20296

VAT – Compulsory registration – tax and penalty and interest appealed against – non attendance – dismissal for want of prosecution refused – failure to register found – appeal dismissed

LONDON TRIBUNAL CENTRE

MOHAMMED HAQUE	Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S
REVENUE AND CUSTOMS	Respondents

Tribunal:	ADRIAN SHIPWRIGHT (Chairman)
SUNIL DAS

Sitting in public in London on 25 May 2007

The Appellant did not appear.

Jonothan Holl, Advocate, HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2007

DECISION

Introduction
1.	This is an appeal against the compulsory registration of the Appellant and the consequent assessment to VAT and penalty for failure to notify the Appellant’s liability to be registered for VAT. This was set out in a letter dated 23 January 2004. This is the disputed decision which is the subject of the appeal.
2.	The Appellant was notified of:
(1)	his liability to be registered for VAT for the period 31 May 2002 to 9 December 2002;
(2)	 an assessment of £2,117.00 for having failed to render a VAT return; and
(3)	a penalty of £211.70 for failure to notify liability to be registered.
3.	The Appellant did not attend the hearing in person or through his representative. The Appellant was not present when the case was called on at the appropriate time. Accordingly, we heard the appeal under Rule 26 of the Tribunal Rules in the Appellant’s absence.
4.	Mr Holl, for the Respondents applied for the appeal to be dismissed for want of prosecution without a hearing. We had much sympathy with Mr Holl’s application in this particular case. However, in this particular case we considered it would be more appropriate to proceed under Rule 26 but we note that in an appropriate case we would have acceded to Mr Holl’s application. Appellants and those advising them should be aware of this.  Mr Holl asked that this should be recorded in a decision.  Accordingly, we do so.
The Issue
5.	The issue was essentially whether the Appellant was liable to be registered for VAT for the period 31 May 2002 to 9 December 2002.
The Law
6.	The Law on the Liability to Register for VAT is set out in Schedule 1 to VATA. Liability to Register following the transfer of a business as a going concern is mainly found in paragraph 7 of the Schedule and paragraph 6 of The VAT Regulations 1995 (SI 1995 /2518. The power of assessment here is found in section 73 VATA and the authority to impose a penalty for failure to notify liability to register is found in section 67 VATA.
The Authorities
7.	We were provided with a copy of the decision Begum Eastern Ocean Limited issued on 28 June 2006. We read and considered this carefully.
The Evidence
8.	A bundle of documents was produced by the Respondents. They were all admitted in evidence.
9.	We heard oral evidence from Clive Peter Dean, an HMRC Higher Officer who coordinated the visits, test purchases and invigilation of the premises. No witness statement was provided.
The Facts
10.	From the evidence we make the following findings of facts:
(1)	The Appellant operated an Indian restaurant take-away trading as “Popadoms”, also sometimes referred to as “Papadum” and “Khanam”.  
(2)	The restaurant take-away operated from premises at 182 Station Road, Athelston, Surrey.
(3)	The Appellant was registered for VAT for the period 31 May 2002 to 9 December 2002.  
(4)	Officers of the Respondents from Woking VAT office investigated businesses potentially liable to be registered for VAT in their area of responsibility in 2001. 
(5)	An HMRC officer visited the business premises on 14 June 2001.  The officer spoke to the person in charge.  Enquiries were made as to the operation of the business and the daily gross takings.  From this information the officer formed the view that the business was liable to be registered VAT.  
(6)	The officer returned to the business premises on 17 October 2001 and spoke to Mr Fakril Choudhury.  He was told that the business had weekly gross takings of between £700 and £800.  The restaurant was open 7 days a week which would give average daily gross takings of between £100 and £115.  
(7)	The officer sought to confirm the accuracy of the VGT figures.  It was agreed that consecutively numbered bills should be used.  Such bills were in use from 19 October 2001 to 16 November 2001.  The gross takings for this period were £3,954.87.
(8)	Test purchases and observations of the premises were carried out to enable accurate assessments of vehicle keeping to be undertaken.  
(9)	Observation of the business premises was undertaken on Friday 19 October 2001.  During the period of observation test purchases were made by other officers of HMRC.  When the till was cashed up and the end of the night the takings were £218.00.  The number of meal bills for 19 October 2001 showed total sales of £193.90.  
(10)	The HMRC officers noted from the observations that at least 6 purchases were made between the test purchases of Officer Lett who entered the premises at 1801hrs and left at 1807hrs and Officer Wright who entered the premises at 2300hrs and left at 2305hrs.  During the intervening period at least 6 purchases were recorded but only 1 was accounted for on the numbered bills and on the till roll.
