20942

VAT –denial of input tax – no economic activity- no valid output VAT invoices- no proof of input tax- appeal dismissed

LONDON TRIBUNAL CENTRE							

	ANTONY IDO LINWARD	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

			Tribunal:	Adrian Shipwright (Chairman)
					Mrs C S de Albuquerque

Sitting in public in London on 26 August 2008

The Appellant did not appear 
Robert Wastell, Counsel, instructed by HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2008

	DECISION	

1.	This is an appeal by the Appellant (“Antony Ido Linward”) against an assessment  for £ 4947.00 VAT plus interest.  The appellant accepted that because of errors £915.00 was due.  The amount in dispute is there for £4, 032.00 plus interest.
2.	The assessment followed the disallowance of an input tax reclaim in respect of the refurbishment of a private property owned by the appellant's partner, Miss Emin.
3.	The decision was contained in a letter dated 23 August 2006.  This was the subject of reconsideration in accordance with the usual procedure by Mrs R Weston, Review Officer.  She upheld the decision in a letter dated 22 March 2007.
4.	The Chairman noted that only half the VAT in dispute had been paid but was told that HMRC did not wish to take any jurisdictional points.
5.	The Appellant was not present when the case was called on for hearing at the time of the day notified to the parties. No representative of the Appellant appeared.   Accordingly, we delayed the start of the hearing and asked the Clerk to telephone the Appellant to find out if he would be attending.  She did so and told us that the phone had rung but there was no reply.
6.	The Appellant not having appeared in person or by his representative when the appeal was called on for hearing we decided to proceed to consider the appeal in the absence of the Appellant under rule 26 (2) of the Tribunal Rules. .
7.	We record here that the onus of proof is on the Appellant to show that the decision to disallow the input tax was unreasonable.
8.	We were provided with a bundle of documents.
9.	The matter concerned the refurbishment of a property ("the Property") owned by the Appellant's partner, Miss Emin.  The Appellant did not have any interest in the Property as co-owner or otherwise.
10.	The Appellant claimed input tax on expenses including those relating to the refurbishment costs of the Property for the period November 2005 to February 2006
11.	The Appellant carries on the business of construction/project manager as a sole proprietor.  The business is and was registered for VAT.
12.	There was no written contract concerning the refurbishment nor any quotations or estimates produced. None of the normal attributes of a commercial dealing seemed to be present. 
13.	It seems that the total cost of the refurbishment was some £40,000.  At the time of the disallowance no VAT invoices had been raised and no payments made in respect of this.
14.	In October 2006, the Appellant notified HMRC that an invoice in the sum of £20,000 plus VAT had been raised and that £17,000 has been paid in September 2006.
15.	The invoice does not bear a sequential reference number in accordance with the regulations nor a full description of the works done and the amount expended.
16.	There was no supporting documentation for the input tax claimed produced.
17.	The Appellant's grounds of appeal were "I do not agree with the decision because the conclusions have not been arrived at independently".
18.	Mr Wastell, Counsel for HMRC very properly and helpfully put forward such points as there were in favour of the Appellant.
19.	In essence, Mr Wastell on behalf of HMRC argued that the Appellant had not discharged the onus of proof of showing that the Respondent's decision was wrong.  There was no economic activity in respect of the refurbishment and so no entitlement to input tax recovery.  There were deficiencies in the output invoices and as regards showing that the costs of the imports have been borne by the Appellant.  There was no allegation of sham or fraud merely that the expenditure had not been borne by the Appellant.
20.	We find that the Appellant has not discharged the burden of proof of showing that the Respondent's decision was unreasonable and/or wrong.
21.	In particular we find from the evidence before us;
(1)	there was no economic activity as regards the refurbishment of the Property so as to engage in the Right of Deduction for input tax in respect of the expenses of refurbishment;
(2)	even if there were (which is not admitted) there were no output invoices relating to the refurbishment of the Property at the time in question;
(3)	the later invoice was just that.  Even if £17,000 had been paid that left £23,000 not dealt with.  The output invoice did not comply with the necessary regulations and was not a VAT invoice; it did not meet the regulations by reference to the time supply. It was not clear that the relative VAT had been accounted for.
(4)	Even if the output was established then it was necessary to establish that the input VAT had been incurred.  It had not been so established.
(5)	It was further necessary to show that the input related to the business.  It was hard to see this in the case of the purchase of the television.
(6)	The Appellant could have disclosed his bank statements but chose not to.
22.	We find that the Appellant has not discharged the onus of showing that the determination and decision were unreasonable and/or wrong.  Accordingly the appeal is dismissed.  We make no order as to costs.

Adrian Shipwright

CHAIRMAN
RELEASE DATE: 28 January 2009

LON2007/1525