of the nine transactions selected for verification it has been confirmed that five commenced with defaulting traders resulting in a loss of revenue exceeding £376,018”.  Full details of the sales that resulted in the loss were then shown in a tabular format.
18.	Mr Skirving’s letter of 20 April 2006 continued:-  “As explained in Notice 726, where you have genuinely done everything you can to check the integrity of the supply chain, can demonstrate you have done so, have taken heed of any indications that VAT may go unpaid and have no other reason to suspect VAT would go unpaid, the joint and several liability measure will not be applied to you.  However, if you knew, or had reasonable grounds to suspect, that the VAT would go unpaid then the measure can be applied to you.  From your records you will be able to ascertain who supplied you with the goods detailed above and may wish to consider what appropriate action is needed to ensure that VAT does not go unpaid in respect of future transactions.  For the avoidance of doubt, I should finally tell you that this letter is without prejudice to any enquiries Customs may be making, or have made, into transactions with which you have already been involved and which are in a chain of transactions where VAT has gone unpaid”.
19.	On 25 April, Mr Hobson telephoned Mr Skirving asking if Mr Skirving would release the Period 02/06 payment now that his enquiries were complete.  Mr Skirving stated that they were not complete and that five out of the nine cases had been traced to a VAT loss.
20.	On 26 April, Mr Hobson wrote to Mr Skirving in response to Mr Skirving’s letter of 20 April, and concluding that “in the circumstances our client should be repaid all of the outstanding input tax credit due to it without further delay”.
21.	On 2 May Mr Shakoor contacted Mr Skirving to ask him if he had received his deal sheets for March 2006.  Mr Skirving advised that they had arrived that morning but that the bank statements and payment details were missing.  Mr Skirving was also asked if he had been contacted by Mr Hobson with regard to releasing the period 02/06 repayment.  Mr Skirving advised that he was considering his reply.  Mr Shakoor telephoned again on 5 May to ask when the repayment would be released and Mr Skirving advised that he would have a decision for him “next week”.
22.	On 8 May, Mr Skirving sent a letter to Raptor informing them that the Period 02/06 VAT payment was being authorised and was being released without prejudice.  It was explained that the meaning of the payment being made without prejudice was that this would allow the Commissioners to make further enquiries.
23.	The letter of 8 May states as follows “….. H M Revenue and Customs is entitled as part of its responsibility for care and management of VAT to make all reasonable enquiries into VAT repayment claims including testing further information given in support of a repayment claim.  At this point, in time enquiries are still continuing with aspects of the claim.  I am, however, authorising the repayment of the 02/06 return.  This repayment is released without prejudice to any action that HM Revenue and Customs may take under the VAT Act 1994 or any other enactment”.
24.	In evidence, Mr Skirving confirmed that traders involved in this type of enterprise are very keen for their repayment claims to be made expeditiously as the nature of their business requires them to have the cash available to continue their pattern of trading.
25.	Mr Skirving explained that the process of dealing with a claim is dealt with by making reference to the Commissioners’ database which includes a decision log, a copy of which was before the Tribunal covering the period 27 March to 29 June.
26.	It was explained that each return is subject to automated credibility checks or tests and where there is a failure to pass these checks or tests, returns are checked manually or are often sent to local VAT offices for further investigation.
27.	As part of these enquiries Mr Skirving confirmed that he would contact other officers who dealt with companies who appeared on each period’s VAT return to trace the progress of transactions and to detect any missing traders which would consequently result in the loss of revenue to the Commissioners.  
28.	Mr Skirving stated that the decision log alone was not a full record of the enquiries that were carried out but other than one entry, noted on the decision log prior to 8 May 2006, being an email received on 12 April; no other evidence was given of any enquiries made or answers received.
29.	In evidence, Mr Skirving stated that the letter of 8 May would allow inquiries to be made at a later date and that by authorising the Period 02/06 return he had concluded that he could proceed no further with his inquiries or it meant he had completed his review of the 02/06 return.  Mr Skirving gave evidence that he had made internal enquires in relation to the nine trades selected within the period 02/06 return.
