03 0822 GOLDCREST TRANSPORT SERVICES LIMITED Mr J H Fryer-Spedding CBE Mr R Presho North Shields 23 June  The Appellant did not appear and was not represented Mr Charles Morgan, of counsel, instructed by the Solicitor's Office of HM Customs and Excise, for the Respondents 
06/07/2004 DRAFT MAN/03/0822  	                 18722
	COMPULSORY REGISTRATION  — Appellant alleging inaccuracy of own accounts for material period — whether liability to be registered — VATA 1994 Schedule 1 paragraph 1 — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

 
 	
	GOLDCREST TRANSPORT SERVICES LIMITED	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	 Mr J H Fryer-Spedding CBE (Chairman)
						 Mr R Presho (Member)	

Sitting in public in North Shields on 23 June  2004

The Appellant did not appear and was not represented

Mr Charles Morgan, of counsel, instructed by the Solicitor's Office of HM Customs and Excise, for the Respondents

	© CROWN COPYRIGHT 2004

DECISION

1.	There being no attendance by or on behalf of the Appellant we determined to proceed under the provision of Rule 26(2) of the Value Added Tax Act Tribunal Rules 1986 (as amended).
2.	This appeal is made against a decision of the Respondents, made in a letter dated 2 October 2003 by which an earlier decision to compulsorily register the Appellant for VAT was confirmed.  
3.	The Appellant carries on business as a taxi operator from premises at 130, Heaton Road, Newcastle-upon-Tyne.
4.	On 23 September 2002 Mr M D Orr, an officer of the Respondents, visited the Appellant’s premises.  During the course of the visit, he established that the turnover of the Appellant for the year ended 31 July 2000 was £61,161.  The VAT registration limit for the period 1 April 2000 to 31 March 2001 was £52,000.  Following the visit, Mr Orr obtained the Annual Accounts of the Appellant for the year ended 31 July 2000 from the Inland Revenue.  These confirmed the turnover as being £61,161.
5.	By a letter dated 7 October 2002 Mr Orr requested the Appellant to complete an enclosed Application for VAT registration.  He requested a reply within 14 days from 7 October 2002.  He received no reply.  Under cover of a letter dated 21 October 2002 Mr Orr sent the Appellant an application form completed on the Appellant’s behalf, together with a Schedule showing that the VAT registration threshold of £52,000 had been exceeded during June 2000 rendering the business liable to register for VAT with effect from 1 August 2000. 
6.	By an undated letter Mr R Kirkwood, Company Secretary of the Appellant, replied to Mr Orr’s letter of 21 October 2002.  He wrote:
“I am writing to you further to your visit to our premises, and subsequent telephone calls, and a response to your request.
In considering my submission that Goldcrest does not need to register for VAT I should be grateful if you could take the following factors into account.
I maintain that as far as the running of our credit accounts is concerned, the company is acting solely as an agent and not as a principal.  The company owns no vehicles, pays no wages to drivers, and charges only one fee (the office “bit” or rent).
You say that all monies paid into our account is “turnover” and the company has a liability on that figure, I maintain that, that figure is “total receipts” and that the “turnover” figure is in fact “total receipts” less drivers’ credit payments.
…”
7.	By a letter dated 18 November 2002 Mr Orr wrote to Mr Kirkwood informing him that the Appellant’s accounts for the year ended 31 July 2001 showed that the turnover of £61,161 was made up of “income: Drivers’ Rent £61,161”.  He then wrote:
“On that basis, there is no reason for Customs to cancel the VAT registration at this stage.  However it was noted that there was a relatively large Trade Debtors’ figure on the Balance Sheet that could relate to the Account work.
If your contention that the Income is actually made up of Drivers’ Rents plus Account Work then you need to be able to demonstrate, in detail, how the overall income figure was calculated.  Your accountant may well be able to assist you in this matter.”
It would seem that Mr Orr referred to the annual accounts for the year ended 31 July 2001 in error in place of 31 July 2000.
8.	The Appellant’s accountants, Messrs. Robsons, 17, Bell Villas, Ponteland, Newcastle-upon-Tyne, by a letter dated 13 February 2003, sent to Mr Orr certain information relating to radio rental for the years ended 31 July 2001 and 31 July 2002.  Further correspondence between Messrs. Robsons and the Respondents then ensued, but by a letter dated 23 June 2003 Mr Orr pointed out to Messrs. Robsons that applications for deregistration could not be made retrospectively, so that even if the 2001 accounts showed a turnover below the VAT registration limit, cancellation could only take place from the current date.
9.	By a letter dated 26 June 2003, Messrs. Robsons informed Mr Orr:
