19069
	VAT — compulsory registration — private car hire operator — whether on facts Appellant became liable to be registered with effect from end November 1995 — finding that he did not so become liable — appeal allowed

	VAT — global assessment — whether valid as relating only to period when Appellant liable to be registered — appeal allowed

MANCHESTER TRIBUNAL CENTRE

 
 	
	MUKHTAR AHMED t/a PREMIER CARS	Appellant

	- and -

	HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

				Tribunal:	David Demack (Chairman)
						Mrs Marilyn Crompton
						Arthur Brown FCA	

Sitting in public in Manchester on 16 April 2004 and 4 April 2005

Richard Barlow, of counsel, instructed by IVC, VAT Consultants, for the Appellant 

David Abberton, counsel instructed by the Acting Solicitor for HM Revenue and Customs, for the Respondents 

	© CROWN COPYRIGHT 2005

DECISION

1.	On 8 June 1999 the Appellant, Mr Mukhtar Ahmed, was compulsorily registered for VAT with effect from the end of November 1995; and on 24 October 2000 he was assessed to tax of £31,655 for the period between 1 December 1995 and 31 May 2000 inclusive.  He appeals against both the decision of the Commissioners of Customs and Excise compulsorily to register him, and against the assessment.
2.	In his Notice of Appeal against the registration decision, Mr Ahmed’s representatives gave his reason for appealing as, “The proprietor is not registerable (sic) from the date of 1 December 1995”.  No formal notice of appeal appears to have been served against the assessment, a global one for the whole of the assessment period.  Its validity therefore depends on his being liable to be registered with effect from the end of November 1995.  Notwithstanding that the assessment has not been appealed against, the appeal has been treated throughout as against both the registration decision and assessment.
3.	The Commissioners’ decision to register Mr Ahmed arose in this way.  On 27 September 1997, as part of a general check on private car hire businesses, Mrs S A Jones, the Commissioners’ assessing officer, paid an unannounced visit to Mr Ahmed’s business, Premier Cars, at Halifax.  She was accompanied by another Customs officer, Mr Parsons, and two representatives of the Benefits Agency.  She spoke to Premier Cars' receptionist and to Mr Ahmed’s brother, Mr Zulfiqar Ahmed.  Amongst other things, the latter told her, and she contemporaneously noted, that Premier’s full-time drivers paid a weekly rent for radio and other services of £36, and part-time drivers £20 per week.  Two drivers, one full-time and the other part-time, confirmed those rent levels.  Mrs Jones uplifted two of Premier Cars’ journey record books showing dates, journey details and the names of drivers carrying out the work, a list of the drivers’ names and addresses, and files containing details of account work and fare sharing income.  On 29 September 1997, Mrs Jones wrote to Mr Ahmed asking him to supply his remaining records and inviting him to attend for interview on 1 October.  He failed to keep the suggested appointment.  He supplied his records of rentals received on 10 October which, on comparing them with the uplifted journey records, Mrs Jones accepted as revealing the true number of drivers engaged.  They did, however, show full and part-time driver weekly rentals of £21 and £15 respectively – figures which Mrs Jones rejected.  Mr Ahmed attended for interview on 5 November 1997 when he claimed that his records and wallet had been stolen whilst he was swimming.  Mrs Jones subsequently contacted the local police who confirmed that the theft of the wallet had been reported immediately after the theft, but that of the records was not reported until later.  In interview, Mr Ahmed maintained that the figures of £21 and £15 for weekly rentals were the correct ones.
4.	Mrs Jones subsequently calculated the income she considered Mr Ahmed had received.  Based on the contents of the uplifted record sheets but substituting £36 for full-time rentals and £20 for part-time rentals, including fare sharing income, she calculated that Mr Ahmed had been liable to be registered from the date on which she then understood him to have taken over Premier Cars, i.e. on 1 May 1994.
5.	Mr Ahmed was registered for VAT with effect on that date, and was required to make a single return for the period between 1 May 1994 and 28 February 1998.  He failed to make the return and was assessed to tax of £29,718.  He appealed against the assessment and, on the Commissioners reviewing it, the amount assessed was reduced to £28,975.  The appeal came on for hearing on 27 May 1999 and, at the hearing, Mr Ahmed produced documents showing both that he did not take over Premier Cars until 10 June 1994, and on his doing so, acquired 16 radios.  The Commissioners accepted the position revealed in the documents produced, and withdrew both the original registration decision and the assessment.  Mr Ahmed’s appeal was either withdrawn or allowed (it matters not which).  
