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	United Kingdom VAT & Duties Tribunals Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> Villa Skips Ltd (t/a Stevens Skips) v Revenue & Customs [2009] UKVAT V20926 (16 January 2009) URL: http://www.bailii.org/uk/cases/UKVAT/2009/V20926.html Cite as: [2009] UKVAT V20926

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20926

VAT - SECURITY– Protection of Revenue –– the Appellant's director associated with three other businesses which had bad VAT compliance records – Appellant phoenix of another company that went into liquidation –– Whether Respondents' actions in requiring a security reasonable –Yes –– Appeal dismissed –– VAT ACT 1994 Schedule 11 p 4(1)

LONDON TRIBUNAL CENTRE

VILLA SKIPS LIMITED Appellant

Trading as Stevens Skips

- and -

HER MAJESTY'S REVENUE and CUSTOMS Respondents

Tribunal: MICHAEL TILDESLEY OBE (Chairman)

SHEILA WONG CHONG FRICS (Member)

Sitting in public in Birmingham on 12 December 2008

The Appellant did not appear

Gloria Orimoloye of the Solicitor's office of HM Revenue & Customs, for the Respondents

© CROWN COPYRIGHT 2008


 


DECISION

The Appeal

1. The Appellant was appealing against a Notice of Requirement to give Security in the sum of £17,750 (quarterly returns) or £11,800.00 (monthly returns) issued on 20 March 2007.
2. The Appellant carried on business undertaking skip hire and waste management from premises at Ham Villa, Ham Road, Charlton Kings, GL52 6NB. The Respondents considered that the Appellant was a risk to the protection of the revenue because of Mr Barry Steven's association with other business which had bad records of VAT compliance. Mr Stevens was a director of the Appellant.
3. The grounds of Appeal were that

(1) There had been no loss of revenue in this case;

(2) It was improper to rely upon previous dealings

(3) The decision made was arbitrary.

(4) The decision made was against the weight of evidence.

(5) The decision was unfair.

4. The Appellant did not attend the hearing. The Appellant's advisers informed the Tribunal in a letter dated 4 December 2008 that the Appellant had ceased to trade and that they had no instructions to take part in the Appeal. We were satisfied that notice of hearing was served on the Appellant in accordance with the Tribunal Rules. We granted the Respondents' application to hear the Appeal in the Appellant's absence.
5. We heard evidence for the Respondents from Guiliana Marion Cradle, the Officer who authorised the issue of the Notice of Requirement, and Owen Lloyd Jones, the Officer who served the Notice of Requirement upon the Appellant. We also received a bundle of documents in evidence.

The Issue to be Decided

6. The issue for the Tribunal was whether the Respondents had acted reasonably in imposing the security for the protection of the revenue. Thus we have to decide whether the Respondents acted in a way in which no reasonable panel of Commissioners for HM Revenue and Customs 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 requirements. In exercising this jurisdiction we must limit ourselves to considering facts and matters which existed at the time the challenged decision to require a security was taken.

The Legislation

7. Paragraph 4(2), Schedule 11, of the Value Added Tax 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."

The Facts Relied upon by the Respondents for the Notice of Security

8. When issuing the security requirement Mrs Cradle placed reliance on Mr Barry Steven's association with three other businesses which had bad VAT compliance records. The businesses were H C Stevens & Sons, Toppix Limited, and Topmen Limited with VAT debts at the time the security was issued of £52,090.58, £98,803.28, and £49,104.14 respectively. H C Stevens & Sons had four outstanding VAT returns and had been in the default surcharge regime since September 1986 with 65 periods of default. Topmen Limited had seven outstanding VAT returns and had been in the default surcharge regime since March 2003 with 22 periods of default. Toppix Limited was compulsorily liquidated and became insolvent on 20 September 2006. At the time of its insolvency it had five outstanding VAT returns and 33 periods of default.
9. The businesses including the Appellant traded from the same address and shared the same trading name of Stevens Skips. H C Stevens & Sons was a partnership with Barry and Robert Stevens named as partners. The other three businesses were companies of which Mr Barry Stevens was a director.
10. Mrs Cradle concluded that the Appellant was a phoenix of Toppix Limited because the Appellant started business soon after the compulsory liquidation of Toppix Limited and both companies were engaged in the same line of business from the same trading address under the same trading name. Mrs Cradle considered that the Appellant would be run along similar lines to Toppix Limited, which would increase the risk of the Appellant not complying with its VAT responsibilities.
11. Mrs Cradle calculated the quantum of the security by using the last four VAT returns submitted by Toppix Limited. They agreed to the Appellant's request for monthly returns which reduced the security demanded to £11,800.

