1870003 0534 ANTHONY ARNOLD ROWSON t/a Mr C P Bishopp Mr N H Phillips Manchester 7 July The appellant did not appear and was not represented Joanne Vickery, of counsel, instructed by the Solicitor's Office of HM Customs and Excise, for the Respondents 

VALUE ADDED TAX  — input tax — improbable claims — claims rejected in full even though some input tax credit likely to be appropriate — no evidence to support claim produced — whether rejection reasonable — yes — output tax admitted not to have been declared — further assessment reasonable — appeal dismissed

VALUE ADDED TAX — misdeclaration penalty — no grounds for mitigation advanced — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

 
 	
	ANTHONY ARNOLD ROWSON T/A	Appellant
	CASTLE COVE CARAVAN PARK

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	 Mr C P Bishopp (Chairman)
						 Mr N H Phillips (Member)	

Sitting in public in Manchester on 7 July 2004

The appellant did not appear and was not represented

Joanne Vickery of counsel, instructed by the Solicitor’s Office of HM Customs and Excise, for the respondents

	© CROWN COPYRIGHT 2004

DECISION

1.	In this appeal Mr Anthony Arnold Rowson, who trades as Castle Cove Caravan Park in North Wales, challenges two assessments and the imposition on him of a misdeclaration penalty.  The first of the assessments, covering all of the accounting periods from 07/98 to 01/01, is designed to recover the total amount of Mr Rowson’s input tax claims for those periods because, the Commissioners say, he has failed to produce any evidence to support those claims.  This assessment is for £82,485.  The second assessment, covering five of the periods from 10/99 to 04/01, is principally of output tax for which, the Commissioners say, Mr Rowson has not accounted, though a small amount of further disallowed input tax is also included.  That assessment amounts to £16,881.  The misdeclaration penalty has been imposed in respect of each of the periods, save for the last, included within the first assessment because, in each of those cases, the objective conditions for the imposition of the penalty are satisfied.  The tax assessed in relation to the last period was below the threshold and it is for that reason that no penalty has been imposed for it.  The aggregate penalty is £12,296.
2.	Mr Rowson’s representatives, Moore Stephens, chartered accountants, informed the tribunal on 5 July, that is two days before the date fixed for the hearing, that they were unaware of the hearing date and asked that the case should be removed from the list.  That request was refused administratively.  Moore Stephens wrote again, indicating that neither they nor the appellant would be attending but making a number of observations.  Their letter suggests that they expected the hearing to proceed in their and the appellant’s absence, and they did not renew the application for a postponement.  Joanne Vickery of counsel, who appeared for the Commissioners, asked us to proceed to hear the case in their absence.  There was no apparent reason why the hearing date had not come to the appellant’s or to his representatives’ attention; notice had been sent out in good time and there was no indication that it had been returned by the Post Office, though we accept that does not amount to clear evidence of delivery.  We were concerned that the appeal related to tax periods going back some six years.  It was apparent from the papers we then had available to us that Mr Rowson had taken little active interest in his appeal.  We concluded in all those circumstances that it was appropriate that we should proceed to hear the appeal in his absence.
3.	The only oral evidence we heard was that of the assessing officer, Dennis Eccles.  He told us that he had made two visits to the appellant’s premises, at the caravan park.  On the first, in May 2001, an appointment for which had been made only with some difficulty, he had met the appellant, his bookkeeper, a Mr Holton, and his accountant, a Mr Stein.  No accounting records were produced and Mr Eccles was told that they were not available because they had been destroyed in a fire.  He agreed to allow the appellant some time to reconstruct the records, but time went by with no evidence of progress and in July 2001 Mr Eccles made the first of the two assessments against which the appeal has been brought, which at the time he described as a protective assessment, necessary to prevent risk to the revenue.  He nevertheless invited the appellant and his advisers to produce further evidence to enable him to reconsider and, if necessary, adjust the assessment.
4.	A second visit was arranged, in the hope that it might lead to a reconsideration.  That visit took place in May 2002, already some 10 months after the assessment had been made.  Neither the appellant nor Mr Holton was present, but Mr Stein attended.  He handed to Mr Eccles two boxes containing a variety of invoices, many of which, Mr Eccles told us, had no apparent connection with the appellant’s business at all and none of which he could marry to the appellant’s VAT returns.  However, as an incidental consequence of Mr Eccles’ visits to other traders in the locality, he had come across documents passing between those traders and Mr Rowson which made it clear that he had earned commission on caravan sales.  Mr Stein who, at the time, was responsible for the preparation of the VAT returns conceded at the meeting that that commission had not been accounted for in those returns.  It also emerged that, as again Mr Stein conceded, the appellant had failed to account for output tax on some of the rental payments charged to occupants of the pitches on the caravan site.  Mr Eccles raised a further assessment about a month after the second visit – the second of those with which we are concerned.  We accept Mr Eccles’ evidence and are satisfied that the second assessment was properly raised.