“The “turnover” of 2000 includes monies relating to credit accounts on behalf of drivers, which is not “income” for VAT purposes.
The maximum radios ever on hand has been 40.  Therefore theoretical maximum if all radios out every week is £62,400 (40 x 30 x 52).  However normal usage would indicate 30 radios out at any one time and Company allowed two weeks free in lieu of drivers’ holidays therefore £45,000 maximum in respect of radio rentals.
As already stated the bookkeeping for 99/00 was very poor but as the turnover from 1999 was £31,057 and £36,990 in 2001 it is highly unlikely that the “true” turnover for 2000 was £61,161. 
The director involved with 2000 accounts no longer has anything to do with the Company and the current records are much better.
We therefore appeal on the grounds that registration was not required as the “turnover” blip in 2000 was due to the inclusion of monies not classed as income for VAT and the “VAT” income for the next 12 months would be less than £52,000.  This is borne out by the actual figures per the 2001 accounts.”
10.	Subsequently the Respondents referred the matter for review to Mr G S Clough, a Review Officer.  By his letter dated 2 October 2003 Mr Clough pointed out to the Appellant that although it had been argued that the Accounts for the year ended 31 July 2000 were incorrect, no documentary evidence had been provided to establish this.  He continued:
“Despite your clients turnover exceeding these limits, was your client able to satisfy the Commissioners that they were in fact not liable to be registered at the end of July 2000 (or earlier) because the turnover for the next 12 months would be below the threshold set out in Schedule 1 paragraph 1(3) of the VAT Act 1994?  Following other High Court decisions involving late registrations, the Commissioners have to give effect to Schedule 1 paragraph 1(3) by considering the case as at the date from which registration would otherwise take effect, and by looking forward and being satisfied that the turnover would not exceed the de-registration threshold.  The only information that should be relied upon is the information available at the time.  The first contact with your client was by letter dated 29 July 2002.  Every opportunity was given to your client to produce evidence that they were not liable to register before formally registering in October 2002.  As registration had already been carried out when evidence was produced (May 2003), consideration of no longer liable does not apply.  
In conclusion the decision to compulsorily register your client is confirmed.  
Based on the information provided I am satisfied that your client is entitled to deregister with effect from 23 May 2003”
11.	Schedule 1 paragraph 1 of the Value Added Tax Act 1994, at the material time, provided:
“(1) Subject to subparagraphs (3) to (7), a person who makes taxable supplies but is not registered under this Act becomes liable to be registered under this Schedule –
(a)	At the end of any month, if the value of his taxable supplies in the period of 1 year then ending has exceeded £52,000; or
(b)	At any time, if there are reasonable grounds for believing that the value of his taxable supplies in the period of 30 days then beginning will exceed £52,000.”
12.	We consider that the proper course, if the Appellant wished to pursue this appeal, would have been for the Appellant to have submitted to the Respondents and the Inland Revenue corrected accounts for the year ended 31 July 2000.  No attempt appears to have been made to produce such accounts.  We do not consider that it was satisfactory for the Appellant simply to refer to one or two aspects of  their accounts which may have been incorrect.   Further, corrected accounts should have been supported by the appropriate documentary evidence.  Needless to say, we have had the disadvantage, from the Appellant’s point of view, of not having had any argument or evidence of the Appellant to assist us at the hearing.  
13.	We consider that the view expressed by Mr Clough in his letter dated 2 October 2003 was correct.  
14.	We observe that the Notice of Appeal dated 31 October 2003 includes an application for extension of time to make the appeal.  For the removal of doubt, we grant such extension.  However, for the reasons stated above, the appeal will be dismissed.
15.	Mr Morgan applied for an order for costs in favour of the Respondents in the event of their being successful.  He asked for the figure of £900, equal to Counsel’s brief fee.  In view of the non-attendance of the Appellant, we think that it is reasonable that the Appellant should make such contribution to the costs of the Respondents.  We therefore direct that the Appellant do pay to the Respondents the sum of £900 towards their costs.

MR J H FRYER-SPEDDING CBE
CHAIRMAN
Release Date: 16 August 2004
MAN/03/0822