The Appellant's Case

12. Mr Barry Stevens explained in a letter dated 13 April that the problems with his associated businesses arose because his brother was ill and as a result he fell behind with the paperwork. Mr Stevens had enlisted the help of his two daughters and accountants to carry out the administration for his businesses which should prevent a recurrence of the problems with late VAT returns and payments. Mr Stevens also offered to submit monthly VAT returns.
13. The Appellant did not have the funds to pay a security because Mr Stevens had used all available monies to discharge bankruptcy proceedings. Mr Stevens considered that the steps he was taking would minimise the risks posed by the Appellant to the protection of the revenue.

Reasons

14. Our starting point is to consider whether Mrs Cradle acted in a way in which no reasonable panel of Commissioners for HM Revenue and Customs could have acted, or whether she took into account some irrelevant matter, or disregarded something to which she should have given weight when imposing the security requirement for the protection of the revenue on the Appellant on the 20 March 2007. In exercising our jurisdiction we must limit ourselves to considering facts and matters which existed at the time the challenged decision to require a security was taken. We are unable to substitute our own discretion for that of the Commissioners. Our task is to decide whether the decision of Mrs Cradle was reasonable.
15. Mrs Cradle decided that the Appellant posed a substantial risk to the protection of the revenue. In arriving at her decision Mrs Cradle placed particular weight on Mr Barry Stevens' involvement with three other businesses which had very bad compliance records for VAT. Mr Barry Stevens held positions of responsibility in each of these businesses either as a partner or company director. We consider that Mrs Cradle was correct in giving weight to Mr Stevens' association with businesses with bad compliance records when imposing the security requirement. In our view Mr Steven's association with these businesses was relevant in assessing the Appellant's risk to the protection of the revenue, particularly as Mr Stevens was the sole director and in control of the Appellant.
16. Mrs Cradle also took into account the timing of the Appellant's commencement of business which coincided with the compulsory liquidation of Toppix Limited. Mrs Cradle concluded that the Appellant was in effect a phoenix of Toppix Limited. The companies were in the same line of business, trading from the same address under the same trading name. We agree with Mrs Cradle's description of the Appellant as a phoenix of Toppix Limited which highlighted the security risks posed by the Appellant, particularly as Toppix Limited went into compulsory liquidation owing £98,803.28 in unpaid VAT.
17. Mr Stevens made various proposals to reduce the risks of non-compliance by the Appellant, namely monthly returns and enlisting the help of his daughters and accountants to carry out the administration. The proposals had no bearing upon the reasonableness of Mrs Cradles' decision as they did not form part of the factual matrix when she took her decision. Mrs Cradle, however, accepted the Appellant's offer of monthly returns, which had the effect of reducing the amount of security demanded from £17,750 to £11,800.00.
18. The fact that the Appellant did not have the funds to pay for a security provided additional proof of the potential risks posed by the Appellant to the protection of the revenue.
19. The Appellant's grounds of Appeal comprised five assertions not backed up by argument or evidence, which undermined the persuasive force of the Appeal. The assertion that there was no loss in revenue associated with the Appellant misunderstood the purpose of a security which was to prevent the Appellant from getting into arrears in the first place. Similarly the statement about the impropriety of placing weight on records of other businesses overlooked the relevance of Mr Steven's controlling influence in the businesses. Finally the Appellant's assertions regarding the unfairness and arbitrariness of the decision would be tested by the Tribunal.
20. We find no evidence that Mrs Cradle took into account some irrelevant matter or disregarded something to which she should have given weight in coming to her decision on the 20 March 2007.
21. Mrs Cradle used the last four VAT returns for Toppix Limited to calculate the amount required for the security. Mrs Cradle's choice of Toppix Limited was appropriate because the Appellant had effectively resumed the business previously carried out by Toppix Limited. In those circumstances the amount so calculated would have been a fair representation of the Appellant's future VAT Liability. We consider the amount demanded as security was reasonable and reflected the degree of risk posed by the Appellant.

Decision

22. For the reasons set out above we have decided that the issue of the Notice of Security dated 20 March 2007 on the Appellant was reasonable. We, therefore, dismiss the Appeal. We make no order for costs.

MICHAEL TILDESLEY OBE

CHAIRMAN

RELEASE DATE: 16 January 2009

LON/2007/1597