6.	Mrs Jones then reviewed the situation in the light of new information she possessed.  Assuming:
1.	that each of the 16 radios represented a car operated by Premier Cars at the outset of trading;
2.	using a straight line increase in the number of drivers from 16 at acquisition to the over 30 admitted by Mr Ahmed at the end of 1996; 
3.	applying the average amount generated per driver each week as shown in Mr Ahmed’s records in the period between 4 January 1997 and 4 October 1997; and 
4.	taking the average number of drivers per week from his records for that same period;
Mrs Jones concluded that Mr Ahmed had breached the historic annual registration limit of £45,000 for VAT registration (for which paragraph 1(i)(a) of Schedule 1 to the Value Added Tax Act 1994 provides) in the week ended 28 October 1995.  On that basis, he was liable to be registered with effect from the end of November 1995, and was so registered. 
7.	Mr Ahmed gave evidence to us on the first day of the hearing.  He completed his evidence in chief, but was not cross-examined.  The hearing was then adjourned.  Mr Ahmed did not appear on the second day of the hearing, his counsel, Mr Barlow, producing a doctor’s note indicating that he was suffering from a depressive illness which was likely to prove permanent.  We thus had no opportunity to test a claim Mr Ahmed made in evidence that, notwithstanding that when on taking over Premier Cars he acquired 16 radios, he started by operating only 6 to 8 cars.  We found him an evasive, and hence unreliable witness and conclude from the documents before us that not only did he fail to maintain proper basic records but also refused to co-operate with the revenue authorities.  (Amongst the papers were assessments to income tax for 1994/95 and 1995/96 made by the Inland Revenue in the absence of income tax returns for those years and confirmed by the General Commissioners of Income Tax).
8.	As Mr Barlow, Mr Ahmed’s counsel, quite correctly pointed out, the question of whether, and if so when, Mr Ahmed’s turnover exceeded the historic annual registration limit is a question of fact:  it does not turn on the exercise of best judgment by the Commissioners.  For Mr Ahmed to succeed in his appeal, he must establish on the balance of probabilities that his annual turnover did not exceed the registration limit in the week ended 28 October 1995.
9.	In the calculations resulting in her concluding that Mr Ahmed was liable to be registered with effect from the end of November 1995, as we mentioned in paragraph 6 above, Mrs Jones made four assumptions, all of which must be factually correct if we are to accept her decision as to registration.  That is so, notwithstanding that the burden of proof falls on Mr Ahmed.  
10.	We have most carefully considered the four assumptions in question.  With the second, third and fourth, we have no problems.  But as to the first, on the basis of the very limited evidence adduced (as indicated above), we find that Mr Ahmed did not operate 16 cars from the outset of trading.  Consequently, we also find that his turnover in the year to 28 October 1995 did not exceed the then current historical annual registration limit of £45,000, so that he was not liable to be registered with effect from the end of November 1995.  And since the assessment under appeal is a global one, allowing no room for factual error, we hold it to be invalid as relating, at least in part, to a period during which Mr Ahmed was not required to be registered.  It follows that we allow the appeal against both the registration and the assessment.
11.	 (We might add that, as part of our deliberations, we made a calculation similar to Mrs Jones’ of Mr Ahmed’s turnover but assuming, purely hypothetically, that on commencing trading he operated 15, as opposed to 16 cars.  On that basis he would not have been liable to be registered until the end of January 1996.  Had the number of cars been even less than 15, the date on which he would have been required to register would have been even later).
12.	Mr Barlow applied for Mr Ahmed’s costs in the event of the appeal succeeding.  We consider this to be one of those rare cases in which we should exercise our discretion not to award costs to a successful appellant.  Mr Ahmed brought the appeal on himself:  he failed to keep proper records; and he concealed material from the Commissioners.  We refuse the application.

DAVID DEMACK
CHAIRMAN
Release Date: 28 April 2005

MAN/00/0460 

££Ahmed (t/a Premier Cars) v Revenue and Customs [2005] UKVAT V19069 (28 April 2005)