Kevtron Maintenance Services Ltd v Revenue and Customs [2006] UKVAT V19447 (02 February 2006)

19447
	SECURITY — no attendance by or on behalf of appellant — poor compliance record — director and company secretary involved in previous insolvent company — was the requirement reasonable — yes — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

 

KEVTRON MAINTENANCE SERVICES LIMITED	Appellant

- and -

THE COMMISSIONERS FOR
HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

Tribunal:	Lady Mitting (Chairman)
John D Kippest

Sitting in public in Birmingham on 16 January 2006

The Appellant did not appear and was not represented

Richard Mansell of the Solicitor’s Office for HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2006

DECISION

1.	The decision under appeal is that of the Respondents contained in a letter dated 19 July 2005 to require the Appellant company to give security under paragraph 4(2)(a) Schedule 11 Value Added Tax Act 1994.  The amount of security required was £19,800 if quarterly returns were to be submitted or £13,200 on monthly returns.
2.	There was no attendance by or on behalf of the Appellant company and, having checked that the notice of hearing had been properly addressed and sent and not returned, we proceeded to hear the case under rule 26(2) Value Added Tax Tribunals Rules 1986.
The facts
3.	We heard oral evidence from Miss Lucia Carpanini, whose decision it was to require the security.
4.	Miss Carpanini’s involvement with this case began when it was referred to her by a member of her team who was concerned about the compliance record of the company.  The company had registered for VAT with effect from 10 February 2004.  The intended business of the company was stated in the application for registration to be “service and repair of domestic gas heating systems and appliances”.  
5.	The Appellant’s first return for 03/04 was a nil return and was received on time.  The return for 06/04 was also received on time, together with the due payment of £910.39.  The return for 09/04 was received one day late but with its due payment of £7,421.55.  By the time the notice of requirement was raised, no further returns had been submitted.  The Respondents raised a central assessment on 11 February 2005 for £7,931, this sum eventually being paid on the 4 May 2005.  A further centrally issued assessment for £7,370 was raised for 03/05 on 13 May 2005.  This had not been paid by the time Miss Carpanini raised the request for security but was paid on 28 July 2005.
6.	Miss Carpanini also looked at the identity of the officers of the Appellant company.  She discovered that Mr Terence Francis Smith was a named director and Mr Anthony David Lea, the company secretary.  They had each been the director and company secretary, respectively, of a company called Kevtron Limited which had been registered from 9 July 2001 to 18 November 2004 and had become insolvent leaving the Respondents with a debt of £33,001.62.  Kevtron’s business was described in its application for registration as “mechanical and electrical engineers”.  In the statutory information given on its insolvency it described the nature of its business as “installation and maintenance of gas heating systems”.  Miss Carpanini made the point in her evidence that although the Respondents claimed £33,001.62 in Kevtron’s insolvency, the true liability could have been very much greater because Kevtron had not submitted a number of its returns.  The amount claimed was merely the amount of the centrally issued assessments then outstanding and default surcharges.
7.	Miss Carpanini took the view that it would be appropriate to raise a demand for security and she wrote to the Appellant on 26 April 2005, advising the company of her views and asking them to let her have any further relevant information in default of which she would proceed with the request.  In her letter, she incorrectly stated that “Kevtron Maintenance Services Limited is the same entity as Kevtron Limited”.  The Appellant replied on 28 April 2005 pointing out, quite rightly, that the Appellant was a separate legal entity from Kevtron but not really giving any further information to alter Miss Carpanini’s view.  A colleague responded to the Appellant by letter dated 7 June 2005 confirming that Kevtron and the Appellant were separate legal entities but going on to say that they were linked due to the directors and in the light of this, the Respondents still had concerns about the Appellant’s VAT.  Nothing further was heard and the requirement was duly made.
The Appellant’s case
8.	The Appellant had submitted a bundle of documents to the Tribunal Centre but, without explanation or focus.  The documents included the certificates of incorporation of both Kevtron and the Appellant; documentation with regard to the liquidation of Kevtron; copy statements from Bibby Factors and some miscellaneous correspondence.  Without some further explanation, we could see nothing in the documentation to assist us in the matter in issue.
9.	The grounds of appeal given to the Tribunal Centre were as follows:
“HM Revenue & Customs require a deposit because they consider this company and Kevtron Limited in liquidation are the same entity / have same directors.  This company is independent and differs in nature.”
Conclusions
10.	Our jurisdiction is supervisory and we are limited to considering the reasonableness of the Respondents’ decision, such consideration to be limited to those matters prevailing at the time the decision was made.  The position at that time was that the Appellant’s compliance record, although it had been satisfactory to begin with, had deteriorated and two returns were outstanding and one centrally issued assessment had been paid but not the second.  The compliance record alone would have been sufficient cause for concern but in addition, there was the involvement of the officers of the company in Kevtron Limited.  Quite clearly, this is a separate legal entity but there is a clear link between the two companies both in their officers and in their nature of business.  Although the notice of appeal pleads that “this company … differs in nature”, it clearly does not as evidenced by the very similar descriptions of the nature of Kevtron’s business taken from the statutory information on its insolvency and the description of the Appellant’s intended business taken from its application for registration.  
11.	These factors taken into account by Miss Carpanini are quite clearly relevant and critical.  We know of no other factors which she should have considered but failed to and we find her decision to have been totally reasonable.  The appeal is therefore dismissed.
12.	Mr Mansell made an application for a contribution to the Respondents’ costs in the sum of £150, which we grant.

LADY MITTING
CHAIRMAN
Release Date: 2 February 2006
MAN/05/0526