19657

VAT ASSESSMENT: Appellant proprietor of a public house – reasonable grounds for suspecting under declaration of sales – gross takings below the norm for other public houses in the same area –  assessment for unpaid VAT based on two weeks taking – Appellant deliberately failed to co-operate with the investigation by not responding to requests for additional information – Respondents considered fairly all material placed before them and came to a decision on that material which was reasonable and not arbitrary – the assessment was to best judgment and accurate –  Appeal dismissed – costs order made against the Appellant.

MANCHESTER TRIBUNAL CENTRE

	THOMAS AQUINAS  BRENNAN	Appellant

	- and -

	HER MAJESTY’S REVENUE and CUSTOMS	Respondents

			Tribunal:	MICHAEL TILDESLEY OBE (Chairman)
					WARREN SNOWDON  JP        (Member)

Sitting in public in York on 12 June 2006

Appellant did not appear

Nigel Poole Counsel instructed by the Acting Solicitor for HM Revenue & Customs, for the Respondents

© CROWN COPYRIGHT 2006

DECISION

The Appeal

1.	The Appellant was appealing against an assessment dated 15 December 2004 in the sum of £16,710 plus interest of £1,871.01 for unpaid VAT in respect of the period 1 November 2001 to 31 July 2004.
2.	The Appellant disputed the accuracy of the assessment because it was based on a projection of two weeks takings.
Preliminary Matter
3.	On 25 May 2006 Mr Simmons of Public Business Services (UK) Ltd, Accountants, the Appellant’s representative, wrote to the Tribunal requesting an adjournment of the hearing because he was away on holiday until 15 June 2006. Mr Simmons’ letter was referred to a Tribunal Chairman who refused the adjournment. The Tribunal Office notified Mr Simmons of the Chairman’s decision and advised him that he could renew his application at the hearing but he must be in a position to deal with the Appeal if his application was unsuccessful.
4.	The Appellant and his representative did not appear at the hearing. The Respondents applied for the Appeal to be heard in the Appellant’s absence under rule 26 of the Tribunal Rules 1986.
5.	We considered the Appellant’s application for adjournment and found the following facts:
(1)	The Appellant and his representative had failed to attend a previous hearing of the Appeal on 24 January 2006. The Tribunal on that occasion granted an adjournment of the hearing and ordered the Appellant to pay the Respondents’ costs of £385. The Tribunal took the unusual step of requiring the representative to show cause why he should not pay personally for the costs order of £385 which indicated the Tribunal’s displeasure with the representative.
(2)	 On 8 March 2006 the Tribunal Office notified the Appellant’s representative of the new hearing date of 12 June 2006. The representative was given 14 days from the date of issue of the notice to inform the Tribunal that the new hearing date was inconvenient. Further if no response was received within the 14 days, the Tribunal would not grant a postponement of the hearing unless for the most compelling reasons.
(3)	The Appellant or his representative did not advise the Tribunal within the 14 days that the date was inconvenient.
(4)	The Appellant’s representative in his letter dated 25 May 2006 stated that he did not receive the letter of 8 March 2006. The Respondents disputed the truth of the representative’s statement. On the 24 May 2006 Mrs Joh Geldard, the assessing officer, contacted the Appellant about the impending hearing on 12 June. The Appellant was not aware of the hearing date and referred Mrs Geldard to his representative. When Mr Simmons, the Appellant’s representative, spoke to Mrs Geldard he told her that he had not received the notification of the hearing for 12 June 2006. When Mrs Geldard pointed out to Mr Simmons that she had not told the Appellant of the hearing date of 12 June, Mr Simmons was unable to explain from where he obtained the date of 12 June. 
(5)	The Appellant gave no reason for his non-attendance on 12 June 2006.
(6)	The Appellant and his representative failed to respond to requests for information from the Respondents in connection with the Appeal.
(7)	The Appellant’s representative failed to comply with the Tribunal direction issued on 24 January 2006 to show cause why he should not pay personally for the costs order of £385
6.	We are satisfied that the Appellant’s representative received the 8 March 2006 notice of hearing. We find from the facts that the Appellant and his representative deliberately chose not to attend the hearing with the purpose of frustrating the Appeal process and avoiding the assessment. In those circumstances we refused the adjournment and granted the Respondents’ application to proceed in the Appellant’s absence.
The Evidence
7.	We heard evidence upon oath from Mrs Joh Geldard, the Officer who issued the assessment. The Respondents supplied us with a bundle of documents.
The Facts Found
8.	The Appellant runs a public house in Leeds.
9.	The Respondents identified that the turnover for the Appellant’s business as declared in the Appellant’s VAT returns was lower than the norm for public houses in the Leeds area. As a result of this information Mrs Geldard carried out an unannounced inspection of the Appellant’s business premises on 3 February 2004. Mrs Geldard found that the Appellant was not available, however, she ascertained from two members of staff present that the Appellant performed a daily Z reading from the till.
10.	 Mrs Geldard spoke to the Appellant on the 4 February 2004 when she was told that the Appellant’s accountant would be in contact with her. No contact was made. On 12 February 2004 Mrs Geldard spoke to the Appellant again and instructed him to retain all his future till rolls.