(11)	On 31 October 2001 an officer made a test purchase at the Appellant’s premises for take away food at a value of £17.65.  He paid in cash.  When the till was cashed up by an officer the amount of £17.65 was not recorded.  Meal bills with number from 120 to 126 inclusive had been used but the test purchase amount was not included.  Further test purchase in cash was made on 7 November 2001.  This purchase was recorded in the business takings on bill numbered 190.
(12)	Invigilation of the premises was agreed to and was to take place on Tuesday 19 February 2002 and Saturday 23 February 2002.  Teams of officers attended the business premises to confirm a complete night’s takings including cashing up at the end of the evening trade.  The gross takings for Tuesday 19 February 2002 were recorded as £154.40.  The gross takings for Saturday 23 February 2002 were recorded as £391.60.  
(13)	The HMRC officer considered that Mr Choudhury had not been keeping full records and accounts of the business and was understating the daily gross takings of the business.  He calculated the average weekly gross takings of £1,400.00.  On the basis of a 46.5 week year which would allow for closing, annual turnover was calculated at £65,100.00.
(14)	Mr Choudhury stated that he had taken over the business from Mr Ali in about April 2000 and that over that time the menu and prices had not changed.
(15)	Accordingly, the officer considered that Mr Choudhury was liable to be registered for the whole period of his trading and that it was a taxable period within the meaning of the VAT Act.
(16)	Mr Choudhury was notified of his liability to be registered for VAT with effect from 14 February 2000 by notice of compulsory registration for VAT dated 17 May 2002.  
(17)	Correspondence took place between HMRC and Mr Choudhury’s advisors.  
(18)	The HMRC officer involved with Mr Choudhury wrote to the Appellant on 10 February 2003.  The officer said he understood that the business had been taken over as a going concern on 31 May 2002.  He also wrote that he had no record of an application for VAT registration so a form was enclosed with a request that it be completed and returned within 14 days.  If it was not so returned, the Appellant would be compulsory registered.
(19)	Advisors to the Appellant then contacted the officer by letter dated 21 February 2003.  This said that the Appellant was then in Saudi Arabia, but the business had been taken over from previous owners and that the owners were not VAT registered.  It also said that there had been yet another change of owner.
(20)	By letter dated 3 February 2003, the HMRC officer informed the advisors that the Appellant had taken over a VAT registered business and that he was aware of the new ownership.  Further correspondence took place.
(21)	By letter dated 1 February 2006, a review officer for HMRC invited the advisors to submit any further information or evidence in relation to the appeal.  The review officer, having received some information from the Appellant, wrote expressing his surprise at the Appellant’s ability to recall weekly takings from 4 years before.  However, the recollections did not constitute proper evidence in the review officer’s opinion and the original decisions would therefore stand.  
(22)	The Appellant contends that the registration is based upon a decision made on 17 May 2002 which was disputed and remains in dispute awaiting request.
The Submissions of the Parties
The Appellant Submissions in outline
11.	The Appellant was not present but Mr Holl helpfully pointed out that the Appellant would probably argue that HMRC had not proved its case and that it was wrong to impose liability on the Appellant.  The penalty was disproportionate.  We are grateful to Mr Holl for his assistance.
HMRC’s Submissions
12.	In essence, HMRC submitted:
i.	The Appellant carried on business as an Indian take-away.
ii.	He was the transferee from Fakril Choudhury with effect from 31 May 2002.
iii.	The transferor had been notified on 17 May 2002 of his liability to be registered for VAT with effect from 14 February 2000.
iv.	Fakril Choudhury was a taxable person for VAT purposes.
v.	The transfer with the transfer of the business as a going concern within section 49 and paragraph 1(2) of Schedule 1 VAT Act.
vi.	The Appellant was a taxable person by virtue of the transfer.
vii.	The decision to register Fakril Choudhury for VAT has not been the subject of an appeal to the Tribunal.
viii.	The Respondent therefore contends that the appeal should be dismissed.
Discussion
13.	We have found that Fakril Choudhury was reasonably considered by HMRC to be a taxable person.  There is no evidence to contradict this.  
14.	There was no evidence to contradict there having been a transfer of the business as a going concern in the circumstances and on the evidence before us.
15.	Accordingly, we agree with the arguments by HMRC and agree that the appeal should be dismissed.
Conclusion
16.	For the reasons set out above we dismiss the appeal.  We make no order as to costs.    

ADRIAN SHIPWRIGHT

CHAIRMAN
RELEASE DATE: 10 August 2007

LON/2006/00214