30.	When the repayment claim documentation was approved on 8 May it then required to be counter signed and this was done by Mr Skirving’s senior officer on 9 May.  The effective date, therefore, accepted by the Commissioners as the date when the payment was made, was 10 May, the day following the counter-signature of the repayment authorisation.
31.	The number of days from 17 March to 10 May was 55 days or if the VAT return had been received on 16 March, 56 days.
32.	In evidence, Mr Skirving confirmed receiving a letter typewritten with a date of 5 March 2006, but which had been changed in manuscript to 5 April 2006 being a repayment supplement warning letter.  This was a document sent by the National Compliance Repayment Supplement team in Liverpool in relation to Raptor’s VAT Return for the Period 02/06 and this was a reminder that the repayment supplement would be due with effect from 15 April 2006 “less contact has been made with the trader prior to this date”. 
33.	The letter stated that over 18 days had elapsed since the claim had been received and requested that Mr Skirving check his records and advise the team of the current situation.
34.	The Officer who completed the processing of the repayment on 10 May was Hannah Martin. In doing so she made an error which caused the repayment supplement to be generated. Her error was that she utilised the start date as 27 March 2006 as the date when Raptor was first made aware that the Commissioners had withheld the repayment, and needed to make further enquiries, and the end date when the Commissioners were satisfied that the repayment could be made at 8 May 2006; she allocated 13 days as being deductible rather than 43 days meaning that she had, in error, used the date of 27 April in her calculation.
35.	The error was noticed by Ms Jones whose role included checking that payments to traders of repayment supplements had been correctly made. On 16 May 2006 she wrote to Raptor advising them that due to an administrative error the repayment supplement of £39,147.77 had been included in the total repayment sum incorrectly.
36.	Raptor, by letter dated 10 November 2008, requested an explanation as to why the repayment supplement for the Period 02/06 had been withdrawn.
37.	Mr McCoy undertook a full independent review and reconsideration of the decision by Ms Jones to withdraw the repayment supplement.  Mr McCoy explained that in doing so he looked at the whole matter afresh and in his view 17 March 2006 was the correct day of receipt, that the credibility checks had then taken place and that on 22 March the return had failed the credibility checks and that a pre repayment credibility query was sent for checking on the same date.  On 29 March, the query was referred to the local VAT office for verification.  Mr McCoy could find no evidence of the date of the start of enquiries beginning on 27 March as stated by Ms Jones and was not satisfied that an enquiry was well enough intimated to Raptor at that stage.
38.	Mr McCoy took the view that the letter of 10 April, however, was unequivocal in stating that enquiries were continuing and on the basis that this had been sent by first class post took this as being received on 11 April at which point the clock stopped.
39.	In evidence, Mr McCoy stated that “the time that could be left out of account begins on the date when the trader was initially contacted regarding the enquiry by letter 11 April 2006 to the date that we were satisfied the claim could be authorised 8 May 2006”.
40.	In calculating the time that could be left out of account, Mr McCoy further stated that it begins with the date on which the Commissioners first consider it necessary to make such an inquiry …., Section 79(4)(a) refers: and …ends with the date on which the Commissioners satisfy themselves that they have received a complete answer to their inquiry, or determine not to make the inquiry or, if they have made it, not to pursue it further, ….  Section 79(4)(b) refers”.
41.	Mr McCoy stated that although it was clear to him that enquiries were being made at 10 April he made no enquiries himself to ascertain the nature of the enquiries being made.
42.	Mr McCoy identified an administrative error, of 28 days which needed to be left out of account and which had been miscalculated by Ms Martin.  These days were from 11 April 2006 to 8 May 2006.
43.	Mr McCoy wrote in these terms to Mr Shakoor on 11 December 2008 and wrote in response to a request for a further reconsideration of this decision on 16 February 2009 to Mr Hobson now with ITax (UK) LLP Tax Advisors who had replaced Halliwells as Raptor’s advisors.

