20029
Notice of requirement to give security – Subsequent payments – Reasonableness of notice – Appeal dismissed
BELFAST TRIBUNAL CENTRE
B E SILCOCK & CO LTD Appellant
THE COMMISSIONERS FOR HER MAJESTY'S REVENUE & CUSTOMS Respondents
Tribunal: Ms H GIBSON QC (Chairman)
MRS J WHITESIDE OBE
Sitting in public in Belfast on 27 September 2006
No appearance by the Appellant
Mr B Haley for the Respondents
© CROWN COPYRIGHT 2007
DECISION
- This is an appeal under section 83(1) of the Value Added Tax Act 1994 whereby the Appellant company against a decision of the Respondent contained in a Notice dated 13th September 2005 issued pursuant to Schedule 11 paragraph 4(2)(a) of that Act whereby the Appellant company was required to give Security in the sum of £7,501.00 if quarterly returns are submitted or £5,001.00 if monthly returns are submitted.
- The Notice of Appeal dated 28th September 2005 (Trib form 1) was served by VAT Solutions (UK) Ltd on behalf of the Appellant. Mr Steve Allen Director was referred to as the representative.
- There was no appearance by or on behalf of the Appellant. The Tribunal noted that letters dated 8th December 2005, 11th January 2006 and 21st April 2006 were sent to VAT Solutions (UK) Ltd seeking convenient dates for the hearing. No response was received and the Tribunal sent a further letter to VAT Solutions (UK) Ltd advising of the hearing date of 27th September 2006. Again no response was received. The clerk to the Tribunal confirmed that no telephone communication had been received from either the Appellant or his representative prior to or on the day of hearing. The Tribunal heard from Mr Haley that he had had a telephone conversation with Mr Steve Allen on 20th April 2006 when he was still acting as representative of the Appellant. No changes of representative or address or telephone numbers had been notified to the Tribunal. No correspondence had been returned 'not delivered' to the Tribunal office.
- The Tribunal decided to proceed in the absence of the Appellant under Rule 26(2) VAT Rules 1996.
- We heard evidence Mr John Savage, an officer of Her Majesty's Revenue and Customs in Northern Ireland.
THE FACTS
- The Notice dated 13th September 2005 issued pursuant to Schedule 11 paragraph 4(2)(a) of the Value added Tax Act 1994 whereby the Appellant company was required to give Security in the sum of £7,501.00 if quarterly returns are submitted or £5,001.00 if monthly returns are submitted.
- The Appellant's stated grounds of Appeal are that "the demand has been issued not for any VAT lost via insolvency but in respect of VAT arrears and compliance issues. The arrears were discharged and there was good reason for the compliance issues. The demand for security is excessive in the circumstances."
EVIDENCE
- Mr John Savage, an officer employed by Her Majesty's Customs and
Revenue in Belfast, gave evidence on behalf of the Respondents. He stated that the Appellant company was incorporated in 2004 and at the relevant time carried on business providing accountancy and taxation services from 43, High Street, Lurgan. An application to register for VAT was received on 24th March 2005. The Appellant had requested to be registered with effect from 1st April 2005 but this was back-dated to 30th November 2004 and a penalty was issued. The Appellant company was registered with effect from 1st December 2004 under registration number 849 0952 90. The Appellant failed to render the first period return ending 31st May 2005.
- Mr Savage stated that Mr Brian Ernest Silcock, who was a director in the Appellant company, had previously been registered for VAT as a sole proprietor under registration number 256 0935 53. Mr Silcock ...t/a Brian Ernest Silcock and Company) had also carried on business providing accountancy and taxation services from 43, High Street, Lurgan. During this time Mr Silcock had a poor record of compliance. A statutory demand had been issued against Mr Silcock in respect of outstanding VAT. A banker's draft for £48,000 discharging same was paid to the Respondents prior to the court hearing. When he de-registered for VAT on 16th February 2004, Mr Silcock had left a debt of £4,296.78 to the Respondents. Furthermore he had failed to file returns for the periods ending 30th November 2003 and 15th February 2004. A Notice of Requirement had been served on him on 13th November 2003 due to this poor compliance. The Notice was in fact subsequently withdrawn in March 2004 as Mr Silcock had cancelled his registration on the grounds of reduced turnover. At the time Mr Silcock cancelled his registration he advised the Respondents that he was going to form a limited company which would trade below the registration threshold. There was no break in trading.
- Mr Savage stated that he had monitored the trading activity of the Appellant company and did an inspection to ascertain if it was trading above the threshold.
- At the time of service of the subject Notice of Requirement, the Appellant company had a debt on file of £3,097.00 and an outstanding civil penalty of £246.00. The £4,296.78 tax owed Mr Silcock in respect of assessments for the periods ending 30th November 2003 and 15th February 2004 from his period of trading as Brian Ernest Silcock and Company had not been paid prior to issue of the Notice of Requirement. Nor had the outstanding returns been filed.
- Mr Savage stated in light of the foregoing matters, the Respondents had considered that it was necessary for the protection of the revenue to require the Appellant company, as a condition of it supplying goods or services to security by means of a guarantee or cash deposit. Consequently on 13th September it notified the Appellant of the requirement to give such security in the sum of £7,501.00 if quarterly returns are submitted or £5,001.00 if monthly returns are submitted.
- The amount of the security was based on turnover declared on the
application to register. The 12 months projected liability was £15,003.78.
- Mr Savage advised the Tribunal that the sum of £3,300.00 had been received from the Appellant company on 4th November 2005. The remainder of the Appellant company's outstanding tax liability (registration number 849 0952 90) was discharged some time later. Mr Silcock's outstanding liability as a sole trade (registration number 256 0935 53) was finally discharged on 3rd April 2006. Therefore at time of the hearing there was no outstanding liability.
- The Appellant company de-registered for VAT on 3rd April 2006. Had it subsequently registered for VAT, the Respondents would have had to serve a further notice of Security.
SUBMISSIONS
- Mr Haley submitted that the basis for issue of the Notice of requirement to give security was that same was necessary for protection of the revenue. He further submitted that the reasonableness of that decision can therefore only be tested at the time of the decision to issue the notice.
CONCLUSION
- In exercising its jurisdiction, the Tribunal is obliged to limit itself to considering facts which existed at the time the challenged decision was taken (Peachtree Enterprises (1994) STC 747). The subject decision was taken on 13th September 2005. At this time the Appellant company had an outstanding tax liability and return. Mr Silcock a Director in the Appellant company also had an outstanding tax liability from his period of trading as a sole proprietor. The subsequent payments of these liabilities were made after the decision.
- Having considered all the documents available (including all certificates issued under Schedule 11 of the value added Tax Act 1994) and heard the evidence, the Tribunal is satisfied that the Respondent acted reasonably on 13th September 2005 when it required the Appellant company to give Security and that in reaching such decision it had taken account of all relevant material. The Tribunal does not consider the amount of the security demanded to be unreasonable. Accordingly the appeal fails.
- The Respondents made no application for costs and we make no order.
- The Tribunal does however observe that all outstanding liabilities have been paid, that the company has been de-registered for VAT and in fact should it seek re-registration the Respondents would have to give consideration to the issue of a further Notice of Requirement to give Security. The Tribunal was advised that they would not be able to rely on the subject Notice.
HEATHER GIBSON
CHAIRMAN
RELEASED: 22 February 2007
LON/05/1022
