20935

S29A VATA 1994 – Appeal against decision to reduce to nil a claim for refund of tax for alleged domestic heating oil supplies – examination of trading patterns – appeal dismissed
S.73 VATA 1994 – assessment for incorrectly claimed input tax – no proof of payment or supply – missing trader – appeal dismissed
	
MANCHESTER TRIBUNAL CENTRE					MAN/07/1322

 
 	
					LIAM DAVIDSON	Appellant
trading as Hillside Fuels
	
- and -

THE COMMISSIONERS FOR
				HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

Tribunal:	Ian Huddleston, Chairman
		A.F. Hennessey, Member

		
Sitting in public in Belfast on 2nd December 2008

No-one appeared on behalf of the Appellant
Mr. James Puzey, BL, of Counsel for the Respondents

© CROWN COPYRIGHT 2008

DECISION

The Appeal
1.	The disputed decisions of the Respondents which are the subject of this Appeal are:
(a)	the Respondent’s decision to refuse to treat supplies by Liam Davidson trading as Hillside Fuels (the Appellant) in the total sum of £206,412.22 representing VAT for the periods 11/03, 02/04 and 05/04 to 10/04 inclusive as reduced rated for the purposes of VAT pursuant to Section 29A of the Value Added Tax Act 1994 (“the Act”).  The relevant decisions were dated the 19th July 2004 in respect of the first two accounting periods, and the 10th October 2005 for the remaining accounting periods;
(b)	assessments to tax made pursuant to Section 73 of the Act in the sum of £100,963 plus interest in relation to accounting periods 12/04 to 01/06, notified by way of Notice of Assessments dated the 7th February 2007.
2.	The Appellant did not appear and the Tribunal decided to continue with the hearing pursuant to Rule 26(1) of the VAT Tribunal Rules 1986.
The Facts
3.	The facts which led to these decisions are as follows:
(a)	the Appellant carried on a business of the sale of fuels and related produced from premises at Dundalk Road, Newtownhamilton, Newry, County Down, BT35 0JB.  He was registered for VAT (registration number 815 5958 01) with effect from the 1st December 2002;
(b)	in April 2003 the Appellant submitted an application for VAT registration which the Respondents subsequently determined that the Appellant ought to have been registered for VAT not later than the 30th November 2002;
(c)	by a letter dated the 5th April 2004, the Respondents invited the Appellant to contact them in relation to a repayment claim made on the Appellant’s first VAT return for the period ending 30th November 2003.  No response was received.  By a letter dated 11th June 2004, the Respondents advised the Appellant of its intention to reject repayment claims pending production of the business records to support claims for the period ending November 2003 and also the period ending 02/04, if no response was received by the 21st June 2004.  No response was received and accordingly the Appellant’s VAT returns for the period ending 11/03 and 02/04 were amended by the Respondents.  The Appellant was notified of the decisions by letter dated the 19th July 2004.
4.	An Officer of HM Revenue & Customs visited the Appellant’s accountant on the 15th April 2005 and noted that almost every invoice relating to the sale of rebated fuel was supplied to residential addresses made out in respect of an odd number of litres. An invoice book for periods 01/09/04 to 07/09/04 was uplifted in order to verify the Appellant’s customer base.  On that occasion, the Officer contacted three customers, each of whom denied receiving any fuel from the Appellant.
5.	As a consequence, on the 6th May 2005 the Respondents requested invoice books going back to the start of trading, and these were subsequently provided by the Appellant’s Representative on the 1st July 2005.  The Respondents contacted eight more alleged customers, all of whom denied ever having received fuel from the Appellant.
6.	The Appellant attended an interview on the 12th August 2005 in which he claimed that his customers collected fuel from his premises, and the addresses he recorded on invoices were those provided by the customers.  This was in contradiction to an earlier claim which the Appellant had made in a statement to one of the Officers of the Respondents given in 2004.  At that stage the Appellant has claimed that 75% of his rebated fuel was delivered directly to customers and only the balance was collected from his premises.  After that interview, the Respondents contacted a further two customers, both of whom denied ever having received fuel from the Appellant.