Authorities
Customs and Excise Commissioners v L Rowland & Co (Retail) Ltd - [1992] STC 647

Cellular Solutions (T Wells) Ltd v The Commissioners of H M Revenue and Customs, VAT and Duties Tribunal 2006, Decision 19903

Purple International Ltd v The Commissioners of H M Revenue and Customs, VAT and Duties Tribunal 2003, Decision 18243

Watford Timber Company Ltd v The Commissioners of H M Revenue and Customs, Vat and Duties Tribunal 1997, Decison 14756

Olympia Technology Ltd (No.2) v The Commissioners of H M Revenue and Customs, VAT and Duties Tribunal 2006, Decision 19647

Alliance & Leicester PLC v The Commissioners of H M Revenue and Customs, VAT and Duties Tribunal 2007, Decision 20094

Beast in the Heart Films (UK) Ltd v The Commissioners of HM Revenue and Customs, First Tier Tribunal 2009, Case TC00180, 2009, FTT T230 (TC)
Raptor’s Submissions
44.	Raptor said that the return was posted on 15 March and, on the basis that it would be received the following day having been sent by first class post, was received on 16 March 2006.  On this basis, the time in issue from 16 March 2006 to 10 May 2006 was a total of 56 days.
45.	Raptor said that throughout the period the Commissioners failed to demonstrate they were making “inquiries” as required under the Act and cited the Opinion of Auld J in the case of the Commissioners of Customs and Excise v L Rowland & Co (Retail) Ltd – [1992] STC, 647 -
Held - The word 'inquiry' in the context of the phrase 'periods referable to ... the raising and answering of any reasonable inquiry relating to the requisite return or claim' .…. ‘meant an inquiry in the sense of a question or questions put to the taxpayer for him to answer, not an inquiry in the sense of a general investigation concluded by a report.  It was an inquiry relating to a particular return in respect of which a supplement might be payable if the claim for the repayment was not dealt with promptly.  The word 'raising' itself in that context was clearly used in its ordinary and natural meaning of putting an inquiry or question to, or making an inquiry of, the taxpayer about his claim for repayment.  It implied the act of inquiring and the period of inquiry ended when the commissioners received a complete answer to the inquiry put to the taxpayer.  [1992] STC 647 at 648
In my judgment, the protection to the taxpayer, such as it is, and the spur to efficiency on the part of the commissioners are not to be found in giving the word 'inquiry' in this context the broad meaning contended for by the commissioners and then seeking to qualify it in time, as well as in nature, by the word 'reasonable'.  It is to be found in the ordinary and natural meaning of the word 'inquiry' in its context, namely 'periods ... referable to ... the raising and answering of any reasonable inquiry relating to the requisite return or claim' (see s 20(3)(a) and reg 41(a)).  The inquiry contemplated by these words is not a general one in the sense of a general investigation.  It is an inquiry relating to a particular return in respect of which a supplement may be payable if the claim in it for repayment is not dealt with promptly.  The combination of the words 'the raising and answering of any ... inquiry' also indicates that the word 'inquiry' is used in the sense of a question or questions put to the taxpayer for him to answer, not an inquiry in the sense of an investigation concluded by a report.  The word 'raising' itself in this context is clearly used in its ordinary and natural meaning of putting an inquiry or question to, or making an inquiry of, the taxpayer about his claim for repayment.  As Mr Heim, the tribunal chairman in the Five Oaks Properties case, observed (at 324), 'it implies the act of enquiring'.’   [1992] STC 647 at 656

46.	Raptor said that any enquiries must be reasonable and noted that the Commissioners said that they were entitled to stop the clock during the period of first contact which Mr McCoy calculated as 11 April. 
47.	Raptor referred to Judge Hellier The Beast in the Heart Films (UK) v HMRC [2009] UKFTT 230 at paragraph 28 - 
(iii) when, on the evidence was the instruction to pay issued?
“My conclusion that the Instruction form was not the issue of written instruction directing payment is not the end of the matter.  I have concluded above that the Instruction was an instruction directing the making of the repayment to the Appellant but that it was an instruction by one arm of the Commissioners to another and thus was not "issued".

