18802
VALUE ADDED TAX – compulsory registration – whether the business carried on by the Appellant was previously carried on by a taxable person and transferred to the Appellant as a going concern – held it was – decision on registration upheld – consequential assessment under VATA 1994 s.73 upheld – penalty for late registration withdrawn – VATA 1994 s.49 – appeals against decision on registration and assessment dismissed – appeal against late registration penalty allowed

LONDON TRIBUNAL CENTRE

	ABDUL HAMID	Appellant

-	and –

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	MR JOHN WALTERS, Q.C.   (Chairman)
						MS SANDI O’NEILL

Sitting in public in London on 21st July 2004

The Appellant in person

Mr Jonathan Holl, Advocate, of the Office of the Solicitor of Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2004

DECISION

1.	Mr. Hamid appeals against the Commissioners’ decisions, contained in a letter dated 30th October 2002, (a) requiring Mr. Hamid to be registered for VAT with effect from 20th August 2001, on a transfer of a business as a going concern; (b) assessing Mr. Hamid for VAT due of £5,291.71 (reduced to £4,099.65 on review) for the period from 20th August 2001 to 18th January 2002, under section 73 VAT Act 1994; and (c) imposing a penalty of £529 (reduced to £204.98 on review) on Mr. Hamid, under section 67(1) VAT Act 1994 for failure to register for VAT with effect from 20th August 2001.  The Tribunal heard evidence from Mr. Hamid and from Mrs. Sainsbury and Mr. Dean, the officers of the Commissioners who collected the information on which the assessment was based.
2.	Mrs. Shala Begum Ullah (“Mrs. Ullah”) carried on an Indian restaurant business at 21 Molesey Road, Hersham, Walton-on-Thames, Surrey from a date in 2000 under the name of “New Rajoot”.  She and Mr. Hamid were the leaseholders of the property at which the business was carried on, and also the holders of the liquor licence.  Mrs. Ullah was registered for VAT with effect from a date early in 2000.  She traded until 17th February 2001, when she let Mr. Shueb Ahmed (“Mr. Shueb”) into possession of the property, while she remained the leaseholder.  Mr. Hamid said in evidence that Mr. Shueb was “working for” Mrs. Ullah, but he did not know on what terms. At this time, Mr. Hamid had no active involvement in the day to day operations of the business.
3.	 Mr. Shueb ran the restaurant from February until a date in August (or possibly September) 2001. During this time Mr. Hamid remained one of the leaseholders of the property and one of the licensees of the premises.  Mr. Shueb then, according to Mr. Hamid’s evidence, “disappeared”.  At that point (August 2001) Mr. Hamid took over the entirety of the rights and obligations of the lease of the restaurant from Mrs. Ullah and (after a closure period of two weeks) started to run the business himself under a new name “Uzzal”.  
4.	Mr. Shueb was not registered for VAT.
5.	Mr. Hamid’s trade under the name “Uzzal” was at a low rate of turnover until January 2002 when he transferred the business into the name of a new company “Uzzal Limited”.  His case is that he (or Uzzal Limited) should be registered for VAT as from 1st May 2002, when Uzzal Limited was in place and the turnover of the trade had increased to the level making registration mandatory. This increase was due to the closure of a competitor Indian restaurant business in December 2001. 
6.	For the Commissioners, Mr. Holl submits that Mr. Hamid was required to be registered for VAT with effect from 20th August 2001, the date when he says Mr. Hamid took over the lease from Mrs. Ullah and started running the restaurant, after Mr. Shueb’s departure.  He says that there were transfers of a business as a going concern by Mrs. Ullah to Mr. Shueb, and by Mr. Shueb to Mr. Hamid.  He relies on section 49(1)(a) VAT Act 1994, which is in the following terms:
“Transfers of going concerns
(1)	Where a business carried on by a taxable person is transferred to another person as a going concern, then–
(a)	for the purpose of determining whether the transferee is liable to be registered under this Act he shall be treated as having carried on the business before as well as after the transfer and supplies by the transferor shall be treated accordingly;”
7.	Mr. Holl submits that Mrs. Ullah was plainly a taxable person and that she transferred the restaurant business to Mr. Shueb as a going concern.  By section 49(1)(a) Mr. Shueb is treated as having carried on the business before the transfer (when Mrs. Ullah was in fact carrying it on) as well as after the transfer and this treatment results in Mr. Shueb being “credited” with having made supplies at a sufficient rate and over a sufficient period to render him liable to be registered as a taxable person.  
8.	We note that the applicable definition of taxable person includes (besides a person who is registered for VAT) a person who is required to be so registered – see: section 3(1) VAT Act 1994.
