18887

	
	TAKEAWAY FOOD SHOP  — issue as to registrable date — whether suppression — whether dishonest conduct — VATA 1994 Section 60(1) 73 and Schedule 1 — appeal dismissed.

MANCHESTER TRIBUNAL CENTRE

 
 	
	LABAS MIAH t/a LUCKY TANDOORI TAKEAWAY	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	John Fryer-Spedding CBE (Chairman)
						Warren Snowdon
						Roland Presho FCMA	

Sitting in public in North Shields, Tyne and Wear on 23 November 2004

No attendance by or on behalf of the Appellant 

Mr Charles Morgan, counsel, for the Respondents 

	© CROWN COPYRIGHT 2004

DECISION

1.	There was no attendance by or on behalf of the Appellant.  We determined to proceed to hear the appeal pursuant to Section 26(2) of the Value Added Tax Tribunal Rules 1986.  We should say that the Appellant’s business was advised by Accountants, Messrs Hossain, Moorehead & Co of Manchester.   That firm acted for the Appellant at least until August 2001.  However, prior to the hearing, we asked the Tribunal Clerk to telephone to them about the absence of an appearance of or for the Appellant.  They replied that their instructions in the appeal had by then been withdrawn.  
2.	We should also mention as a preliminary matter that at the start of the hearing we informed Mr Morgan, the Respondents’ counsel, that one of the Members, Mr Snowdon, and one of the Respondents’ witnesses, Mr A Gibbs-Barton, served as Justices of the Peace on the South East Northumberland Magistrates Bench.  After taking instructions, Mr Morgan said that he would not be calling Mr Gibbs-Barton.  We, therefore, disregarded the statement of Mr Gibbs-Barton included in the Respondents’ bundle.  
3.	This is a consolidated appeal against:
(i)	an assessment for the sum of £4274, with interest, relating to VAT arrears for the period 1 March 1993 to 28 February 1998.  Notice of this assessment was issued on 7 July 1998.
(ii)	an assessment for the sum of  £53,034, with interest, relating to VAT arrears for the period 1 March 1993 to 30 November 1997.  Notice of this was issued on 4 August 1998.
(iii)	a decision to assess the Appellant pursuant to section 76 of the Value Added Tax Act 1994 to a penalty for dishonest conduct falling within section 60(1) of the Act for the sum of £35,598 relating to the period 1 October 1994 to 28 February 1998.  Notice was given by the Respondents by their letter dated 28 August 1998.
4.	Pursuant to a Direction of the Tribunal given on 10 September 2001, the Appellant’s accountants served a Defence.  This document is headed, however, “Statement of Case”, but we shall refer to it as “the Defence”.  
5.	The Defence shows that the Appellant’s business was originally operated as a partnership formed in 1981.  However, in 1992, the Appellant apparently took over the business as a sole trader.  
6.	In 1996, as part of an exercise relating to unregistered traders, officers of the Respondents carried out certain investigations relating to the Appellant’s business.  On the evening of 2nd December 1996, officers of the Respondents, Mr B Bonham, Mr D Healy and Ms J Minnikin made certain test purchases at the Appellant’s premises at 4 Fifteenth Avenue, Blyth, Northumberland.  
7.	On 19 January 1997 and 9 April 1997, Mr Bonham, in his evidence, said that he saw a male person enter the premises and purchase two bags of chips which were not recorded on a bill but the cash was placed in the till.  
8.	On 19 January 1997 and 9 April 1997, invigilations were carried out by Mr L Terry and Mr M Usher and the takings recorded.  
9.	On 16 October 1997, Mr A Sutherland, Mr Bonham and Mr G Calvert attended the premises and made certain test purchases.  
10.	On 17 October 1997, Mr T Collins and Mr Usher attended the premises, made enquiries of the Appellant and observed him cashing up for the day.  They informed the Appellant that they had reason to believe that he was not declaring all his takings and showed him Public Notice 730.  
11.	On 30 October 1997, the Appellant applied to register for VAT.  On 10 November 1997, he received notice of registration with effect from 1 October 1997.  
