20511

Notice of Requirement to give security – whether requisite for the protection of the revenue – VATA 1994 Sch 11 para 4(2) – whether decision was reasonable – yes – appealed dismissed

LONDON TRIBUNAL CENTRE

	1sr STOP HIRE SERVICES LIMITED	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S 
	REVENUE AND CUSTOMS	Respondents

			Tribunal:	Malcolm Gammie CBE QC (Chairman)
					Sheila Edmonson FCA

Sitting in public in London on 22 June 2007

The Appellant did not attend and was not represented

Jonathan Holl, advocate, of the Office of the Solicitor for HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2007

DECISION

1.	This is an appeal by 1st Stop Hire Services Limited (“the Appellant”) against a decision by the Commissioners of HM Revenue and Customs (“the Respondents”) in a letter dated 24 October 2006 requiring the Appellant to give security under paragraph 4(2) of Schedule 11 to the Value Added Tax Act 1994.  
2.	Paragraph 4(2), Schedule 11 of the VAT Act 1994 provides that:
“If they think it is necessary for the protection of the revenue, the Commissioners may require a taxable person, as a condition of his supplying or being supplied with goods or services under a taxable supply, to give security, or further security, for the payment of any VAT that is or may become due from –
(a) the taxable person, or
(b) any person by whom or to whom relevant goods or services are supplied.”
3.	The decision required the Appellant to give security by guarantee or cash deposit in the sum of £33,212.30.  The Appellant appealed on the grounds that the deposit required to be paid was based on an amount in excess of two quarters’ tax.  The Appellant in its notice of appeal also indicated that it was endeavouring to reach agreement to clear its outstanding historical VAT liability.
4.	The Appellant had indicated to the Tribunal before the hearing that it would not attend and would not be represented.  Accordingly, we resolved to hear the matter in the Appellant’s absence as allowed by Rule 26(2) of the Value Added Tax Tribunal Rules 1986.
5.	The Respondents were represented by Mr Jonathan Holl, who produced a bundle of documents relating to the appeal.  We also heard the evidence of Miss Claire Bell, the Respondents’ Officer who had given the decision of 24 October 2006 against which the Appellant had appealed.  
6.	The issue for our decision was whether in reaching their decision the Respondents had acted in a way that no reasonable panel of Commissioners could have acted, or whether they had taken into account some irrelevant matter, or disregarded something to which they should have given weight when imposing the security requirement of 24 October 2006.  Having heard the evidence and having conferred on the matter, we announced our decision following the hearing to dismiss the Appellant’s appeal.  
7.	The Appellant carries on business providing sound and lighting consumable sales and trades as DSH Hire.  A previous Notice of Requirement to provide security was served on the Appellants on 18 August 2005.  The amount required on that occasion was £16,875.  This was eventually paid on 11 August 2006 following a previous decision of this Tribunal given on 20 June 2006 (Tribunal Decision No. 19628), to which we were referred.  
8.	Upon receipt of the security deposit, the amount was offset against the outstanding VAT debt of £41,586.11.  At the time of the further Notice of Requirement of 24 October 2006, the Appellant had an outstanding tax debt of £26,512.30.  The return for the period ending 31 July 2006 was outstanding and the assessment issued in lieu of the return was also unpaid.  Returns for the periods ending 30 April 2005, 31 July 2005, 31 January 2006 and 30 April 2006 were unpaid when the Notice of Requirement was issued.  Various time to pay agreements had been cancelled and then re-instated as a result of unpaid or undeclared VAT returns.  
9.	The documents before us gave details of the Appellant’s position and also indicated that an associated company, for which both the Appellant’s director and secretary were also officers, had also received a Notice of Requirement to provide security, in the amount of £1,750.  
10.	The level of security required in the Appellant’s case had been calculated by taking the tax debt of £26,512.30 and the equivalent of four months tax based on the total tax due in respect of the four missing tax returns (07/05, 10/05, 01/06 and 04/06), which amounted to £6,700 (rounded down), to give the total required security of £33,212.30.
11.	Miss Bell in her evidence took us through the Notice of Requirement of 24 October 2006.  She explained the background to the previous Notice of Requirement and that the amount paid following the Appellant’s previous appeal had been offset against the VAT due.  The matter had then been referred to her to consider the requirement for a further deposit given the tax debt that remained outstanding.  She took us to the document summarising the Appellant’s compliance record and statement of account up to 24 October 2006.  This showed that the Appellant was failing to submit its VAT returns in time and had a continuing unpaid balance of VAT due.  She said that she had accordingly formed the view that the Appellant still represented a risk to the revenue.  She had calculated the amount of the security required on the standard basis.  
12.	As regards the Appellant’s grounds of appeal Miss Bell said that the security required was in excess of two quarters tax because the quantum included the outstanding tax debt.  She said that it was reasonable to request that the Appellant clear its outstanding liability.  As regards the Appellant’s statement that it was seeking agreement to clear the outstanding debt, Miss Bell said that no agreement had been reached and the liability remained.  
13.	Miss Bell said that the Appellant’s supplies were mainly cash sales to retail customers rather than trade sales for which it had to extend credit.  She considered that the Appellant should therefore have had the cash resources to pay the tax.  The previous Notice of Requirement had been upheld by the Tribunal.  The amount then sought had been reluctantly paid and had immediately been offset against the outstanding debt.  The Appellant had made no proposals for paying the outstanding liability and by continuing to trade the amount of the tax debt was increasing.  
14.	In his submissions, Mr Holl said that in the circumstances the Officer’s decision to require security had been reasonable and the amount required was also reasonable.  There was no substance in the Appellant’s grounds of appeal.  He referred us to the decision of the Tribunal in Goldhaven Limited v The Commissioners of Customs and Excise (Tribunal Decision No 14675) for the statement in paragraphs 14 and 15 of that decision of the principles that we should apply.  
15.	As the earlier Tribunal did in the Appellant’s previous appeal, we adopt the Goldhaven principles, which are summarised in paragraph 6 above.  From the documents before us and the evidence of Miss Bell, it is evident that she had to reach a decision in respect to a business with a poor compliance record and a continuing significant outstanding VAT liability.  Against that background we considered that her decision was reasonable and we therefore dismiss the appeal.
16.	Mr Holl made no application for costs and we make no order.

CHAIRMAN
RELEASE DATE: 18 December 2007

LON/06/1307