20678
VAT – security – requests for security by HMRC for protection of revenue – whether requests reasonable – on facts requests held to be reasonable – appeals dismissed

MANCHESTER TRIBUNAL CENTRE	Reference No:  MAN/07/1370
MAN/07/1339
MAN/07/1338

	HIFZUR RAHMAN	Appellant

	and

	THE COMMISSIONERS FOR
	HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

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	FAZLUR RAHMAN	Appellant

	and

	THE COMMISSIONERS FOR
	HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

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	H. RAHMAN, F. RAHMAN AND M. MIAH	Appellant

	and

	THE COMMISSIONERS FOR
			HER MAJESTY’S REVENUE AND CUSTOMS		   Respondents

Tribunal: David Demack (Chairman)
	    Peter Whitehead (Member)

Sitting in Manchester on the 28 March 2008

Mr. Fazlur Rahman for himself in the second appeal and for the Appellant in each of the other appeals

Mr. Richard Mansell of the Solicitor’s Office of HMRC for the Respondents

DECISION

1. Each of the above appeals is against a decision of the Commissioners for Her Majesty’s Revenue and Customs (“the Commissioners”) to give security for future taxable supplies.  The Commissioners are empowered by paragraph 4 of Schedule 11 to the Value Added Tax Act 1994 to demand security where they consider it necessary for the protection of the revenue.  Mr. Fazlur Rahman appeared to represent himself in person, to represent the partnership of which he is a member, and to represent Mr. H Rahman.  As a matter of convenience, we agreed to hear all three appeals together.  The Commissioners were represented by Mr. R Mansell of the General Counsel and Solicitor’s Office of the Commissioners.

2. The notice of requirement in the case of Mr. Fazlur Rahman was made on the 21 November 2006 in the sum £61,047.89 for three monthly returns or, alternatively, in the sum of £58,747.89 for one monthly returns.  At the time the request for security was made Mr. Rahman was indebted to the Commissioners in a sum exceeding £54,800.  That sum related to unpaid returns for the periods 09/99 to 03/03 and 12/03 to 03/06, unpaid default surcharges for periods 12/99, 09/02, 12/02, 03/03, 12/03 to 06/06 inclusive, and an unpaid central assessment for period 06/06.  The sum he now owes has increased to £66,923.24.  He is a cash trader, and thus the Commissioners maintain that there is no reason why he should not have paid the tax due from him.

3. The notice of requirement in the case of Mr. Hifzur Rahman was also made on 21 November 2006.  In his case it was in the sum of £21,047.20 for quarterly returns, or £19,047.20 for monthly returns.  Mr. Hifzur Rahman has been involved in a number of companies which have had a poor record of VAT compliance.  His own returns and payments have consistently been late since 2000.  In 2004 he was required to give security for future taxable supplies, and was only removed from the security requirement on paying the outstanding liability of £87,343.44.  Mr. Rahman is also a cash trader, and the Commissioners maintain that they know of no reason why he should not have paid the VAT due from him.

4. The third Appellant is a partnership consisting of Mr. Fazlur Rahman, Mr. Hifzur Rahman and Mr. Mohammed Miah.  They trade under the name or style of Tagore Indian Restaurant from premises in Ambleside, Cumbria.  On 21 November 2006, when the partnership owed in excess of £3,000 tax, it was required to give security for future taxable supplies in the sum of £11,988.79 for quarterly returns, or £10,088.79 for monthly returns.  That requirement for security followed an earlier similar requirement made on 27 July 2005.  Following the earlier requirement the partners provided a sum of £6,000, which was subsequently set off by the Commissioners against outstanding debts.  As in the case of the two sole traders involved in the appeal, the partnership is a cash trader, so that it has received the tax the tax for which it is liable.  It is currently indebted to the Commissioners in a sum of £21,556.37 plus surcharges of £2,197.28, a total of £23,753.65.

5. We are satisfied that in each case in which the Commissioners required security, the amount thereof was based on the aggregate of the relevant taxpayer’s liability to tax in the four accounting periods prior to the demand being made.  Consequently, we are satisfied as to the reasonableness of each demand.  At the hearing, Mr. Fazlur Rahman accepted that the demands for security were reasonable, and recognised that the Commissioners had made them for the protection of the revenue.

6. Mr. Rahman maintained that the problems of each of the taxpayers concerned were due to the untimely death of his eldest brother in 2004, and said that the tax unpaid in each case would be paid once his brother’s estate had been “sorted out”.  He added that he had recently made arrangements to re-mortgage a property which he owned and, on completion of that transaction, a sum of £125,000 would be released and paid to the Commissioners in discharge of the tax outstanding.

7. Assuming the moneys so released are paid to the Commissioners it may be that they will withdraw the security requirements.  On the other hand they may not: it is a matter for them.  In the meantime, since we are quite satisfied that all three requests for security were reasonable, and can at best be explained only in part by the death of Mr. Rahman’s brother, we are left with no alternative but to confirm all three security requirements.

8. We dismiss the three appeals, but make no direction as to costs.

David Demack
CHAIRMAN
Release Date: 14 May 2008

 CROWN COPYRIGHT 2008