Migliore v Customs and Excise [2004] UKVAT V18692 (14 July 2004)
18692

03 0584 LUIGI MIGLIORE Mrs E Gilliland Mrs M P Kostick BA FCA CTA Manchester 30 April Mr M J Wild for the Appellant Miss H Redmond, of counsel, instructed by the Solicitor's Office of HM Customs and Excise, for the Respondents 
06/07/2004 DRAFT MAN/03/0584
	VAT  — de-registration application — delays by both parties — de-registration date decided upon by Commissioners arbitrary — did not act reasonably — appeal allowed

MANCHESTER TRIBUNAL CENTRE

 
 	
	LUIGI MIGLIORE	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	 Mrs E Gilliland (Chairman)
						 Mrs M P Kostick BA FCA CTA (Member)	

Sitting in public in Manchester on 30 April 2004

Mr M J Wild for the Appellant

Miss H Redmond, of counsel, instructed by the Solicitor's Office of HM Customs and Excise, for the Respondents

	© CROWN COPYRIGHT 2004

DECISION

1.	The Appellant is a sole trader carrying on the business of an Italian Restaurant in Sheffield.  On 31 July 2001 the Appellant applied for registration for VAT stating that he thought that the value of his taxable supplies in the next 12 months would be £57,200. The Appellant was duly registered for VAT with effect from 1 August 2001.  The Appellant made his return for the period 1 August 2001 to 30 November 2001 in January 2002 showing taxable supplies in the sum of £12,551 and output tax of £663.23.  In his next return (for the period 02/02) which was dated 31 March 2002 the Appellant returned the amount of VAT due for the period as “Nil” and his total sales and purchases also as “Nil”.  In fact he was still trading and as appears from a voluntary disclosure signed by the Appellant dated 19 February 2003, the net VAT due to the Respondents for this period was £849.92. The total value of his sales inclusive of VAT was £11,731.  The reason why the Appellant made a nil return was because he considered that his annual turnover would be below the limit for registration of £53,000 and on the return he had printed in capitals on the first page “* Please forward Deregistration form asap*”. The return is date stamped as having been received by the VAT Central Unit on 13 May 2002 and by the local office at Grimsby on 15 May 2002.  Unfortunately no steps were taken by the Commissioners to send a de-registration form to the Appellant as requested and it is unclear why not. The Appellant made further “Nil” returns for the periods 05/02, 08/02 and 11/02.
2.	The Appellant appears to have taken advice and on 16 July 2002 a request on VAT 902 was received by the Commissioners stating that the Appellant wished to cancel his registration because his taxable turnover would not exceed £53,000. The reason given was a deterioration in trade. This was followed on 17 July by a formal application on VAT 7 to cancel his registration with effect from 1 August 2002.  On this form it was stated that the Appellant expected to make taxable supplies of £45,000 over the next 12 months and the reason for reduction in turnover was given as loss of trade due to increasing competition. This application was received by the Commissioners on 19 July 2002. No action appears to have been taken by the Commissioners to deal with the application until a letter dated 4 December 2002 was sent to the Appellant referring to the 3 “Nil” returns and stating that pending a decision on the application to de-register VAT must continue to be charged and accounted for.  It was also stated that the Appellant might need to submit a voluntary disclosure to account for all the VAT not accounted for on the 3 “Nil” returns.  The Appellant was invited to contact the writer of the letter (Mr. Wadforth) and a telephone number was given. Somewhat oddly the letter concluded by saying that a response within 14 days would be appreciated.  The letter did not in fact ask the Appellant for any information.
3.	The Commissioners on 16 January sent to the Appellant a request for information on form VAT 5.  This request which was sent under the name of Alison Beecham repeated merely what had been stated in the letter dated 4 December from Mr. Wadforth.  However the Appellant replied giving his gross takings for the 3 periods and also for the period 11/02.  The amount for the 4 periods came to less than £53,000.  The Appellant’s reply was dated 20 January 2003 and was received by the Commissioners on 21 January 2003.  On either 28 or 31 January 2003 the Appellant was asked to provide a voluntary disclosure for the 4 periods of “Nil” returns. These were signed and dated 19 February 2003 and were returned to the Commissioners.  They are likely to have been received within a day or so of 19 February.  On 21 March the Commissioners asked the Appellant to confirm that the figures for turnover provided by the Appellant were inclusive of VAT and this was confirmed on 31 March 2003. On 7 April de-registration was granted with effect from 1 December 2002.
4.	De-registration is dealt with in paragraph 13 to the First Schedule to the Value Added Tax 1994 (the Act) where it is provided in paragraph 13(1) that subject to sub paragraph (4) where a registered person satisfies the Commissioners that he is not liable to be registered for VAT, “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”.  The Appellant’s request for cancellation was dated 18 July 2002 and was received by the Commissioners on 19 July 2002.  No later date has been agreed between the Commissioners and the Appellant and at first sight paragraph 13(1) would appear to require that the cancellation must take effect from 19 July 2002 once the Commissioners are satisfied that the Appellant is not liable to be registered. However sub paragraph 13(4) provides:
“The Commissioners shall not under sub-paragraph (1) above cancel a person’s registration with effect from any time unless they are satisfied that it is not a time when that person would be subject to a requirement to be registered under this Act”.
