Miah v Customs & Excise [2003] UKVAT V18387 (31 October 2003)

Draft 6 May 2004
VAT — preliminary point — taxpayer trading in partnership—partnership dissolved— taxpayer took over existing business as going concern trading as sole proprietor — failed timeously to give notice of dissolution making VAT returns under partnership registration — on later giving notice as being allocated new registration no failed  properly to complete VAT return for long period — by arrangement with taxpayer’s accountant Customs cancelled new registration number and allowed old partnership number to be re-used — taxpayer then assessed to tax and under partnership number — whether assessments valid.

MANCHESTER TRIBUNAL CENTRE

 
 	
	 DULA  MIAH	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	Mr J D Demack (Chairman)

Sitting in public Manchester on 5 September 2003

Mr P Smallwood for the Appellant

Mr J Puzey of Counsel instructed by the Solicitors office of HM Customs and Excise for the Respondents

	© CROWN COPYRIGHT 2003

DECISION
1.	In this appeal by Dula Miah, I am required to decide as a preliminary point whether certain assessments to tax and an assessment to a civil evasion penalty are valid having been issued under a registration number originally allocated to a partnership of which Mr Miah was a member but which was replaced when he continued the business as sole trader only to be later re-used.
2.	The facts are not in dispute and may be shortly stated in this way.
3.	Mr Miah and one Nur Ullah traded in partnership  as The Village Tandoori from premises at      from 8 December 1994.  On 2 March 1998 they applied to be registered for VAT with effect from the end of August 1995 (sic).  They were so registered under registration number 708 0432 61.  (For convenience I shall refer to that number as 708.  Another registration number in point in the appeal is number 733 8572 14.  I shall refer to it as 733).  The partnership was dissolved on 29 November 1998.  The business was transferred to Mr Miah as a going concern on 30 November 1998, and he continued to trade as its sole proprietor.
4.	By reg 5(2) of the VAT Regulations 1995 (the 1995 Regulations) Mr Miah and Mr Ullah were required to notify the Commissioners in writing of changes to the ownership of the business within 30 days.  They failed to do so.   Mr Miah continued  to make VAT returns under no 708 and pay the tax due under them.  But on or about 16 June 1999 he submitted completed forms VAT 1 and VAT 68.  The former was an application for registration as sole proprietor of The Village Tandoori: the latter informed the Commissioners of the transfer to him of the former partnership business as a going concern.  The Commissioners did not act on the Form VAT 1 and rejected the Form VAT 68 as it had been signed only by Mr Miah.  (It was not a legal requirement for the Form VAT 68 to be signed by all partners, but it was the Commissioners policy to insist on signature by all.  I understand that policy to be based on the Commissioners attempt to ensure that only bona fide Forms VAT 68 were acted on, so that it was a perfectly sensible and reasonable one).  On 29 June 1999 Mr Miah returned a form he had been sent requiring signature of the Form VAT 68 by both former partners, endorsed as follows:  “Sorry – the partner who has left the business will not sign any forms.  We will therefore have to let the VAT no [number] go and apply for a new one.”  As the Commissioners’ were still not being satisfied that the partnership had been dissolved did not act on the information provided by Mr Miah
5.	However, sometime after 29 June 1999 but before 1 September 1999 (the Commissioners’ records do not reveal the precise date they allocated him the 733 number effective from 30 November 1998 as applicable to his sole proprietorship of The Village Tandoori.  Under number 733  he was required to complete a VAT return for period 9/99 covering the long period from 30 November 1998 to 30 September 1999.  Mr Miah incorrectly completed the return: instead of including information  for the wrong period, he merely returned that for the three month period between 1 July 1999 and 30 September 1999 and paid the tax thereon.  (He had earlier paid the VAT for his declarations to 30 June 1999 under the 708 registration).
6.	On 4 November 1999 Mr George Wade, a Customs officer, paid an unannounced visit to Mr Miah.  The following day he sent a memorandum t Customs registration section at Middlesbrough saying “Dula Miah, Village Tandoori, VAT reg 708 0432 61.  Please note the above business is now a sole proprietor run by Mr Dula Miah. It is no longer a partnership.”  Mr Wade followed that note by telephoning Middlesbrough on 11 November and noted of conversation: “Trader has new VAT no 733 8572 14 for sole prop.  Has submitted return 09/99 under this no.  Check before issuing assessment for correct VAT nos.”  The following days, in two telephone conversations with Mrs Anderson, a Customs officer at Middlesbrough, Mr Wade ascertained that she had spoken to Mr Miah’s accountant and had arranged with him for Mr Miah to retain and use  the 708 number
7.	Notwithstanding that arrangement, for the period 12/99 Mr Miah made his return under the 733 number.
8.	As part of the agreement with Mr Miah’s accountant, Mr Miah again completed new forms  VAT 1 and VAT 68, and Customs then proceeded to regularise his registration by re-instating the 708 number and by cancelling the 733 number.
9.	