7.	On the 5th February 2005 the Respondents informed the Appellant that they intended to reduce his repayment returns to nil and invited the Appellant to provide any additional information in support of his claim by the 19th September 2005.  Again, no further information was provided by the Appellant, and the Respondents wrote to the Appellant on the 10th October 2005.
8.	On the 27th October 2005 the Appellant’s Representatives wrote to the Respondents requesting that they provide their reasons for reducing the Appellant’s claim for VAT repayments to zero. 
9.	On the 31st January 2006 the Respondents explained that they had attempted to verify the Appellant’s claim, and were not satisfied that the fuel had been supplied to domestic customers. 
10.	On the 23rd March 2006 the Appellant’s Representative queried the details of the verification exercise, and in a letter dated the 5th April 2006 the Appellant’s Representatives requested a reconsideration.  The Respondents replied in a letter dated the 11th April 2006 and confirmed their decision in a letter dated the 28th April 2006.
11.	Prior to the issue of that confirmatory letter, the Respondents had, from the information provided in the Appellant’s own invoice books, considered the details of 100 customers allegedly supplied during the period 7th September 2004 to 16th September 2004.  Of those 100 customers, 5 represented cash sales, 1 customer details were illegible, and 1 further customer had died.  Accordingly 93 alleged customer’s were written to, of whom 60 responded (59 in writing and one orally) all indicating that they had never been customers of the Appellant. 
12.	In the intervening period, in relation to the second aspect of this Appeal (ie. the assessments to tax), an Officer of the Respondents visited the Appellant’s accountant on the 26th May 2006 and identified invoices from a business named Premier Fuels covering the period 2nd December 2004 to the 3rd January 2006.  The input tax relating to total purchases of £677,945.22 to the period November 2005 totalled £100,970.
13.	The Officers subsequently made enquiries which established that there was no record of Premier Fuels being registered for VAT during the period of purchases that accorded with the Appellant’s records.  Premier Fuels had been using the VAT registration number of another business, namely Premier Leisure Promotions Limited.  It subsequently transpired, after further investigation, that Premier Leisure Promotions Limited were visited on the 8th October 2004 by an Officer of the Respondents Oils Assurance Team.  The Managing Director, a Mr. McKeown, was spoken to and claimed that Premier Fuels was a subsidiary of Premier Leisure Promotions and would in future be making supplies of fuels.  As a result of that visit, approval under the Registered Dealers in Controlled Oils scheme was granted on the 14th October 2004, but this was subsequently revoked on the 30th June 2005 because no monthly returns had been filed and no replies had been received in correspondence.  Premier Leisure Promotions was de-registered for VAT as a missing trader on the 1st August 2005 and this de-registration was back dated to be effective from the 1st December 2004.
14.	In a letter dated the 5th June 2006, the Respondents wrote to the Appellant seeking alternative documentary evidence of the fuel purchased and the VAT claimed.
15.	In a letter dated the 12th August 2006 the Appellant advised the Respondents that the only documentary evidence of the purchases of fuel from Premier Fuels was the invoices submitted.  The Appellant indicated that the fuel had been paid for in cash and that no receipts were held.  No details of Premier Fuels delivery vehicles were retained.
16.	In a letter dated the 18th December 2006, the Respondents notified the Appellant that assessments to tax would be issued to recover the input tax reclaimed on the fuel said to have been purchased from Premier Fuels.  Notice of Assessments were formally issued to the Appellant in the sum of £100,963, plus interest, on the 7th February 2007.
17.	As a result of these series of decisions, there were a number of appeals lodged with the Tribunal, all of which were subsequently consolidated under the reference LON/06/0533 and all of which are now being processed under the reference attributed to this Appeal, ie. MAN/2007/1322.
The Appellant’s Case
18.	On the various Notice of Appeals lodged by the Appellant, copies of which were produced to the Tribunal, the grounds put for the Appeal could be summarised thus:
(a)	he argued that supplies should properly be taxed at the reduced rate;
(b)	the Appellant contended that the decision of the Respondents was unreasonable;
