20626
Notice of requirement to give security – Reasonableness of notice – whether it ought to have been considered at time of registration – relevancy of subsequent trading history
Appeal dismissed

MANCHESTER TRIBUNAL CENTRE				REF: LON/07/0566

GERALD PATRICK HOUSTON MARTIN
Trading as The Hillside

Appellant

-and-

THE COMMISSIONERS FOR HER MAJESTY’S REVENUE AND CUSTOMS

Respondents

Tribunal  :  Mr. Ian Huddleston (Chairman)
 					Mrs. Joan Whiteside (OBE)

Sitting in public in Belfast on 21st February 2008
Appellant in Person
Mr. B. Haley for the Respondents

DECISION

	The Appeal

1.	This is an Appeal under Section 83(1) of the Value Added Tax Act (1994) against the Respondent’s Notice of Requirement for Security issued pursuant to Schedule 11, paragraph 4(2)(a) of the VAT Act 1994 requiring the Appellant to give security in the sum of £46,607 (if quarterly returns were to be submitted) or £31,071 (if monthly returns were to be submitted).

2.	The decision which the Appellant appealed was contained in a letter from the Respondents dated the 5th February 2007.

3.	The Notice of Appeal was served on the 3rd March 2007 and listed four grounds of appeal, namely (and here they are paraphrased):

	(a)	that the decision to ask for security should have been made during the application process at a point when, in the Appellant’s opinion, all historical information was already available;

(b)	that the Appellant had not been in business for a period of over two and a half years (the implication being that his previous history was “spent”);

(c)	that the Appellant had no borrowings and that the business was running satisfactorily and that returns to the date of the February 07 letter had been paid;

(d)	that the Appellant would have to sell the business in order to afford to pay the security sought.

4.	The Tribunal heard evidence from the Appellant and from Mr. Edward Joseph MacMahon, a higher officer in HMRC, attached to the Belfast Office and who had responsibility for the issue of the Notice of Requirement.

	Evidence

5.	Mr. MacMahon gave evidence on behalf of the Respondents.  He gave evidence as to the Appellant’s previous association with two failed businesses, namely:

•	a former pub which was converted into a public limited company (The Old Monk Co plc) on the 1st May 1995 and subsequently became insolvent owing the Commissioners in excess of £680,400;
•	a second public house, Stonehill Tavern, which was operated by a company of which Mr. Martin was the sole director/shareholder, and which became insolvent owing the Commissioners in excess of £102,700;
•	on that basis, Mr. MacMahon had taken the decision that, for the protection of the Revenue, it was necessary to require security for the payment of future VAT and had thus issued the Notice of Requirement on the 5th February 2007.

6.	The Appellant gave sworn evidence.  As confirmed by his appeal notice, the crux of his case centred on two issues, namely:

•	that HMRC had not asked for security during his initial application for registration;
•	that his trading history since taking over the Hillside (which he had since disposed   of) had traded satisfactorily and that all returns and VAT had been paid in a prompt and correct manner.

	Submissions

7.	Mr. Haley, on behalf of HMRC, submitted that:

•	the Respondents had been reasonable in issuing the Notice of Requirement based on the facts and the trading history of those businesses in which the Appellant had been involved;
•	that it was inappropriate to take into account the trading of the Appellant since its  initial registration or, indeed, the service of the Notice of Requirement and cited, in support, the decision of this Tribunal in the case of BE Silcock & Co. Ltd. –v- HMRC [23rd September 2006]

	Conclusion

8.	In exercising its jurisdiction in such matters as this, this Tribunal is obliged to consider only those facts which existed at the time when the challenged decision was taken (Peachtree Enterprises (1994) STC 747 and BE Silcock Co. Limited applied).  The decision against which the Appellant had appealed in this case was taken in February 2007.  At that point, as the Appellant himself conceded in cross examination, not only was there a risk but a “proven” risk that the Appellant might default – given the two failed enterprises in which he had been involved.

9.	The timing of issue of the Notice of Requirement was something in relation to which, under the VATA 1994, the Respondents had absolute discretion and the fact that it issued after the Appellant’s registration did not make it unreasonable.  Indeed, the Notice of Request could, if the circumstances justified it, be issued at any time.

10.	Equally, as the Appellant now acknowledges, the subsequent trading history, however good, was not relevant to the question of “reasonableness” as it applied at the time of the February 2007 decision to issue.

11.	Having considered all of the documents available and having heard the evidence, the Tribunal was satisfied that the Respondents did act reasonably when they issued the Notice Requiring Security and that they had not taken account of any irrelevant material or otherwise acted unreasonably. On that basis the appeal fails and is dismissed.

12.	The Respondent made no application for costs, and we make no order.

Chairman : Ian Huddleston
Release Date :  18 March 2008