12.	On 11 November 1997, Mr Collins and Mr Usher interviewed the Appellant.  The Appellant said that he had at all material times known what was the registration threshold, because his accountant had informed him about this.  The Appellant admitted that he had thrown customers’ meal bills away until the officers had started visiting his premises.  However, he said that he had by then started keeping the meal bills, adding them up and sending the totals to his accountant.  He also said that he paid his son and other staff their wages in cash.  Sometimes he himself took £100 or £80 in cash.  He said that he sometimes paid suppliers in cash and sometimes by cheque, the payment being made to the delivery driver.  Sometimes he obtained credit.  Mr Collins put to him that the Appellant’s average takings for the past three years were considerably lower than that recorded when the officers had carried out their invigilations.  The Appellant said that this could have been due to recently established competition.  He also said that he had then recently put his prices up.  He said that a customer had got his new menus printed when the prices changed but he did not know the customer’s name and he had paid him with some curry.  He said that he gave him a curry for a thousand menus.  He had no receipt for the transaction.  Later the Appellant again admitted that he had removed meal bills.  He also admitted that he had removed them because he did not want to be registered for VAT.  He later said that he had been taking out between £100 to £150 per week from the business to live on.  He could not explain how some of the test purchases did not appear in his records.  
13.	On 26 November 1997, the Appellant’s accountants informed the Respondents that the Appellant’s records for the period 1 October 1991 to 31 March 1994 had been lost.  
14.	On 31 January 1998, Mr Collins and Ms A Broughton attended the Appellant’s premises and carried out a further invigilation.  
15.	On 6 May 1998, Mr Collins and Miss Broughton interviewed the Appellant.  Mr Collins put to the Appellant that his January 1998 takings for each Saturday night had been twice the average of the Saturday night takings since 1994.  The Appellant said that this was due to a leaflet drop which he had carried out and was not due to a suppression of his takings.  The Appellant said that he could make no comment upon the fact that he had made purchases from Laidler Foods which were not in his records.
16.	The officer analysed the outcome of the above investigations in connection with the Appellant’s records held by his accountants and recorded that:
(i)	only one of the three test purchases made on 2 December 1996 appeared in the Appellant’s records
(ii)	only two of the three test purchases made on 16 October 1997 appeared in the records
(iii)	the takings observed by the officers on 17 November 1997 were higher than any other prior recorded daily gross takings
(iv)	the takings observed by the officers on 31 January 1998 were higher than on any other recorded daily gross taken.
17.	In the light of the above information, the Respondents concluded the Appellant was registrable for VAT with effect from 1 March 1993 and backdated the effective date of registration to that date.  Mr Collins produced as Schedule 1 to his statement, a computation supporting that effective date for registration.  
18.	The two assessments dated 7 July 1998 and 4 August 1998 and the penalty letter dated 28 August 1998 were then issued as mentioned above.  Mr Collins also produced a detailed schedule supporting a suppression rate of 53 per cent.  He said that he felt that the degree of co-operation afforded by the Appellant was properly reflected in a 25 per cent mitigation of the penalty.  
19.	
In the Notice of Appeal, the grounds of appeal were shown as follows:
	“the penalty has been levied on an assessment based on estimated assessments on grounds which are not correct.”   
20.	In the Defence and in correspondence, the Appellant’s accountants argued that the officers of the Respondents should attend the Appellant’s premises for one or two weeks continuously in order to make a proper assessment.
21.	Section 73(1) of the Act under which the assessments are made provides:
	“where a person has failed to make any returns required under this Act … or to keep any documents and afford the facilities necessary to verify such returns or where it appears to the Commissioners that such returns are incomplete or incorrect, they may assess the amount of VAT due from him to the best of their judgment and notify it to him.”
22.	We consider that the Respondents correctly computed the date from which registration should have been effected in accordance with Schedule 1 to the Act and that their assessment was made to the best of their judgment.  They made proper and adequate investigations and took into account material disclosed to them by the Appellant, see Van Boeckel v Customs and Excise Commissioners 1981 STC 290.
23.	We find that the conduct of the Appellant, as set out above involved ‘dishonesty’ for the purposes of Section 60(1) of the Act.  We therefore conclude that the Appellant was properly assessed to the penalty under Section 76.  We also consider that the amount of mitigation allowed by the Respondents was the proper amount.
24.	For the above reasons, we dismiss the appeal.  We direct that the Appellant do pay the Respondents’ costs of the appeal to be taxed if not agreed.

JOHN FRYER-SPEDDING
CHAIRMAN
Release Date: 29 December 2004

MAN/99/0405