(c)	the Appellant suggested that “all documents had been made properly available"; and
(d)	finally, in respect of the assessments to tax, that the input tax was properly deductable.
19.	As indicated above, the Appellant did not appear and was not represented, therefore the several Notices of Appeal - together with correspondence passing between the Appellant’s Representatives and the Respondents - was the only information available to the Tribunal.
20.	There was a suggestion that the Appellant, through his doctor, had written to the Respondents the day before the hearing of this Appeal, suggesting that he was unfit to appear, but that letter was not actually produced to the Tribunal.
The Respondent’s Case
21.	The case for the Respondents falls into two distinct elements:
(a)	Refusal to treat supplies as reduced rated 
(i)	Under Section 29A of the VATA Act, provision is made that for certain supplies a reduced rate of 5% VAT will be charged.  The products to which that reduced rate applies are specified in Schedule 7A of the Act and includes fuel oil supplied for domestic use.  Note 5(f) of Schedule 7A Group 1 defines a supply of fuel oil of less than 2,300 litres delivered to any premises in any one day as deemed to be for “domestic use”.
(ii)	The Respondent’s case is, that on the evidence available to them, the Appellant’s supplies were not made for a qualifying use and do not fall to be reduced rated pursuant to Section 29A of the Act. 
(b)	Assessments to Tax
(i)	It is the Respondent’s case that the Appellant has failed to prove that supplies were made by Premier Fuels and that payment was made by the Appellant for those supplies – in which case input tax was wrongly reclaimed.
(ii)	In the alternative, the Respondents argued that if supplies were made by Premier Fuel and payment was made for those supplies, that the Appellant is not entitled to a deduction of input tax as Premier Fuels was not a taxable person making a taxable supply at the relevant time.
22.	The Respondent’s case is that Premier Fuels were not registered for VAT at the time that the supplies were made to the Appellant, and were using an incorrect VAT number assigned to another business, and that therefore they could not make taxable supplies, charge VAT on its supplies, or issue valid VAT invoices in compliance with Regulation 14 of the VAT Regulations 1995 (“the Regulations”).
	Conclusions
23.	Having heard the evidence adduced on behalf of the Respondents, which consisted of sworn witness statements and the oral evidence of Mr. George Bingham, one of the Assessing Officers, this Tribunal finds as follows:
(a)	the Respondents had operated a robust examination into the trading affairs of the Appellant based on the evidence available to it (which had never been contradicted by the Appellant) and, on that basis, they were right to refuse to treat supplies by the Appellant as reduced rated for the purposes of VAT pursuant to Section 29A of the Act.  All of the information, including the results of customer sampling,  had been put to the Appellant through his Representatives, but had never been contradicted nor explained.  In the absence of a satisfactory explanation the Respondents had acted reasonably in refusing to treat the supplies as reduced rated;
(b)	equally, on the evidence before the Tribunal, the Tribunal finds that Premier Fuels was not registered for VAT during the period of the alleged taxable supplies as recorded in the Appellant’s records, and that the Appellant had failed to prove that payment had been made by the Appellant for those supplies.  Even if payment had been made, the Tribunal finds, in the alternative, that the Appellant was not entitled to make a deduction of input tax as Premier Fuels was not a taxable person at the relevant time.  As a consequence of that finding, the assessments to tax, therefore, have been properly made.
24.	On application made to it and given the extreme nature of the facts of this case, the Tribunal finds that costs should be awarded in favour of the Respondents in an amount, in default of agreement, to be assessed by this Tribunal.
25.	Under rule 26(3) of the Value Added Tax Rules 1986 (as amended) the Tribunal may set aside any decision or direction given in the absence of a party on such terms as it thinks just, on the application of that party, or of any other person interested, served at the appropriate Tribunal Centre within 14 days after the date when the decision or direction of the Tribunal was released.
Ian Huddleston
Chairman

Release Date : 21 January 2009