9.	Thus although Mr. Shueb never in fact registered for VAT, he was required so to do and was thus himself a taxable person.  He in turn, so Mr. Holl submits, transferred the restaurant business to Mr. Hamid as a going concern, with the result that section 49(1)(a) applies also to attribute to Mr. Hamid the earlier supplies in fact made by Mr. Shueb and Mrs. Ullah with the consequence that Mr. Hamid was rendered liable to register for VAT from the time of the transfer to him by Mr. Shueb, that is, from 20th August 2001.
10.	Mr. Holl adds that the low level of supplies which Mr. Hamid says he achieved in his first months of running the business (and on which he relies to show that he was not liable to register until 1st May 2002) does not affect the position because the head of liability to register on which the Commissioners rely (paragraph 1(2)(a), Schedule 1, VAT Act 1994) focuses on the level of past supplies – that is the level of supplies actually made by Mr. Shueb and Mrs. Ullah in the period of one year ending at the time of the transfer.
11.	Mr. Holl referred us to the recent decision of these Tribunals (Chairman: Dr. Nuala Brice) in Sandra Dollard v Commissioners of Customs and Excise (VAT Tribunal reference 18656).  In that case (which the Tribunal heard in the absence of the appellant) the Tribunal emphasised that the burden of proof was on the appellant to show that there was no continuing trade when she took over the business. The Tribunal found that she had not discharged that burden of proof. It found on the material available to it that, on the balance of probabilities, the previous trader or traders to the appellant had been a taxable person or persons (paragraph 41); there was no interruption in the trade which would have precluded any transfers being transfers of a going concern (paragraphs 42 and 44-45); and the turnover of the business was above the registration limit at the date of the transfer to the appellant (paragraph 43).
12.	This Tribunal is faced with a similar problem in that Mr. Hamid has not adduced any evidence bearing on the issues of whether the transfers by Mrs. Ullah to Mr. Shueb, and by Mr. Shueb to himself were transfers of a going concern, and whether the turnover of the business was above the registration limit at the date of the transfer to him (by Mr. Shueb), August 2001.  His only argument has been that his own turnover (or that of Uzzal Limited) after August 2001 was below the registration limit, which does not deal with the points on section 49(1)(a) and paragraph 1(2)(a), Schedule 1, VAT Act 1994 relied on by the Commissioners.  Such evidence as was adduced – for example Mr. Dean told us that the local authority, as the rating and licensing authority, had no record of any significant break in trading at the business address – suggests that the Commissioners’ case is right on the facts.
13.	We accept Mr. Holl’s submissions on the effect of section 49(1)(a) and paragraph 1(2)(a), Schedule 1, VAT Act 1994 in this case and also find that Mr. Hamid has not discharged the burden of proof on him to disprove their application on the facts of this case.  Mr. Hamid expressly did not challenge the methodology or amount of the assessment made under section 73(1) VAT Act 1994 – he said in evidence that the Commissioners’ estimate “is maybe about right” (on the basis that he was liable to be registered) – and we therefore uphold the decision requiring registration with effect from 20th August 2001 and the assessment and dismiss the appeals against them.  
14.	Mr. Hamid’s point that he should not be regarded as being the transferee of a business carried on by a taxable person as a going concern because Mr. Shueb was never registered for VAT, has no substance.  As we have noted at paragraphs 8 and 9 above, Mr. Shueb was a taxable person for all relevant purposes notwithstanding his actual failure to be registered.  Quite apart from that, there is some evidence that Mr. Shueb was not in fact carrying on the business independently, but as the agent of Mrs. Ullah.  Mrs. Ullah was a taxable person, therefore if section 49(1)(a) does not apply to Mr. Hamid by reference to the transfer to him by Mr. Shueb, it does so by reference to the transfer to him by Mrs. Ullah.
15.	In the course of the hearing, Mr. Holl indicated the Commissioners’ willingness to withdraw the penalty imposed on Mr. Hamid under section 67(1) VAT Act 1994 for failure to register for VAT with effect from 20th August 2001.  We would comment that this was an appropriate action in recognition of Mr. Hamid’s grievance about being in effect penalised for Mr. Shueb’s failure to register for VAT. We therefore formally allow Mr. Hamid’s appeal against the penalty.
16.	This Decision gives reasons for our dismissals of Mr. Hamid’s appeals against the registration decision and the assessment, and our allowing his appeal against the penalty, all of which we announced at the conclusion of the hearing.
17.	There will be no order for costs.

JOHN WALTERS, Q.C.
CHAIRMAN

RELEASED: 15 October 2004

LON/03/723