19773

VALUE ADDED TAX – input tax – assessment to recover over-claimed input tax – no evidence to support claim provided – appeal dismissed

MANCHESTER TRIBUNAL CENTRE			

 
 	
	MYTECH MANAGEMENT SERVICES LIMITED 	Appellant

	- and -

THE COMMISSIONERS FOR
	HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

		Tribunal:	Colin Bishopp (Chairman)
				Marjorie Kostick BA FCA CTA

Sitting in public in Birmingham on 13 September 2006

The Appellant was not represented 

 Jonathan Cannan, counsel, instructed by the Acting Solicitor for HM Revenue and Customs, for the Respondents 

	© CROWN COPYRIGHT 2006

DECISION

1.   	In this appeal Mytech Management Services Limited (“Mytech”), formerly known as CS Company Services Limited, challenges two assessments, dated 30 June 2005 for £47,744 and interest, and dated 26 August 2005 for £15,313 and interest.  The purpose of each assessment is to recover input tax which, the Respondents say, Mytech overclaimed in its VAT returns from period 10/02 to period 01/05 inclusive.

2.   	There was no one present to represent Mytech when the appeal was called on for hearing.  Jonathan Cannan, counsel for the Respondents, asked us to proceed in Mytech’s absence, in accordance with rule 26(2) of the Value Added Tax Tribunals Rules 1986 (SI 1986/590), as amended, and we agreed that we should do so.  It was apparent that Mytech had successfully sought a postponement of an earlier hearing and had asked that this hearing be postponed on what we can only describe as unconvincing grounds.  The request had been refused, some time ago, and there was no evident reason why Mytech had not arranged for one of its officers, or an outside representative, to attend.   We also took into account the nature of the dispute between the parties:  in essence, the assessments were raised because Mytech has failed to produce the evidence on which it relies to support its claim, and has still not produced it despite several requests.  If Mytech is aggrieved by our decision it may apply to the Tribunal within 14 days after its release for a direction that it be set aside.

3.   	The Respondents’ attention was initially drawn to Mytech by the nature of its trade, namely the sale of VAT-registered companies to third parties.   Nothing now turns on the nature of the trade, but in the course of a visit to Mytech at which that topic was discussed Julian Cook, the officer responsible for the assessments, took the opportunity of examining Mytech’s accounting records which, we were told, were somewhat disordered.  He found little evidence to support the claims for input tax credit which Mytech had made in its periodic VAT returns and, it seemed, some of the claims could not be correct since they were for the VAT supposedly included in the cost of some supplies which were zero-rated, exempt or out of scope.  He spoke to Mytech’s Manager, Paul Cullen (who, although not a director, seems to have been Mytech’s effective controller) and asked him to produce such further evidence as was available to support the claims.  Some evidence and explanations were given and, as a result, Mr Cook excluded from the assessments he later  raised a number of items about which he had initially been concerned.   No evidence or explanation was given in relation to the remainder of Mr Cook’s concerns.

4.   	Mr Cook concluded that he had been able to determine the correct amount of input tax in one period, 07/04.  It amounted to just less than 67 per cent of the declared liability for output tax in that period, and was consistent with the proportion revealed by Mytech’s 04/05 return (which was made after his first visit and when Mytech was aware that its input tax claims were subject to scrutiny).  That percentage was not, however, consistent with the earlier returns, which revealed claims for input tax credit close to 100 per cent of the declared output tax liability.   Mr Cook also examined the records for two other periods, 10/04 and 01/05, which showed justifiable claims for input tax credit which were significantly lower than 67 per cent of the declared output tax liability.  

5.   	Despite that finding, Mr Cook made the first assessment on the assumption that the proper claim for input tax credit in each period amounted to 67 per cent of the output tax liability declared in that period, while making it clear that, should no further information be provided in relation to periods 10/04 and 01/05, he would raise a further assessment to recover the difference between the amount first assessed and the lower amount which for which he could find supporting evidence.  No further information was provided, and the second of the two assessments now under appeal was raised.  Mytech was again invited to produce any further evidence it had, in order that the Respondents could reconsider the assessments, but it has not done so, although it did ask for a review.  The reviewing officer, in our view entirely appropriately, made the point that as no material had been provided which might cast doubt on Mr Cook’s conclusions, there was no basis on which he could reconsider the assessments, which he upheld. 

6.   	We take the foregoing from what we were told by Mr Cannan and from the documents, including correspondence between the parties before and after the assessments were raised, with which we were provided.  It does not, indeed, appear to be controversial.  The grounds of appeal merely assert that Mytech does not owe as much as the amount assessed.  Nothing is put forward to suggest that there is evidence available which Mr Cook has not seen, still less that he has ignored or misconstrued evidence which was produced to him. 

7.   	We are in much the same position as the reviewing officer:  there is nothing before us on which we could conclude that the assessments are incorrect.  Mr Cook, faced with inadequate evidence, has adopted a pragmatic and, in our view, entirely reasonable course.  His duty, as section 73(1) of the Value Added Tax Act 1994 makes clear, is to raise an assessment to the best of his judgment.  We are satisfied that he has done so, and that his approach cannot be faulted.  The appeal must be dismissed. 

8.     	Mr Cannan asked for a direction that Mytech pay the Respondents’ costs, on the ground that the appeal was frivolous or at least, had not been seriously pursued.    We are satisfied that his request is proper, and we direct that Mytech shall pay the Respondents’ costs of the appeal, assessed at £750.  

COLIN BISHOPP 
CHAIRMAN
Release Date 19 September 2006
MAN/05/0724