20684
REGISTRATION – Entitlement to be registered – Cancellation of registration – Whether Appellant carrying on a business or economic activity – Whether taxable supplies made by Appellant – Appeal dismissed
INPUT TAX – Invoice – Whether self-billed invoice – No – Whether input tax charged on invoice relates to supply to Appellant of any services – No – Appeal dismissed

LONDON TRIBUNAL CENTRE

	JEFFREY MIAH	           Appellant

-	and –

	THE COMMISSIONERS FOR HER MAJESTY’S REVENUE & CUSTOMS 	 Respondents

				Tribunal:	SIR STEPHEN OLIVER QC (Chairman)
						MR RANBIR SURI JP

Sitting in public in London on 28 April 2008

The Appellant in person

Simon Chambers for the Respondents

© CROWN COPYRIGHT 2008

DECISION

1.	Mr Jeffrey Miah appeals against two decisions both conveyed by letter of 8 December 2006.  The first was to remove his registration with effect from the date for which registration was granted, i.e. 3 August 2005.  The second was to disallow his claim for input tax in the sum of £20,037.50 in respect of the 10/06 period. 

2.	Mr Miah presented his case and gave evidence.  Sean Clayton, a Customs officer with responsibility for local compliance and input tax claims, gave evidence for the Respondents.

The Registration

3.	In April 2005 Mr Miah submitted a VAT 1 Form applying for registration with effect from 31 December 2005.  The business trade name was entered as “Miah & Co Reserve”, “Rembrandt Union” and “Miah Fancy”.  The activities were said to be “art history, lecturing, bookshop, franchising, banking, food processing, land dealing, agricultural import export, land agent, artist, land development.”  The estimate of supplies in the next twelve months was said to be £30,000 (taxable) and £1m (exempt).  

4.	In May 2005 Mr Miah wrote asking to change the registration date to 7 August 2005.  As evidence of his business activities he said that he had a bank account, a Rembrandt Union land purchase and a land purchase in France.  Mr Miah explained that there had been no sales.  He added that he had a licence from the Office of Fair Trading to conduct the following businesses: Consumer Credit, Consumer Hire, Credit Brokerage, Debt Adjusting/Counselling, Debt Collecting, Credit Reference Agency with the right to canvass off trade premises debtor-creditor-supplier agreements and regulated consumer hire agreements.  

5.	In response to further requests for evidence of trading Mr Miah referred to a solicitors’ bill with VAT paid, papers relating to land in France (with attestation of ownership) and in London and he gave his bank details.  

6.	Following Mr Miah’s supply of further information he was registered with effect from 3 August 2005.  

VAT returns

7.	Mr Miah’s returns for 04/06 showed no outputs and purchases of £169.  His return for 07/06 showed no outputs/sales and purchases of £2,690. 

8.	The 10/06 return (dated 23 October 2006) showed no outputs/sales and the total value of purchases as £94,463.  The VAT reclaimed in Box 4 was £20,037.  The invoice in support of the claim for input tax was provided by Mr Miah.  It contains his name and registration number and is dated 20 October 2006.  The supplies are said to have been from the “Inland Revenue” and are described as follows:

“As I should not be paying tax.  1 x deductions and allowances Sale   £114,500
to 83 ex as agreed 
VAT 17.5%							      £  20,037.50”
	
The Customs visit

9.	On 16 November 2006 Sean Clayton visited Mr Miah at his premises and asked him to provide documentary evidence to support his business activities as a land agent and artist, business bank statements and personal bank statements, VAT account and related papers, all books of accounts and sales and purchase invoices.  

10.	A fact-finding meeting between Mr Miah and the Customs was held on 8 December 2006 and on the same day Customs notified Mr Miah of the decision to deregister because he was neither liable nor entitled to be registered.  The decision to disallow the input tax claim for the 10/06 period was expressed as follows:

“You have provided no evidence of VAT charged on goods or services received from a taxable person in relation to the claim of £20,037 for the above VAT period.  The claim has therefore been reduced to nil.”

The issues

11.	Two issues arise in this appeal.  First, are we satisfied that the decision of the Customs to cancel Mr Miah’s registration was reasonably taken? Second (and whatever our conclusion on the first issue), are we satisfied that Mr Miah’s claim for input tax was supported by a proper invoice?  We will approach the second question both as a matter of whether the Customs acted reasonably in refusing to admit the invoice (said to be a self-billed invoice for supplies from the Inland Revenue) and of whether the Customs were (or were not) correct in law in disallowing the claim.  

