19475
Value added tax – security – requirements for – whether decision of Commissioners to require security reasonable – yes

Value added tax – appeals – procedure – withdrawal of appeal – whether withdrawal can be made by notice to other party only  - no

LONDON TRIBUNAL CENTRE

	FRAMETECH LTD	Appellant

-	and –

	 THE COMMISSIONERS FOR HER MAJESTY’S  REVENUE AND CUSTOMS                                                  

Respondents

				Tribunal:	Dr. David Williams (Chairman)
						Mrs Norah Clarke (Member) 

Sitting in public in Cardiff on 6 December 2005 

Mrs P A Crinnion of the Office of the Solicitor to Her Majesty’s Revenue and Customs for the Appellant 

The Respondents did not appear and were not represented

© CROWN COPYRIGHT 2006

DECISION

1	This appeal is against the decision of the Respondents (the Commissioners) requiring security from the Appellant before it is allowed to supply goods or services under a taxable supply for the purposes of value added tax (VAT). The security required was £30,400. The reasons for the appeal were that the request for security was unreasonable in view of the Appellant’s VAT payment record and that the amount of security provided was excessive.

The absence of the Appellant 

2	The Appellant did not attend the hearing, nor was represented at it. The hearing date and venue had been agreed by the Appellant’s solicitors, Beachcroft Wansbroughs. At the start of the hearing, the tribunal was told both by the clerk and the officer representing the Commissioners that there had been no reply to recent phone calls about the case. The tribunal adjourned for 15 minutes in case of a last minute response by the Appellant. On reconvening, the tribunal was told that the officer had rung the solicitors twice in the previous fortnight, and that the clerk had been unable to get a reply from the Appellant’s office. The tribunal was also told that the officer had now been informed that a fax had been sent to the officer’s office the previous afternoon indicating a withdrawal by the Appellant. The officer had not personally seen a copy, and no copy was available for the tribunal at that time. The clerk confirmed that no such notice had been sent either to the Cardiff office or the London office, and that no other communication had been received from the Appellant or the solicitors. 

3	The Commissioners were represented, had presented full paperwork for the appeal, and had three witnesses present. The tribunal decided to proceed with the appeal under rule 26(2) of the Value Added Tax Tribunals Rules 1986 (the VATT Rules).  

Withdrawing an appeal

4	A copy of the fax from Beachcroft Wansbroughs was given to the tribunal some time later, after the first witness had been heard. It had been sent at 13.22 the previous afternoon to the office of the officer representing the Commissioners before the tribunal. It advised that the client had decided to withdraw. It apologised to the Commissioners for the late notification and it added: “Please will you arrange for the tribunal to be advised.” The fax was initialled “B.W.”.

5	Rule 16(1) of the VATT Rules provides that an appellant or applicant may at any time withdraw an appeal or application “by serving at the appropriate tribunal centre a notice of withdrawal signed by himself or on his behalf.” Rule 16(2) preserves the right of the other party to ask for costs and other similar measures. The chairman ruled at the hearing of this appeal, and the tribunal confirms, that it is clear from the face of the copy of the fax that eventually arrived that it was not a valid withdrawal. Accepting for current purposes that Beachcroft Wansbroughs signed the notice sufficiently for the purposes of the rule, and that the notice is properly served in faxed form, it is nonetheless clear on its face that it was not validly served on the tribunal. 

6	The approach of asking an officer of the Commissioners to pass on a notice of withdrawal from any tribunal hearing is simply not good enough. In this case, additionally, the solicitors knew or should have known that the case was one where the officer concerned was travelling a distance to the tribunal venue (and therefore likely already to have left the office to which the notice was sent at the time it arrived) with a number of witnesses, who were also required to travel. The fax was therefore inadequate even as a communication to the other party. 

The requirement for security

7	The tribunal accepts that the notice requiring security was in proper form and validly served. The grounds of appeal, however, questioned whether it was appropriate. The question for the tribunal is whether the Commissioners acted properly in applying Schedule 11, paragraph 4 to the Value Added Tax Act 1994 in the circumstances of the application by Frametech Ltd. That is a discretionary power, and the task of the tribunal is not to retake that decision but to consider if it was properly taken by the Commissioners.     

