19350
	VAT — requirement for security — reasonable for the Commissioners to require it — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

 
 	
	SWANFLAME ASSOCIATES LIMITED	Appellant

	- and -

THE COMMISSIONERS FOR
	HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

				Tribunal:	Richard Barlow (Chairman)
						Mary Ainsworth

Sitting in public in Manchester on 12 August 2005

No appearance by or for the Appellant 

Richard Mansell instructed by the Acting Solicitor for HM Revenue and Customs for the Respondents 

	© CROWN COPYRIGHT 2005

DECISION

1.	When this case was called on for hearing no-one appeared for the Appellant.  Lee & Co accountants had sent a letter to the tribunal dated 11 August stating that the director of the Appellant company was suffering from hypertensive disease and was “Not well to attend the hearing”.  A medical certificate dated 9 August was attached referring to IHD, which we took to mean ischaemic heart disease.

2.	On 18 January 2005 the appeal was listed and no-one appeared for the Appellant.  Lee & Co wrote a letter dated the same date, but faxed the day before, saying that due to a family bereavement “the directors” will be unable to attend and an adjournment was granted.

3.	On 10 June 2005 this case was listed for hearing and Lee & Co had sent a message by fax to the tribunal the day before stating that the same director had been delayed in returning to the UK from abroad and seeking an adjournment.  No-one appeared for the Appellant.  The adjournment was granted on that occasion also and the tribunal issued a direction which included an indication that “on the next occasion it is likely that the tribunal will proceed to hear and decide the appeal whether or not the Appellant is represented and whether or not Mr Jaura attends”.

4.	 In light of the above and in particular as there was no explanation as to why Lee & Co did not attend the tribunal or why another director or manager had not attended in Mr Jaura’s absence we decided to proceed in the absence of the Appellant under rule 26(2) of the Value Added Tax Tribunal Rules 1986.

5.	The Appellant trades as the Shezan Restaurant.

6.	The appeal is against the Commissioners’ decision to give notice dated 6 August 2004 under paragraph 4(2)(a) of Schedule 11 to the Value Added Tax Act 1994 requiring the Appellant to give security by a third party guarantee or deposit in the sum of £19,289 as a condition of supplying goods or services under a taxable supply.  A requirement of that type can only be imposed where the Commissioners think it necessary for the protection of the revenue.

7.	The tribunal’s powers in such a case on an appeal under section 83(l) of the Act are limited to deciding whether the Commissioners’ decision was unreasonable.

8.	The Commissioners’ evidence was given by Mr C Leech a customs officer.  We accept his evidence as entirely truthful.  The Commissioners also relied upon a schedule showing that Mr Jaura had been the sole proprietor of a business trading under the same trading name and at the same address as the Appellant from 5 August 2002 until 31 July 2004 but that when that ownership of the business ceased he owed £30,584.81 VAT which had been assessed.  The Commissioners had previously made four ‘centrally issued’ assessments because returns had not been submitted. 

9.	Mr Leech told us that records held by the Commissioners showed that there had been difficulties in arranging visits to Mr Jaura as sole proprietor of the business and that books and records had not been produced when requested.

10.	At the time the security requirement was made the Appellant had submitted two VAT returns but had not paid the tax declared on the second one and it owed £10,323.46.  Payment of the VAT declared on the first return had been paid 151 days late.  At the time of registration, the director was declared to be Mr Jaura and Catherine Jaura was declared to be the company secretary.  

11.	Mr Leech told us the Commissioners had taken into account the above history and the fact that, as the business is a cash business, there was no question of bad debts or delay in payment of sums owed to the Appellant having caused the defaults.

12.	We are fully satisfied that the Commissioners were entitled to conclude that there was a risk to the revenue.  Clearly previous defaults by a different trading entity managed and owned by the same person can be taken into account in reaching that conclusion and the Appellant had itself also defaulted as soon as it began to trade.

13.	The Commissioners’ decision was not based on anything the Appellant informed them about after the notice was issued but we have seen the grounds of appeal.  They provide no grounds for us to conclude that the Commissioners’ decision was unreasonable.  In fact had they been known to the Commissioners at the time the decision was taken those grounds would have reinforced the Commissioners’ reasons for taking the decision to require security.  The grounds of appeal, as submitted to the tribunal, state openly that the business was having difficulty establishing itself against heavy competition and appear to admit that although returns were being made on time payments could not always be made.  Had those facts been known to the Commissioners they would have been more rather than less likely to require security and even if we accept the grounds of appeal at face value and despite there being no evidence from the Appellant; they afford no basis on which we could hold that the decision to require security was unreasonable.

14.	The appeal will be dismissed accordingly and in view of the Appellant’s non appearance on three occasions either by its directors or by Lee & Co we award the respondents £200 costs. 

RICHARD BARLOW
CHAIRMAN
Release Date: 22 November 2005
MAN/04/0463

££Swanflame Associates Ltd v Her Majesty’s Revenue and Customs [2005] UKVAT V19350 (22 November 2005)