TST Process Systems Ltd v Customs and Excise [2005] UKVAT V19003 (29 March 2005)

19003

	SECURITY  — VATA Sch 11 para 4 — company with directors in common with a failed company — Appellant with poor compliance record — whether requirement for security reasonably imposed — yes — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

 
 	
	TST PROCESS SYSTEMS LIMITED	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	 Colin Bishopp (Chairman)
						 Warren Snowdon	

Sitting in public in North Shields on 16 March 2005

The Appellant was not represented

Christopher Owen of the Solicitor’s Office of HM Customs and Excise for the Respondents 

	© CROWN COPYRIGHT 2005

DECISION

1.	This is the appeal of TST Process Systems Limited against the Commissioners’ requirement, imposed by notice of 29 October 2004, that it give security for its value added tax liabilities as a condition of its continuing to make supplies.  The requirement was imposed in accordance with the provisions of paragraph 4(2)(a) of Schedule 11 to the Value Added Tax Act 1994.
2.	When the appeal was called on for hearing, no officer of the Appellant was present, nor were its representatives, Haines Watts, the chartered accountants.  Christopher Owen, of their Solicitor’s office, who appeared for the Respondents, told us that he had made a telephone call to Haines Watts to find out whether any attendance was to be expected.  He said that he had not been able to speak to the person who had, hitherto, been representing the Appellant, who was said to be away from his office, but the person to whom he had spoken had promised to make enquiries and to return his call.  By the time we came to hear the appeal, more than an hour had gone by but there had been no further telephone call.  Mr Owen was ready to proceed and he had the officer who had imposed the requirement, David Price, in attendance.  Notice of the hearing appeared to us have been properly given and we concluded that in those circumstances it was appropriate for us to hear the appeal in the Appellant’s absence.  
3.	The requirement was imposed, we were told, were for two reasons.  First, one of the Appellant’s directors, Melvyn Thomson, had also been a director of TST Engineering Services Limited, which entered into insolvent liquidation in 1997, owing the Commissioners some £45,000.  The Commissioners perceived that fact as an indication that there could be a risk to the revenue.  Another of the directors of TST Engineering Services Limited was Paul Thompson, whom Mr Price understood to be Melvyn Thomson’s son; he was a director of another company, TST Crane Hire Limited, which had also entered into insolvent liquidation, in 1999.  At the hearing, however, the Commissioners did not rely upon that factor.  More important was the Appellant’s compliance record.  It had, we were told, previously been required to give security but that requirement had been withdrawn in 1998.  Since then, however, the Appellant’s compliance record had deteriorated.  We were provided with a schedule setting out the history of the Appellant’s returns and of three fairly small assessments in the prescribed periods from 11/99 to 06/04.  It shows that initially short delays in rendering returns and payments gradually lengthened and that, from period 03/03, although the Appellant began to render its returns a little more promptly, it was making partial payment or no payment at all with the consequence that, by 29 October 2004, the total amount of its outstanding VAT liabilities had grown to £66,512.27.  Mr Price was also aware that the Appellant had attempted to enter into an arrangement with its creditors but, for reasons of which he was unaware, the attempt had been abandoned.  
4.	We do not ourselves think the insolvency of other companies, even if run by the same directors or their families, is of great relevance after intervals of seven and five years.  The Appellant’s compliance record, however, is quite obviously very poor and although there has been some improvement in the submission of the Appellant’s returns in the more recent periods, it is a matter of concern that no payments at all have been made.  
5.	It is impossible, in those circumstances, to criticise Mr Price’s conclusion that at the time the requirement was imposed the Appellant represented a risk to the revenue and the appeal must be dismissed.
6.	We make no direction in respect of costs.

COLIN BISHOPP
CHAIRMAN
Release Date: 29 march 2005

MAN/04/0768