18747
Input Tax Assessment – supplies invoiced to another registered trader – whether for the benefit of the taxpayer – whether assessment sustainable and to best judgment – appeal allowed in part.

EDINBURGH TRIBUNAL CENTRE

	DAVID PETCH T/A CARRON VALLEY SERVICES	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	       Respondents

			Tribunal:	 (Chairman):  T Gordon Coutts, QC
					 (Members):   Mrs Helen M Dunn, LL.B.
							  S A Rae, LLB., WS

Sitting in Edinburgh on Tuesday 17 August 2004

for the Appellant		Mr D Petch

for the Respondents	Mrs L Hall, Shepherd & Wedderburn, WS

© CROWN COPYRIGHT 2004.

DECISION

The matters which eventually came before the Tribunal were the residue of various assessments which had been amended on more than one occasion made upon the Appellant for the periods 5/97, 8/97, 11/97 and further assessments made in relation to period 2/98, 5/98 8/98 and 11/98.  The latter totalled £244.  

The Appellant appeared on his own behalf.  The Respondents were represented by Mrs Hall of Shepherd & Wedderburn, WS.

The matters ultimately in dispute related to invoices which had been addressed to another trading concern of whom the Appellant was Managing Director being claimed for refund of input tax by the Appellant trading as Carron Valley Services (CVS).

Mr Miller, an officer of the Respondents, was ultimately successful in obtaining a visit to the Appellant during which he discovered various discrepancies including missing invoices and incomplete accounts.  That first visit was made on 14 October 1998.  Mr Miller discovered that the Appellant had claimed to deduct input tax in relation to VAT incurred for advertisements in the “Auto Trader” circulating other than in Scotland.  These invoices were addressed to Incomebusy Ltd a company of which the Appellant Mr Petch was a Director at Glenhead Farm, Stirling, Mr Petch’s address.  Since these invoices were not addressed to the taxpayer that was claiming refund these were initially disallowed.

The regulation of such matters is set out in the Value Added Tax Regulations 1995, paragraph 29 which specifies that proper VAT invoices addressed to the correct person are necessary although, by sub-paragraph 2, in relation to a particular case the claimant could provide an invoice or document or such other documentary evidence of the charge to VAT as the Commissioners might direct.

Dealing with this aspect of the case the Appellant gave evidence to the effect that because CVS cheques were not to be accepted in post-dated form for payment of advertising charges by Auto Trader he devised a scheme whereby the advertisement would be ordered by Incomebusy but utilised for the benefit of CVS.  He gave evidence that CVS were able to accept orders by credit card.  Incomebusy were not.  He said that there was no evidence or documents relating to any mail order supplies by Incomebusy who traded not so much in spare parts of vehicles but in vehicles themselves.

Much discussion and correspondence took place between the Respondents and the Appellant in the course of which the Appellants’ advisor indicated that of the Auto Trader invoices some were paid by CVS and some were paid by Incomebusy.  There was no evidence that in fact Incomebusy paid any cheques.

In the event the Commissioners on review accepted Mr Petch’s evidence to the effect that the charges were for the benefit of CVS but only to the extent of 75%.

It was the Tribunals view that having done so the Respondents were placed in the position that they no longer relied on the deficiencies in documentary evidence and in the provision of VAT invoices to CVS but were prepared to make a guess as to respective benefits between the 2 companies.  The Tribunal were satisfied on the evidence of Mr Petch in this regard, that despite the somewhat devious way in which the entire set of transactions took place, the benefit was properly 100% to CVS and not 75% when viewed overall.  The Tribunal observes however that had the Respondents not accepted that a substantial proportion of the expenditure could be deducted the view would have been taken that the absence of proper accounting and proper records should have meant the disallowance of the entire Auto Trader series of invoices.

The same considerations however do not apply to the remainder of the assessments which the Appellant sought to challenge.  It was suggested by him following upon some consideration by his VAT accountant not explained to us that the remaining assessments in the sum of £459 for each period had to do with Auto Trader invoices.  This could not be demonstrated to the Tribunal.  A schedule of these invoices was produced and their total does not amount to such sum as would equal the assessment. 

The Tribunal were greatly hampered by the state of confusion of the matters before them and by the various productions which, instead of providing primary evidence, consisted of the views of various participants in the whole saga.

The Respondents explained that the 3 assessments in the sum of £459 were based upon a calculation of the discrepancy between input tax reclaimed and the maximum amount of input tax available to reclaim.  That was based upon figures taken from the Appellants own annual accounts and were accordingly an assessment to best judgment on such evidence as was available and preserved by the Appellant.

The Tribunal were un-hesitatingly of the view that the Commissioners were entitled to make an assessment.  They were not referred to any authority but followed the approach taken by the Court of Appeal in Pegasus Birds Ltd v Commissioners of HM Customs & Excise, 27 July 2004, and considered their function as one of exploring whether the sums assessed were sustainable or had been successfully challenged by the Appellant.  They had not been successfully challenged.  There was no satisfactory evidence before the Tribunal about a quantification of the £459 assessments in relation to any matters to do with Auto Trader Ltd.  It perhaps is sufficient for the Tribunal to hold that if and insofar as any assessment or part of any assessments made upon the Appellant consisted of the disallowance of input tax originally invoiced to Incomebusy Ltd these assessments required to be modified.  To that extent but to that extent only the appeal is allowed.

We recognise that our decision may require some re-calculation which we are not in a position to make.  It is sufficient for us to indicate that the Appellant is due on assessment sums in relation to Value Added Tax in relation to the periods 5/97, 8/97 and 11/97.  Parties can consider whether those sums can, in light of our decision above, be reduced in any way.  As matters stand however, they cannot.  

No motion was made by either side in relation to expenses.  In the light of the conduct of the parties and the divided success in the appeal the Tribunal would not be minded to make any award of expenses to or by either party.

T GORDON COUTTS, QC

CHAIRMAN

RELEASE:  3 SEPTEMBER 2004

EDN/03/53