5.	In the instant case the Commissioners were not in fact satisfied that the Appellant was not liable to be registered until confirmation had been received that the gross figures provided by the Appellant were inclusive of VAT.  This did not occur until at least 31 March 2003.  The reason why they were not satisfied at an earlier date was because until the Appellant provided the figures they were not in a position to form a view whether the Appellant’s turnover for the relevant period of 12 months would be below £53,000.  The only figures which the Commissioners already had were the figures on the original return for the first period and the 4 “Nil” returns which clearly were incorrect.
6.	The case advanced by the Appellant before us is that although the Appellant did not in fact provide all the relevant information until February and March 2003, the reason for the delay was because the Commissioners had failed to send him an application for cancellation when first requested on the return dated 31 March 2002 and then when the form had been returned on 19 July 2002 the Commissioners had failed to deal with the application until Mr. Wadforth’s letter dated 4 December 2002, a delay of some 4 and one half months. Mr. K.R.Hughes has given evidence before us and it appears that the cause of the delay after the receipt of VAT 7 on 19 July was due to the introduction to the Grimsby office of the Commissioners of a new electronic system of dealing with such applications and that there were difficulties in scanning documents into the new system.  This gave rise to a growing backlog of work. The result was that the Appellant’s application was not dealt with as quickly as it should have been.  Mr. Hughes could not explain why the Appellant had not been sent an application for cancellation when it had been first requested on the return dated 31 March.
7.	Mr. Hughes gave evidence that while it was considered that strictly it would have been justifiable only to de-register the Appellant from 31 March 2003 when all the information had been provided and the Commissioners had then become satisfied that the Appellant was not liable to be registered, nevertheless he took the view that a fair date from which the de-registration should operate was 1 December 2002 because of the delays there had been in dealing with the application on the part of the Commissioners. The evidence does show that when requested to provide information, the Appellant did so without any undue delay.
8.	There can in our view be no doubt that if the Appellant had been provided with the form when he first requested it and if the Commissioners had dealt with the application with reasonable expedition, the decision to de-register the Appellant would have been reached earlier than it was.  The question is however, How much earlier? The Appellant undoubtedly contributed to the difficulties which have arisen in the instant case by making 4 “Nil” returns when he should have been making returns in the usual form until he was actually de-registered. It was in our view entirely reasonable for the Commissioners to require voluntary disclosures for the relevant periods before reaching a decision.  The first request although made on the return dated 31 March 2002 was not we find received until 13 May at Southend and 15 May at Grimsby.  There was a delay of about 2 months before the Appellant was provided with the application to cancel his registration.  This was returned on 19 July. Nothing then happened for a further 4 and a half months until the beginning of December when an uninformative letter was sent to the Appellant by Mr. Wadforth. The matter was then dealt with by the Commissioners in 2003 over some 3 months. In our view if the Commissioners had been acting with reasonable diligence, the Appellant should have been provided with a copy of VAT 7 by at the latest the end of May. If they had done so, it is likely that it would have been returned promptly, within a day or so, as occurred in July. If the Commissioners had requested the information earlier the Appellant would in our view have been likely to have provided the information by about the end of June in line with what subsequently happened. The actual request for voluntary disclosure does not appear to have been made before the end of January and was dealt with by the Appellant in about 3 weeks (19 February). In our view the Commissioners should have been able to conclude that the Appellant was not liable to be registered by the end of July 2002.
9.	The Appellant should have been de-registered with effect from 1 August 2002 which was the date which the Appellant actually asked for. Mr.Hughes although he correctly had regard to the fact that the Appellant had not provided the information required by the Commissioners and thus that there would be delay before the application could be determined, nevertheless did not in our view in his decision letter dated 30 July 2003 have regard to the delay caused by the failure of the Commissioners to respond to the request on the return dated 31 March and received on 13 May for an application for de-registration to be sent as soon as possible, nor did he refer to the 4 and one half months delay in dealing with the application when received. These were relevant matters which were not stated to have been taken into account.  In evidence he did say that the reason for giving the date of 1 December rather than 31 March when all the information was to hand was because there had been delay by the Commissioners.  However we consider that the revised date was arbitrary and did not reflect the fact that there had in substance been over 6 months delay by the Commissioners.  In effect Mr. Hughes treated the Commissioners as having been in delay for only about 4 months. We accordingly allow the appeal pursuant to s. 84(a) of the Act.
10.	The Appellant has not sought costs and we make no direction in relation to costs.

MRS E GILLILAND
CHAIRMAN
Release Date:14/07/2004
MAN/03/0584