The statutory framework relating to the deregistration issue

12.	Schedule 1 of VAT Act 1994 contains the provisions relating to VAT registration.  The relevant provisions are as follows:

“(9)	Where a person who is not liable to be registered under this Act and is not already so registered satisfies the Commissioners that he –

(a)	makes taxable supplies; or
(b)	is carrying on a business and intends to make such supplies in 	the course or furtherance of that business, 

they shall, if he so requests, register him from the day on which the request is made or from such earlier dates as may be agreed between them and him.”

Under the heading “Cancellation of Registration” are found these words:

“13(3)	Where the Commissioners are satisfied that, on the day on which a person was registered under this Schedule, he –

(a)	was not registrable under this Schedule; and
(b)	in the case of a person registrable under paragraph 4(2) above, 	did not have the intention by reference to which he was 	registered, 

they may have cancel his registration with effect from that day.”

13.	Section 4 of the 1994 Act contains the provisions regarding the scope of VAT on taxable supplies.  The relevant provisions read as follows:

“(1)	VAT shall be charged on any supply of goods or services made in the United Kingdom where it is a taxable supply made by a taxable person in the course or furtherance of a business carried on by him.  

(2)	A taxable supply is a supply of goods or services made in the United Kingdom other than an exempt supply.”

Section 94(1) provides a definition of business.  The relevant subsection reads as follows:

“(1)	In this Act, “business” includes any trade, profession or vocation.”

14.	Article 4 of the EC Sixth Directive contains the definition of a taxable person and of economic activities.  The relevant paragraphs read as follows:

“1.	“Taxable person” shall mean any person who independently carries out in any place any economic activity specified in Paragraph 2, whatever the purpose or results of that activity.”

15.	The central questions are whether at the material times (i.e. from the date of registration in August 2005 until the date of notification of deregistration in December 2006) the supplies made by Mr Miah (if any) were taxable supplies made by him as a taxable person in the course or furtherance of a business (or trade, profession or vocation) carried on by him.  In the terms of the Sixth Directive, the question is whether Mr Miah was a taxable person, being a person who has independently carried out any economic activities.  

The facts relevant to the registration issue 

16.	Mr Miah came to London from Tonbridge in 1983 to be an artist.  He took part in a training course from 1983 until 1990 at the Faculty of Arts of the Sir John Cass Institute in Whitechapel.  He concentrated on jewellery and engraving.  

17.	At the start of his time in London he lived at a Salvation Army hostel.  Later he moved into a Tower Hamlets residence.  

18.	Mr Miah has painted for many years and built up a stock of paintings.  The paintings are kept in a garage in Chingford.  No exhibition has been held and no sales have been made.  No independent valuation has been made of Mr Miah’s paintings, but Mr Miah estimates them to be worth £17m.  The paintings have not been insured because Mr Miah cannot, he said, afford the premiums.  If a painting is lost or damaged, it will be cheaper to replace it, he said.

19.	We were shown small photocopies of some of the paintings.  We could not possibly be satisfied from those that there is any value in the paintings.  Mr Miah has not shown that there is any market for them, nor has he provided any objective evidence as to their value.

20.	Mr Miah described his business as “Rembrandt Union”.  At present it has no members, except Mr Miah.  The aim of the Rembrandt Union is to have a bookshop, to provide lectures in art history, to publish a magazine and to arrange art-related holidays.  None of these aims have yet been put into effect.

21.	Of his claim in the VAT 1 Form to be processing food, Mr Miah said that he had not yet bought any equipment on account of the expense.  

22.	Regarding “land dealing” Mr Miah said that the expression covered dealing, maintaining and advising.  He has not represented anyone.  He said that he had been in dispute with the Council about his flat. Litigation was involved and he was charging £500 per hour for working on his case.  Mr Miah claimed to have title to a property on the strength of what he understood to have been a declaratory order of HHJ Roger Cooke in 2004 at Central London County Court; the Court Order does not record any Order to that effect and no other evidence was produced showing Mr Miah’s entitlement to that property.  Mr Miah owns a plot of land in France.  No work has been done on it save for a visit by the local geometer.  A possible use for the land in France, suggested Mr Miah, was that it might be used for coppicing and selling stakes. 

23.	Of “banking” and “food processing” activities (mentioned as business activities in Mr Miah’s application for registration) there is no evidence that any of these have taken place.  