11.	On 17 March 2004 Mrs Geldard met with Mr Simmons, the Appellant’s accountants where he provided her with purchase invoices, VAT summaries and details of weekly gross takings but no till rolls.
12.	On 30 March 2004 the Appellant brought a bag of till rolls relating to the period 16 February 2004 to 28 March 2004 to Mrs Geldard’s office. Mrs Geldard was only able to extract readings for a two week period, 25 February 2004 to 9 March 2004 which revealed average gross weekly takings of £5,380.92 compared with £4,539.62 weekly gross takings declared on the VAT return for the period 10/03.
13.	Mrs Geldard found anomalies with the rest of the till rolls which included:
(1)	No till rolls for 14 to 21 March 2004 except 17 March 2004.
(2)	The Z reading for 17 March 2004 was on the end of the till roll dated 27 February 2004.
(3)	Z reading no. 8 was taken at 2357 hours on 25 February 2004 after Z reading no. 9, taken at 1918 hours on the same day.
14.	Mrs Geldard formed the view that the Appellant had manipulated the till rolls. On 28 April 2004 she asked the Appellant for an explanation of the anomalies and the difference in takings. The Appellant did not give an explanation.
15.	On 6 May 2004 Mrs Geldard outlined her concerns in writing to the Appellant and his representative. She also pointed out that the net VAT sales (£193,224) for the year ending 30 April 2002 did not correspond with the declared sales (£145,961) in the Appellant’s income tax return for year ending 30 April 2002. Mr Simmons, the Appellant’s representative, responded by challenging the accuracy of the assessment contending that the increase in the two week period was due to an improvement in trade which was at odds with the Appellant’s statement that trade was declining. Mr Simmons also considered that the time period for the income tax return was not the same as that for the VAT returns. Mrs Geldard replied that she had used the same time period for the two returns.
16.	On 11 June 2004 and 15 July 2004 Mrs Geldard requested in writing an explanation from the Appellant and his representative for the difference in takings to which no reply was received. On 20 October 2004 Mrs Geldard required the Appellant to provide her with the last three months of Z readings taken from his till or a satisfactory explanation to her enquiries by 29 October 2004. Mrs Geldard would have no alternative but to issue an assessment for unpaid VAT on available information if the Appellant failed to comply with her request.
17.	Mrs Geldard received no response from the Appellant. On the 29 November 2004 she issued an assessment in the sum of £16,710 for the period 1 November 2001 to 31 July 2004.  She arrived at the assessment by computing the gross takings for a thirteen week period from the gross takings for the two weeks of till rolls (25 February 2004 to 9 March 2004). She then applied the computed thirteen week gross takings against the Appellant’s takings declared in the VAT returns for the quarters ending 01/02 through to 07/04 which produced an under payment of VAT in the sum of £16,710.
Reasons for Our Decision
18.	Section 73(1) of the Value Added Tax Act 1994 is the Respondents’ authority for making an assessment:
“Where a person has failed to make any returns required under this Act … or to keep any documents and afford the facilities necessary to verify such returns or where it appears to the Commissioners that such returns are incomplete or incorrect, they may assess the amount of VAT due from him to the best of their judgment and notify it to him”.
19.	 Under section 73 the Respondents are required to consider fairly all material placed before them, and on that material, come to a decision which is reasonable and not arbitrary as to the amount of tax which is due. The Respondents are under no obligation to do the work of the taxpayer to carry out an exhaustive explanation.
20.	In this Appeal Mrs Geldard had reasonable grounds for suspecting that the Appellant’s VAT returns were inaccurate because the gross takings declared in the returns were lower than the norm for public houses in the Leeds area. She calculated her assessment on two weeks of gross takings which was the only reliable material supplied to her by the Appellant. Mrs Geldard also did not exploit the Appellant’s statement that the two week period represented a decline in the Appellant’s business takings by increasing the gross takings for the earlier VAT periods of the assessment.
21.	 Mrs Geldard gave the Appellant ample opportunity to provide additional information and explanation. The Appellant failed to take advantage of that opportunity. Further he provided Mrs Geldard with questionable material in respect of the till rolls outside the two week period of 25 February 2004 to 9 March 2004. 
22.	 We infer from the Appellant’s conduct that he chose not to co-operate with Mrs Geldard’s enquiries because he knew that his VAT returns were inaccurate. The obligation was upon the Appellant to demonstrate that the assessment was inaccurate, which he failed to do.
23.	We are satisfied that Mrs Geldard considered fairly all material placed before her and came to a decision on that material which was reasonable and not arbitrary. We had no grounds upon which to dispute the accuracy of her assessment. We hold that the assessment dated 15 December 2004 in the sum of £16,710 plus interest of £1,871.01 for the period 1 November 2001 to 31 July 2004 was to best judgment and accurate. We, therefore, dismiss the Appeal.
24.	We consider that the Appellant has abused the Tribunal procedure by deliberately failing to attend on two occasions. We, therefore, order him to pay the Respondents’ costs of £800 plus VAT.

MICHAEL TILDESLEY OBE
CHAIRMAN

Release Date:14 July 2006

MAN/05/0426
££Thomas Aquinas Brennan v  Revenue & Customs [2006] UKVAT V19657 (14 July 2006)