and said a written instruction directing the making of a payment refers to a document sent to a branch and not an internal document within the Commissioners’ organisation.
48.	Raptor said that the Commissioners require an “inquiry” to be made of the taxpayer or alternatively with the Commissioners’ colleagues and not just “contact” made without more specific direction or content.  They do not accept there was evidence of any specific inquiry having been made by the Commissioners from the date of the receipt of the VAT return, in their view, between 16 March 2006 and 8 May 2006.  Instead, Raptor contends that they were merely contacts made by the Commissioners; that the letter of 10 April 2006 did not raise an inquiry of Raptor and that the telephone conversation of 25 April 2006 between the Commissioners and Raptor’s advisors did not relate to any inquiry or question raised by the Commissioners.  In essence, Raptor contends that the Commissioners have not raised any inquiries.
49.	Raptor says that the letter of 10 April did nothing other than formally record what had been earlier discussed on the telephone with Mr Hobson of Halliwells and that the letter of 5 April is evidence that at 5 April no inquiry had been made.  Accordingly, Raptor contends that following this warning the local VAT office made “contact” solely for the purposes of stopping the clock against Raptor.  Raptor contends that the “contact” was little more than the Commissioners going through the motions of raising an enquiry.  In essence, therefore, Raptor contends that the period calculated from the submission of the return to the authorisation of the payment was 56 days; that there is no evidence of any “inquiry”, as defined in the Rowland case, and, accordingly, that the Appeal should be allowed.
The Commissioners’ Submissions
50.	The Commissioners’ say that enquiries were taking place, that continual investigation takes place in relation to MTIC type traders; that the letter of 10 April clearly states that enquiries are continuing and, accordingly, a without prejudice payment could not be made at that time.  The Commissioners contend that the enquiries were being made of their colleagues and that the review officer, Mr McCoy, was satisfied that Raptor was intimated of this “inquiry” by 11 April.
51.	The Commissioners wrote to Raptor’s representative on 8 May to confirm that the Commissioners’ enquiries into the Period 02/06 return were continuing.  The Commissioners confirmed that they had authorised a without prejudice payment of the Period 02/06 VAT return.  Following the repayment instruction the countersignature took place on 9 May and payment was completed on 10 May.  The Commissioners’ contention, therefore, is that they are required to review payments of repayment supplements to ensure accurate repayments are made.  In particular, the Commissioners drew attention to Section 79(4) which reads “but excluding so much of the period as may be prescribed; and it is immaterial whether any enquiry is in fact made or whether it is or might have been made of the person or body making the requisite return or claim or of any authorised person or some other person”.  The Commissioners cited in support Chairman Palmer in the Watford Timber Co Ltd, VAT and Duties Tribunal [1997] 14756 who said that Section 79(4) overrides the wording in Regulation 199 and that the meaning of “inquiry” can include an inquiring not only of the taxpayer but of the local VAT office.
52.	The Commissioners say that Section 79 does not apply to payment of the claim as the Commissioners have not exceeded the relevant period of 30 days specified in Section 79(2A) of the VAT Act 1994 and, to the extent it is relevant, any period under Section 79(4) extended for 55 days and that the Appeal should be dismissed.
53.	The Commissioners say, following Chairman Oliver in Purple International Ltd, states that Section 79(4), which narrows the interpretation of L Rowland & Co (Retail) Ltd, prevails over Regulations 198 and 199 and that the period starts when Raptor were told of the Commissioners’ inquiries
The Commissioners say that, following Chairman Oliver, in Olympia Technology Ltd No. 2 that there is one relevant period which ends when a final decision is made to release the amounts outstanding and to issue a decision letter. On the facts here they say this was on 08 May.
The Tribunal’s Findings
54.	The Tribunal considered the evidence and submissions in relation to the “raising and answering of any reasonable enquiry relating to the requisite return or claim” under Section 79(3)(a) by which in computing the period of 30 days periods may be left out of account.
55.	The Tribunal were mindful of the purpose behind Section 79 defined by Auld J in Rowland and Co (Retail) Ltd v Commissioners of Customs and Excise [1992] STC at 655 as “a spur to efficiency” and his definition of “the ordinary and natural meaning of the term “inquiry”.”  Section 79 mirrors the imposition on the taxpayer of surcharges if his VAT and any requisite payments are late.  There are, therefore, obligations on both the taxpayer and the Commissioners.
56.	The Tribunal accepted the interpretation of Chairman Avery Jones in Cellular Solutions (T Wells) Ltd v Customs and Excise Commissioners [2006] VAT and Duties Tribunal, Decision 19903, who, after considering Rowland & Co said, at paragraph 14 “we interpret enquiries as meaning a question”.