24.	Mr Miah has claimed, for reasons that we have not understood, that he has been receiving supplies from the “Inland Revenue” which have been used in the course of his business activities.  The Inland Revenue have apparently failed to allow him to deduct living, electricity and other expenses of a personal nature in computing his income tax liability.  Those disallowed amounts, aggregated over the entire period, should, he claimed, be treated as inputs for, or otherwise reduce his liability to pay, VAT.  We cannot accept that.  None of the expenses can be regarded as used for the purposes of his business, even if he had them properly registrable.

25.	There were no records of business income and expenditure or of sales and purchases, nor were any cash books provided.  At most there were random cheques and entries relating to receipts and expenses.

26.	Mr Miah accepted that he had not conducted any of the activities covered by the licence from the OFT; nor was there any evidence that he intended to conduct those activities.

27.	For some years Mr Miah has been employed by a street cleaning contractor and he has worked in that capacity for between 45 and 50 hours a week.  

Conclusion on the decision to deregister 

28.	The existence or otherwise of a business depends on the characteristics of the activities. We therefore approach the present issue by examining the facts set out above in the light of the tests adopted in the authorities, with particular reference to the judgment of Gibson J in Customs and Excise Commissioners v Lord Fisher [1981] STC 238.  

29.	Is the activity a serious undertaking earnestly pursued?  We of course respect Mr Miah’s aspirations.  But nothing of any significance has happened yet.  Nor is there any prospect in the foreseeable future that anything of a business nature will take place.  We do not therefore think that this test is satisfied.

30.	Is the activity an occupation or function which is actively pursued with reasonable or recognisable continuity?  There have, as we see it, been no outputs, no sales, no supplies.  Nothing has happened that could possibly characterise either the Rembrandt Union or the land holding functions as being actively pursued with continuity.

31.	Does the activity have a certain measure of substance in terms of the quarterly or annual value of taxable supplies made?  For reasons we have just given, we can discern nothing of value in the supplies made.

32.	Is the activity conducted in a regular manner and on sound and recognisable business principles?  There is, as we see it, no evidence of anything businesslike about the purported activities of Mr Miah.  

33.	Is the activity predominantly concerned with the making of taxable supplies for a consideration?  The answer must be “No”, because there have been no supplies for a consideration.

34.	Are the taxable supplies that are being made of a kind which, subject to differences of detail, are commonly made by those who seek to profit from them?  The range of activities that Mr Miah claims to have carried out are so diverse and so insubstantial that they cannot, we think, possibly be so described. 

35.	We are satisfied on the strength of those considerations that Customs were correct in their decision to remove Mr Miah from the VAT register.  

The disallowance of input tax issue

36.	Section 24 of the VAT Act 1994 provides that “input tax” in relation to a taxable person means “VAT on the supply to him of any goods or services”.  Regulation 13 of the VAT Regulations contains the provisions requiring a registered persons to produce a VAT invoice.  These state, among other things, that he is to provide recipients of his supplies with a VAT invoice.  Where the registered person provides document to himself (“a self-billed invoice”) that purports to be a VAT invoice in respect of the supply of goods to him by another person, that document must comply with the provisions set out in paragraph (3A).  In particular there must have been a prior agreement entered into between the supplier of the goods or services to which it relates and the recipient of the goods or services; the document must also contain the particulars required under Regulation 14.

37.	The document relied upon by Mr Miah in support of his claim for input tax was the alleged “self-billed” invoice relating to supplies to him by the Inland Revenue.  The terms of that have been set out above.  We cannot see that any taxable supplies have been made by the Inland Revenue to Mr Miah.  The invoice has been written by Mr Miah himself  and does not conform to the regulations in respect of a self-billing arrangement. In particular there has been no self-billing agreement as required by Regulation 13(3A) and (3B) of the Value Added Tax Regulations.  Nor does the invoice indicate any time of supply as required by Regulation 14(b).  Nor does it provide the VAT registration number of the alleged supplier (i.e. of the Inland Revenue).  Moreover it carries a description stating “as I should not be paying tax”.  This indicates that Mr Miah is trying to claim back tax from the Inland Revenue to which he considers he has a claim.  

38.	For all those reasons we agree with the Customs that the claim for input tax has no basis in law.  We think his claim should be dismissed on that basis.

Conclusion

39.	We dismiss the appeal.

SIR STEPHEN OLIVER QC
CHAIRMAN

RELEASED: 15 May 2008

LON 2007/0127