5.	Mr Eccles told us that he was acquainted with the appellant’s business since he lived close by.  It consists of a static caravan park; the main source of income is the pitch rentals paid by the owners of the caravans, who also pay additional charges for electricity and insurance.  The site provides no other facilities, such as a clubhouse or shop.  Mr Eccles accepted that Mr Rowson would incur some input tax which he could legitimately claim (though by no means as much as he had actually claimed) but that in the absence of any evidence of the amount of input tax incurred, and the reason for its being incurred, he had felt obliged to disallow the entirety of the claim, although he had remained willing (as we accept) to consider any reasonable evidence of the expenditure.  It was now three years after he raised the first assessment, yet no evidence of any description had been forthcoming.  The claim that the appellant’s records had been destroyed in a fire in August 2000 had been checked by enquiries of the local fire brigade, which revealed that they had no report whatever of such a fire in that month.  Mr Eccles felt obliged, he said, to treat the claim that the records had been destroyed with some scepticism. 
6.	In our view he was right to do so.  We note from the correspondence included in the bundle of documents produced by Miss Vickery that it has also been claimed that the records were lost in the post between Mr Stein and the appellant.  We are not satisfied that either explanation – fire or loss in the post – is truthful.  It seems to us clear, not merely from Mr Eccles’ evidence but also from the correspondence, and the appellant’s VAT returns, that he has made little or no attempt to account accurately for his true tax liability.  Over the period covered by the first assessment, his returns contend that his input tax credits have exceeded his output tax liabilities, and by a substantial amount.  The nature of his business as it was described to us by Mr Eccles suggests that it is highly improbable that this was so, and that his returns were accurate.  One can only speculate about the appellant’s failure to produce evidence to support his input tax claims, but we are satisfied that the VAT returns, individually as well as collectively, were wrong, and that an assessment was justified.  It might be said that Mr Eccles’ disallowing all of the input tax went too far, but we bear in mind that a trader claiming credit for input tax must not only have incurred that input tax, but must also be in a position to produce evidence supporting his claim: see the Value Added Tax Regulations 1995 (SI 1995/2518) regulation 29(2) and the Value Added Tax Act 1994, Schedule 11, paragraphs 4(1) and 6.  One must sympathise with a trader who is put at a disadvantage by the accidental destruction or loss of his records but we reject the appellant’s claim that he has so suffered.  It is conspicuous that he  has made little or no apparent effort to provide any secondary justification for his claim, for example by obtaining confirmation from his suppliers of his transactions with them.
7.	The only substantial argument which, so far as we could determine, has been put forward to challenge the assessment is that the Commissioners have wrongly disallowed the input tax on a motor home which was later the subject of a taxable sale made by the appellant.  That may or may not be a fair argument but, as Miss Vickery was able to demonstrate, it is irrelevant to the two assessments with which we are concerned since the input tax was incurred, if it was incurred at all, in a period which is not covered by either of them.
8.	As we have indicated, the misdeclaration penalty was imposed because the objective criteria specified by section 63 of the 1994 Act are met; the penalty has been fixed at the prescribed rate of 15% of the tax which would have been lost if the errors had not been detected.  Section 70 of the 1994 Act permits the Commissioners and, on appeal, this tribunal to reduce the amount of the penalty if they or we think it is appropriate to so.  In this case, no reasons have been advanced by the appellant or his representatives which might indicate that any reduction of the penalty is appropriate, and no reasons are to be gleaned from the correspondence.
9.	In all these circumstances we dismiss the appeal against both of the assessments and against the penalty.  
10.	In accordance with the Commissioners’ policy where appellants fail to attend hearings, Miss Vickery asked for a direction in respect of costs.  We think it is entirely appropriate that the appellant should pay the Commissioners’ costs which, if they are not agreed between the parties, are to be determined, on the application of either party, by a tribunal chairman sitting alone.

COLIN BISHOPP
CHAIRMAN
Release Date:16/07/2004
LON/03/0534
££Rowson v Customs and Excise [2004] UKVAT V18700 (16 July 2004)