10.	It was against that factual background that Mr Smallwood, Mr Miah’s representative, submitted that his client should have been registered under the 733 number for the period commencing on 30 November 1998, and consequently the 708 number should have been cancelled from 29 November 1998 with the result that assessments made under 708 were invalid.  He particularly relied on the fact that Mr Ullah had not signed the second form VAT 68, maintaining that that meant that the form had not been correctly completed . He also contended  that the Commissioners’ actions could have resulted in Mr Miah being unjustly enriched at the expense of Mr Ullah if input tax on items acquired by the partnership had not been previously reclaimed – a result  he maintained would be absurd.  He further submitted that the Commissioners actions could lead to uncertainty  for all partnerships where a business was transferred to one or more former partners. 
(1)	Subject to sub-paragraph (4) below, where a registered person satisfies the Commissioners that he is not liable to be registered under this Schedule, they shall, if he so requests, cancel his registration with effect from the day on which the request is made or from such later date as may be agreed between them and him.
(2)	Subject to sub-paragraph (5) below, where the Commissioners are satisfied that a registered person has ceased to be registrable, they may cancel his registration with effect from the day on which he so ceased or from such later date as may be agreed between them and him.
(3)	or ownership of his business within 30 days of such an occurrence and furnish them with full particulars thereof.
(a)	a business is transferred as a going concern,
(b)	the registration under Schedule 1 to the Act of the transferor has not already been cancelled
(c)	on the transfer of the business the registration under that Schedule is to be cancelled and either the transferee becomes liable to be registered under that Schedule . . . and,
(d)	an application is made in the form numbered 3 in Schedule 1 to these regulations by or on behalf of both transferor and the transferee of that business,
the Commissioners may as from the date of the said transfer cancel the registration under Schedule 1 to the Act of the transferor and register the transferee under that Schedule with the registration number previously allocated to that transferor.
11.	Regulation 7(1) of the VAT regulations provides:
“Where any notice is required to be given for the purposes of the Act or these regulations by a partnership, it shall be the joint and several liability of all the partners to give such notice, provided that a notice given by one partner shall be sufficient compliance with any such requirement.”
12.	Mr Puzey, counsel for the Commissioners, submitted that the issue before me was that of whether the Commissioners were satisfied in the terms of either sub-para (1) or (2) of  para 13 of Schedule 1 of the 1994 Act.
13.	He observed that reg 5 of the 1995 Regulations refers to “every registered person” notifying a change of circumstances.  He submitted that the registered person for these purposes was the partnership, not individual partners, and one partner might act on behalf of all, as reg 7(1) made clear. He further contended that it would be unreasonable for the Commissioners to insist that every partner sign a form VAT 68 in circumstances where one partner left and refused to sign or was not contactable: so long as the Commissioners were satisfied that a change in the legal entity had occurred that was sufficient.  The reference in reg 6(1)(d) to an application in Form 3 being made “by or on behalf of both the transferor and transferee” reinforced the point that one person might act on behalf of all.
14.	Mr Puzey accepted that the confusion of having two live registrations had had to be resolved somehow, and it had been resolved with the agreement of Mr Miah’s accountant by transferring the 708 number to him as sole proprietor: and since Mr Miah had filled in forms to that effect he had plainly been in agreement with the course of action in fact taken by the Commissioners; he had clearly  intended the 733 number to be cancelled, for his application for the transfer of the 708 number could not have intended any other result.  He submitted that the assessments in dispute had been validly made, and should be confirmed.
15.	Care and management of VAT is the responsibility of the Commissioners (see para 1(1)   of Schedule 11 to the 1994 Act).
16.	In the instant case, Mr Miah failed to notify the Commissioners of the dissolution of the partnership within 30 days of that event, as required by para 5(2) of the 1995 Regulations.  And, when asked to complete a VAT  return under the 733 registration number for the long period from 30 November 1998 to 30 September 1999, he did not do so. It is against that factual background that I am required to consider Mr Smallwood’s submission that the assessments under appeal are invalid.
17.	I am unable to find anything whatsoever in the legislation, primary or secondary, to support the contentions advanced by Mr Smallwood.  Mr Miah was throughout the short period covered by the two registrations required to be registered: and, for from assisting the Commissioners to resolve an administrative problem of his own making by co-operating with them, he merely served to compound it. In any event, the allocation of a registration number is a matter which falls within the administrative discretion of the Commissioners, and cannot be questions unless the discretion has been properly exercised, L  Reich & Sons Ltd v CEC (1974) Decision No 97.  There is no suggestion of improper exercise of the discretion  in the instant case.
18.	I am quite satisfied that the submissions of Mr Puzey correctly reflect the law in the area with which I am dealing, and it follows that I declare both tax assessments and the penalty assessment valid.  In so deciding I have considered the unjust enrichment and uncertainty points made by Mr Smallwood.  The former I consider without validity; the latter I may dismiss simply by saying that had Mr Miah dealt with matters as he ought to have done, i.e. in accordance with the law, the problems he himself created would not have arisen.