57.	Whereas Raptor contended that they had sent the return by first class post on 15 March 2006 and were entitled like the Commissioners to assume that it was received the following day they produced no evidence to demonstrate the posting on 15 March to counter evidence of the “date received” stamp on the return of 17 March 2006.  17 March 2006 was also later than the day after the last day of the accounting period to which the return related.
58.	The Tribunal, therefore, consider that the relevant period started on 17 March 2006.
59.	The relevant period as referred to at Section 79(2)(b) effectively means that the period ends with a written instruction directing the making of a payment issued by the Commissioners.  The Tribunal consider that the relevant period ended on 10 May 2006 as contended by the Commissioners.
60.	The period under consideration in this Appeal is, therefore, 55 days.
61.	The Tribunal next considered the inconsistency between Section 79(4) which provides that the “clock stops” in relation to computing the period of 30 days on “the date on which the Commissioners first consider it necessary to make such an enquiry” and the provisions of Regulation 199 of the VAT Regulations 1995 which state it stops on the date on which the Commissioners first raise the Inquiry”.
62.	In this matter the Tribunal were persuaded by Chairman Bishopp’s statement in Alliance and Leicester PLC v The Commissioners of H M Revenue and Customs, VAT and Duties Tribunal 2007, Decision 20094 at paragraph 19 to 21 -
“In Refrigeration Spares (Manchester) Limited v Customs and Excise Commissioners (2002, Decision 17603), the President pointed out the difference between regulation 199, which provides that the clock is deemed to have stopped when the Commissioners "first raised the inquiry", and section 79(4)(a), which provides that it stops on "the date on which the Commissioners first consider it necessary to make such an inquiry".  The difference arises from the timing of the enactments: regulation 199 is a re-enactment without material amendment of regulation 5 of the Value Added Tax (Repayment Supplement) Regulations 1988 (SI 1988/1343), while the current wording of section 79 derives from provisions added to its own predecessor, the 1983 Act, by section 20 of the Finance Act 1985 and amended in 1988 and 1992, on the latter occasion because the Commissioners considered that the decision in Rowland & Co (Retail) Limited was too generous to taxpayers.  The need to bring the regulations into line with the Act was apparently overlooked.  So far as it is necessary to do so, I intend to do as the tribunal did in Refrigeration Spares, that is to construe regulation 199 in a manner which is consistent with the enabling primary legislation, namely section 79. 
Later in Refrigeration Spares, at paragraph 32, the President said: 
"… Parliament gave the Commissioners only 30 days in which to process repayment claims.  In limited circumstances the period is extended; but any extension must be within the spirit of section 79 which demands expedition on the Commissioners' part."
It is important also to bear in mind both the purpose of section 79, and the words actually used.  The section allows the Commissioners 30 days in order to process repayment claims, before any penalty (in the shape of a supplement) becomes due.  The suspension of the running of time afforded by subsection (4) relates to the raising and answering of an inquiry; the section states clearly that the suspension ends when the Commissioners have received a complete answer to the inquiry, and not when they are satisfied that the return is correct.  I echo the comment of Auld J in Rowland & Co that an inquiry is a "question or questions put to the taxpayer for him to answer" and does not warrant any wider construction.  Thus the suspension does not extend to the consideration of the material provided in answer to the inquiry—that is to be accomplished within the 30 day period.” 
63.	The Tribunal then considered whether the period for stopping the clock was justified to the extent that the Commissioners were dealing with the raising and answering of reasonable enquiry relating to the requisite return for the Period 02/06.  The Tribunal interpreted the word “reasonable” to mean reasonably necessary for the making of a decision, proportionate and not prompted by any other motive.
64.	The Tribunal accepted the Rowland interpretation that “inquiry” means inquiry in the sense of a question or questions and not an enquiry in the sense of an investigation concluded by a report.  
65.	The aim of Section 79 is to allow the Commissioners 30 days in order to process repayment claims before any penalty in the form of a supplement becomes due.  
66.	A distinction must be drawn between the inquiry itself, the raising and answering of a question or questions, and an examination of the answer or answers.
67.	The Tribunal were provided with no written evidence that questions were made or answers had been received by Mr Skirving in respect of the return for Period 02/06 during the period in which the Commissioners claim the clock was stopped.
68.	No records were offered of any specific questions raised by the Commissioners on specific issues in respect of the return. Indeed given the particular importance of the repayment supplement clock and the sums often involved, the Tribunal might have expected to see a standard procedure within the Department whereby specific inquiries and questions are made in writing and are logged as being tied to the stopping of the clock. The Tribunal agree with Chairman Avery Jones in Cellular Solutions (T Wells) Ltd at para 9 that s79(4) strongly suggests that an “inquiry” is generally made to a specific “person or body”, and it might likewise be expected that this person or body, whether internal or external, would also be clearly identified and logged. It was understood from Mr Skirving that revised and tighter departmental procedures in this area were subsequently introduced.
