Basley v Revenue & Customs [2006] UKVAT V19723 (21 August 2006)

19723

SECURITY – whether reasonable – yes, subject to variation of the figures – appeal dismissed subject to an agreed recommendation

LONDON TRIBUNAL CENTRE

CHRISTOPHER NEIL BASLEY	Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S
REVENUE AND CUSTOMS	Respondents

Tribunal:	DR JOHN F AVERY JONES CBE (Chairman)
SANDI O’NEILL

Sitting in public in London on 18 August 2006

The Appellant in person

Simon Chambers, Senior Officer of HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2006

DECISION

1.	Mr Christopher Neil Basley appeals against a notice of requirement to give security pursuant to paragraph 4(2)(a) of Schedule 11 to the VAT Act 1994 dated 14 February 2006 of £27,566.41 (or £24,716.41 if returns are made monthly).  The Appellant appeared in person; Customs were represented by Mr Simon Chambers.
2.	We heard evidence from the officer concerned, Mrs Susan Ogburn and find the following facts:
(1)	The Appellant is a chartered surveyor and sole practitioner.  His compliance record is not good and at the time of the notice there were arrears of £19,116.41 plus some default surcharges (subject to the Appellant claiming that Customs have omitted a payment of £2,570.84 on 18 November 2005).  
(2)	Customs wrote a warning letter on 10 September 2005 saying that they were considering requiring security and saying “If the Commissioners of HM Revenue & Customs were to require security from you today, it would be for £8,500 or £5,500 if monthly VAT returns are submitted.”  On 27 January 2006 they replied to the Appellant’s letter in reply to their earlier one pointing out that the total VAT debt outstanding was £15,524.04 (comprising VAT of £13,471.91 and default surcharges of £2,052.13).  They went on to say that if they were to require security on that day it would be for £21,871.91 (or £19,071.91 for monthly returns).  The totals of the arrears of VAT (excluding default surcharges) plus the 6 month figure is £21,971.91, or the arrears plus the four month figure is £18.971.91, but they did not explain how the figure was calculated, why it was so different from the 10 September 2005 figure, or, if it was intended to be a total of the VAT excluding surcharges, why there was an apparent further rounding down of £100 (or perhaps an arithmetic error).
(3)	On 14 February 2006 Customs required security of demanded was the arrears of VAT figure which had increased to £19,116.41 plus six months net tax based on the previous year’s returns (now including the return for December 2005) rounded down to £8,450 (or four months on the basis of monthly returns rounded down to £5,600), which gives the totals in the notice of £27,566.41 (or £24,716.41 for monthly returns).  
(4)	Mrs Ogburn was still willing to consider any proposals for reduction of the arrears in which case the security would be the figures based on six (or four) months net VAT only.
3.	The Appellant contended:
(1)	He was now putting the current VAT aside and was making the current payments, although slightly late
(2)	Customs’ figure for the arrears excluded a payment of £2,570.84 made on 18 November 2005 for which he produced a bank statement with HM Customs & Excise written in against the entry on 25 November 2005.
(3)	He would not be able to find the amount of security demanded.
4.	Mr Chambers contended that the amount of security was reasonable and was calculated on the usual basis of six or four months net VAT plus the arrears.  He accepted that it was possible that the cheque for £2,570.84 did not have the VAT number on it and might not have been posted correctly to the Appellant’s account.
5.	It seemed to the Tribunal that it might be helpful if the parties discussed the situation further and so we adjourned to enable them to do so.
6.	When we returned we were invited to dismiss the appeal adding (with their agreement) a recommendation that Customs would not take steps to enforce the security requirement but to give the Appellant nine months to pay off the arrears and to provide security of £6,500, this being the rounded down figure based on the current net figure for the last year’s returns, and on the basis that the Appellant changed over to monthly returns immediately.
7.	We are satisfied about the reasonableness of the notice to require security and of the calculation of the amount.  We would do what was proposed but for the dispute about the £2,570.84.  We consider that Customs should have the opportunity to investigate this and to recalculate the security at today’s date based on the last year’s returns with the arrears figure corrected if necessary for the missing cheque.  Although we are considering the reasonableness of the decision taken on 14 February 2006 we consider that the legal basis of what we are suggesting is that Customs have offered to reconsider the amount of security which the Appellant has instantly appealed and that appeal is before us.  
8.	Accordingly we dismiss the appeal in principle but in the revised figures to be agreed between the parties and notified by Customs to the Tribunal or determined by the Chairman if they cannot be agreed, with the recommendation set out in the previous paragraph.
9.	We should like to add that we were not surprised that the Appellant was still confused by the figures at the hearing.  We consider that it is unfortunate for Customs to quote figures of £8,500 (or £5,500 for monthly returns) on 10 September 2005, followed by £21,871.91 (or £19,071.91 for monthly returns) on 27 January 2006 without a clear explanation of why they differed.  In fact, it would have been much better not to have written the 10 September 2005 figure without first checking the arrears, which is what seems to have happened.

JOHN F AVERY JONES

CHAIRMAN
RELEASE DATE: 21 August 2006

LON/06/320