18651

Value added tax – further and supplementary assessments – basis of assessment

LONDON TRIBUNAL CENTRE

	SALEH SHAFIEI	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	  Dr David Williams (Chairman)
						  Mr  K S Dugdale FCA (Member)

Sitting in public in Lowestoft on 12 February 2004 

The Appellant did not appear and was not represented

Mr Bettoney for the Respondents

© CROWN COPYRIGHT 2004

DECISION

1	The appellant is appealing against three related sets of decisions of the respondents. These are: additional assessments of the appellant’s takeaway business for the period from 10 February 1999 to 28 February 2001, together with interest, of a total of £22,142.38 as at 10 July 2001; a penalty for misdeclaration under section 63 of the Value Added Tax Act 1994 of £2,803; and a late registration penalty under section 67 of that Act of £241. As those dates show, this is an old case.  

2	The appellant did not attend and was not represented at the hearing. The tribunal was told that this was because, after initially appealing and appointing representatives, and then changing those representatives, the appellant sold the business and left the United Kingdom. Nonetheless, he was clearly aware of the case, of the additional assessments, and of the initial consequences of his appeal. More recently, post has not been delivered. The appellant has not informed either the tribunal or the respondents of any new address, and the tribunal is satisfied that the papers relating to this appeal were properly served to the last known address. The tribunal, having considered the matter, decided to proceed with the case in the appellant’s absence under rule 26 of the Value Added Tax Tribunal Rules 1986.

The issues

3	The appellant’s grounds of appeal, accepted late in March 2002, were that the assessments were estimated and in his view excessive.  That appeal came towards the end of a protracted correspondence, together with visits, between the respondents and the appellant and two successive firms of accountants, neither of whom is now acting. The separate issue of late registration is considered below.

The additional assessments

4	It is not necessary to recite the details of the correspondence. During the visits and correspondence a number of challenges were made by those representing the appellant to the figures used by the respondents in the assessments. But, save for the evidence collected by the respondents’ officers noted in this decision, neither the appellant nor the representatives provided any evidence of the various assertions made in that correspondence by way of additional business records or otherwise. In the absence of any such evidence, or of any new evidence in connection with the hearing, the tribunal puts very little weight on the assertions made in the various letters from the appellant’s representatives. However, the tribunal considers that where the representatives did agree with aspects of the respondents’ contentions in the light of the evidence offered by them, some weight can be given to that. 

5	Evidence at the oral hearing was given for the respondents by Mr Colin Scott, an officer based at Norwich who took part in the visits to and subsequent correspondence with the appellant. There was also a witness statement from another officer who conducted a review of the case.  While, as the respondents themselves freely accepted, the evidence on which the respondents based the assessments and penalties was perhaps a little thin as compared with other cases, nonetheless that evidence is to be considered on the basis that at no stage in this protracted appeal has the appellant or his representatives produced records or other evidence to contradict the conclusions drawn by the respondents from the evidence that was collected. The tribunal therefore accepts the evidence from the respondents.	

6	The tribunal finds that the appellant conducted a takeaway business throughout the period relevant to the assessments from the premises in London Road South, Lowestoft. The business was entirely that of supplying food subject to standard rate VAT. Supplies were conducted both by supplies of takeaway food from the premises and by home delivery.

7	In the early hours of 21 January 2001 Mr Scott attended the appellant’s premises with another officer and witnessed cashing up by the appellant. It became clear that the cash in the till, and the till records, related only to the sales in the shop over the previous day. The appellant produced separate records related to home delivery orders and separate moneys paid for those orders by customers. We accept Mr Scott’s evidence that the sums in the till were within the range to be expected from the records on the till roll for that day’s sales, and that the separate sums of money produced by the appellant at that time were within the range to be expected from the separate records of home deliveries. In other words, none of the home delivery business was put through the till.

8	The tribunal also accepts Mr Scott’s evidence that available records – both from the till and the delivery books – were sparse, but that an analysis of the evidence that could be gathered on the visit indicates that a majority (55%) of the sales of the business were at that time generated by home deliveries with the sales recorded through the till being only 45% of total sales.  That evidence is accepted not only on the basis of the analysis following that visit, but also on the evidence of the other contacts that Mr Scott had with the appellant and his knowledge of the local conduct of that kind of business. One of the representatives contended for the appellant in the correspondence that this proportion of home delivery business was too high. That the tribunal takes as an admission that the core of the respondents’ case – that home deliveries were not properly the subject of account for VAT – was correct. But the tribunal puts little weight on the suggested alternative ratio between home deliveries and shop sales both because there is no direct evidence of any kind to support it and because it seems little better than an attempt by the representatives to reduce the assessments based on what might best be described as doubtful assumptions. 

9	The tribunal accepts that the above evidence establishes that the assessments in dispute in this appeal were properly made by the respondents under section 73 of the Value Added Tax Act 1994 and further confirms the amounts assessed in those assessments for the periods assessed. There is, in the tribunal’s view, ample basis to accept that these assessments were made to the best of judgment. What evidence there is in this case is sufficient to found those assessments and points to them being correct. The appellant’s appeal that they are excessive is rejected.

10	The tribunal also accepts that there have been misdeclarations by the appellant and that the conditions for imposing a penalty under section 63 of the Value Added Tax Act 1994 are met. The appellant has suggested no reason for the penalty not to be imposed in the amount assessed or at all, and the tribunal can see none. Accordingly it also rejects the appeal against the penalty assessment. 

Backdated registration

11	Having concluded that sales were being suppressed from the records, the respondents then analysed whether the date of registration by the appellant of his business was to be accepted. The application form produced to the tribunal shows that it was issued to the appellant on 7 October 1997, but that it was received from him on 2 December 1999. This contends that the appellant was required to be registered from November 1999, but wished to be registered from February 1999. The respondents duly registered the appellant. 

12	Based on the analysis put before the tribunal, and which the tribunal accepts, the respondents later backdated the registration to 1 April 1997. That decision is also under appeal, although the then representatives of the appellant contended that they would deal with that aspect of the appeal only after the question of the later assessments had been resolved. No specific grounds of appeal were therefore put forward against this decision.

13	The tribunal has accepted the approach taken by the respondents on those later assessments, and concludes that it should therefore also accept this aspect of the respondent’s case. Again, neither the appellant nor any of those representing him from time to time has sought to bring forward any reason why a penalty should not be applied to him under section 67 of the Value Added Tax Act 1994, nor any ground for considering that the section was not properly applied in this case. Accordingly, the tribunal dismisses the appellant’s appeal on this aspect of the case also, and confirms that penalty.     

DR DAVID WILLIAMS
CHAIRMAN

RELEASED:16/05/2004

LON/02/0211