69.	Mr Skirving submitted in evidence that he was making enquiries and there is reference to this in the notes of his telephone conversations and in his letter of 10 April.  Mr Skirving had in February 2006 been attached to the MTIC section of the Commissioners for less than one month when he had started to deal with this case and the processes in relation to repayment claims may have been new to him at that stage.
70.	The Tribunal found that no inquiries concerning the 02/06 return were made of Raptor in the period from 16 March 2006 to 8 May 2006.
71.	The Tribunal accepted, however, that on the basis of the oral evidence and the letter of 10 April that enquiries within HMRC were being made of other offices and accepted the Commissioners’ review decision that the clock stopped on 11 April 2006 when Raptor is deemed to have received the letter of 10 April 2006. However no evidence in the form of e-mails or letters or notes of telephone communications with other offices was exhibited to the Tribunal.
72.	The Tribunal noted that whereas the relevant period comes to an end when a written instruction directing the making a payment or refund is issued by the Commissioners, they did not accept the Commissioners’ contention that the period to be left out of account terminated on 10 May, although it could extend no further.
73.	Section 79(4) states that “the period referable to raising and answering of …. an enquiry shall, at Section 79(4)(b), end on the date on which the Commissioners (i) satisfy themselves that they have received a complete answer to the inquiry or (ii) determine not to make the enquiry or, if they have made it, not to pursue it further”. 
74.	The letter of 8 May when read with the letter of 20 April does none of these things.  It states that the repayment is being authorised and released without prejudice to any action the Commissioners may take under the VAT Act 1994 or any other enactment.  It does not and cannot claim to evidence that the Commissioners have satisfied themselves they have received a complete answer to the enquiry (whether any inquiry has been made of the taxpayer or any other person) nor does it determine not to make the inquiry nor to pursue it further.  It simply states that “at this point in time enquiries are still continuing with aspects of the claim” and post dates the letter of 20 April.
75.	Instead the Tribunal consider that the letter of 20 April does bring the period out of account to an end in terms of Section 79(4)(b)(i) to the extent enquiries have been made and answered by the use of the words “as a result of our enquiries”. 
76.	The Oxford English Dictionary defines “result” as meaning “the outcome” and, accordingly, means that “a process has been completed”.  The 20 April letter goes on to state that “we now know that of the nine transactions selected for verification, five have commenced with defaulting traders”.  The Tribunal interpret this meaning as a result of their enquiries, they know information that was not known before and is indicative that the Commissioners had received an answer to their inquiries.
77.	The Tribunal’s view, therefore, is that the period to be taken out of account ended on the receipt of the letter of 20 April on 21 April.
78.	The decision log refers to a request for information, on deals relating to further cases, received on 12 May, after the issue of the repayment and so it was clear that a further investigation was being carried out but no evidence was shown that this related to Period 02/06.
79.	Section 79 means that the Commissioners are given no more than sufficient time to ensure that what is being provided is what was requested.  The Tribunal endorse the comments of Chairman Bishopp in Alliance & Leicester PLC, VAT and Duties Tribunal, 2007, Decision 20094, at paragraph 23 – 
“It would be wholly contrary to the spirit of Section 79 if the Commissioners were allowed the entire period from deciding it would be desirable to ask a question through the putting of the question perhaps a week later, the receipt of the answer and the consideration of the answer at leisure some time later”.
80.	The Tribunal are not persuaded the mere selection of a return for repayment verification in itself amounts to an “enquiry” in the sense meant by Section 79.
81.	The Tribunal find that reasonable enquiries were made and that they were intimated to Raptor on 11 April.
82.	The Tribunal do not accept that the clock stopped on the period to be left out of account on 8 May 2006 in terms of Section 79(4).  Instead in terms of that section the letter of 20 April was the time at which the Commissioners received a complete answer to their reasonable inquiries.  At that time, they had identified and were, thereafter, at most examining the results of their enquiries.
83.	According to the decision log any further communication with Raptor was in relation to the paperwork for March and April which did not relate to the Period 02/06.
84.	The Tribunal find that the correct period to be left out of account was from 11 April 2006 to 21 April 2006 a period of 11 days which when deducted from 55 days results in the repayment being made over a period of 44 days which is in excess of the relevant 30 day period.
85.	The Appeal is accordingly allowed.

W RUTHVEN GEMMELL
TRIBUNAL JUDGE

RELEASE DATE: 14 July 2010