8	Mrs Crinnion presented full documentary evidence of the decision, and oral evidence was offered by Officers Loader, Andrews, and Ogburn, all officers of Revenue and Customs actively involved in dealings with the Appellant and the decision to require security. The tribunal accepts their evidence and, in the circumstances, sees no purpose in setting out that evidence at length in this decision.

9	The tribunal was presented with a picture of the involvement of the directors of Frametech Ltd in a number of companies and of the use of the name “Frametech” by a number of companies. The tribunal assumes that the intellectual property in the name “Frametech” would suggest contractual or licensing links between all companies using that name of which the directors of the main companies would be fully aware. Frametech Ltd is based in Flowers Hill, Brislington, Bristol. Its directors were Alan Richard Colley and Wendy Denise Colley of Homepark, Churston Road, Torquay. Each of them also acts or has acted as director of (or company secretary to) other companies with which the Commissioners had had dealings and with the same classification of business activity.  One is Relton Law Ltd, with an address adjacent to the address of Frametech Ltd. The tribunal accepted evidence that Relton Law Ltd had defaulted in its dealings with the Commissioners. The same applied to Frametech (GB) Ltd, with an address in Torquay that was in a residential block of flats. There was another company called Relton UK Ltd, of which the same was also true, also with an address in Brislington. And there were other companies using the name “Frametech” and in some cases sharing an address with a company noted above, that were also in default to the Commissioners. The tribunal noted that some of these other companies, and further companies using the same addresses, had directors who had previously been directors of the Appellant. The tribunal was unable to establish the nature of the links with these other companies. But in the absence of evidence from the Appellant’s directors, the Commissioners did not rely on those further links. Having heard the evidence, the tribunal considers that the Commissioners are entitled to rely on the evidence produced of the relationships with the Commissioners of companies being operated by the same directors, in the same line of business, and from the same addresses when considering the need for security of Frametech Ltd. 

10	The tribunal was also given a history of defaults in both making VAT returns and of payment of VAT due on those returns by the Appellant. It is sufficient to say for present purposes that the record was not one on which the Appellant could reasonably contend the ground of appeal that its record was such that security was not justified. It had only paid part of the VAT due on some of its returns at a late stage to stop recovery of the sum as a civil debt. And at the date of the hearing it owed VAT to the Commissioners. That evidence was entirely consistent with the decision taken by the Commissioners to require security.

11	Further, the tribunal heard and saw evidence of a number of attempts by officers of the Commissioners to speak directly to the directors of the Appellant about its VAT records. Again without reciting details, it accepted that there was evidence that the Commissioners had made a series of attempts to meet with the Appellant’s officers to discuss its position. Even accepting that various computers were stolen, as stated in the letter from Mr Colley of 15 November 2005, the Commissioners’ evidence is clearly entirely consistent with the decision taken to require security.   	    
12	The Commissioners also offered evidence of the basis of the amount of the security required. The Appellant has not raised any substantive objection to the figure shown. The Commissioners have clearly based it on their usual policy and have explained it fully. There is no basis in this ground of appeal either. 

13	In the view of the tribunal, all the evidence points incontestably not only against the grounds of appeal having any substance but also to the conclusion that the Commissioners were acting entirely appropriately in demanding security in this case. The appeal is dismissed.

Costs

14	The Commissioners asked for the costs of the witnesses attending the hearing in Cardiff from their offices in Southampton. This was limited to the travel costs of one car (at 40p a mile) on the return trip from and to Southampton and the tribunal and the vouched accommodation and meal costs of the officers the night before the hearing. The Appellant had not properly withdrawn the appeal and the tribunal considered the application. The tribunal accepts that the officers were not aware of the Appellants’ intention to withdraw, even at an informal level, until the day of hearing and the costs sought had been incurred by that time. Those costs are entirely appropriate and are awarded under rule 29 of the Value Added Tax Tribunal Rules. The amount is to be settled by the parties with liberty to apply to the tribunal if the amount cannot be agreed. 

DAVID WILLIAMS
CHAIRMAN

RELEASED: 27 February 2006

LON/05/334