20943

VAT- Notice requiring security – defaults and non-payments - association and common directors with defaulting companies owing significant sums – whether for the protection of the revenue? Yes and reasonable in amount – Appeal dismissed.

LONDON TRIBUNAL CENTRE						

	LED SCREEN HIRE EUROPE LIMITED	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

			Tribunal:	Adrian Shipwright (Chairman)

Sitting in public in Southampton on 4 September 2008

Richard Lay, Director for the Appellant

Pauline Crinnion, Advocate, of HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2008

DECISION

1.	This is an appeal against a decision on review contained in a letter dated 3 April 2007 upholding a Notice of Requirement to do Security.
2.	The Appellant, LED Screen Hire Europe Limited, appeals by a Notice of Appeal dated 22 June 2 007.  It stated under the heading "Grounds of Appeal" that "We believe the deposit security to be disproportionate on a quarterly basis to that payable.  We believe that a Security deposit of this magnitude would be damaging to the overall company from the cash flow prospective which operates in extremely seasonal industry".  
3.	HMRC did not wish to take any point as the date of the Appeal and accordingly I did not consider whether or not it was in time.
4.	Oral evidence was given by Ms Trish Birch and mothers Clare Bell.  No witness statements were produced but the appellant was given the chance to cross examine them.  The Appellant also gave evidence and was cross-examined.
5.	The Respondents ("HMRC") gave Cases of Requirement to Give Security on 28 February 2007.  The Appellant pastor reconsideration of the decision.  The original decision letter was signed by Ms T. Birch who gave evidence (see above).
6.	The reconsideration was carried out by Miss C. Bell who upheld the Notice of Security and informs the Appellant of this in a letter dated three April 2007.  She considered the Security was required to the protection of the revenue.  
7.	The Appellant had common directors with LED Screen Hire Company Limited and Optiscreen International Limited, companies with bad records of compliance and large depths to HMRC.  The former had three outstanding returns and 11 periods of default and is now in administration owing more than £87,000 to HMRC.  The latter is insolvent owing HMRC almost £250,000.  Three returns are outstanding for this company and there are seven periods of default.
8.	At the time of the Notice Requiring Security was issue the Appellant was already late with its first VAT return and had not paid the relative VAT.  It seems some £33, thousands of VAT is outstanding.
9.	The appellant has been late with its subsequent returns and payment VAT.
10.	The amount of the Security was calculated on the basis of the Appellant's estimate of turnover in Form VAT 1.  This was an estimate of £1 million.  In fact, of the Appellant's representative told us that turnover was nearer to £1½ million.  The amount of the Security could thus have been higher.  It did not include the outstanding VAT which it could have.
11.	The calculation was made in the way commonly applied by HMRC using a Tax Performance Ratio.
12.	I find as a fact that the amount of the Security requested and the means by which it was arrived at were both reasonable.
13.	The Appellant argued essentially that commercially he could not really afford to pay the Security and continuing business.  His cash flow would not bear it.
14.	HMRC argued in essence that the Security was required to protect the revenue given the circumstances.  The method of calculating the Security was reasonable.  A higher figure could have been justified is the actual turnover had been used.
15.	The onus is upon that the Appellant to show that the Security Notice is not reasonable in the circumstances of the case.
16.	I have already found as a fact that the lines of the Security requested and the means by which it was arrived at were both reasonable.  I consider given the circumstances of the previous companies and the non-compliance by the Appellant lacked the decision to issue the Notice to Give Security was also reasonable in the Wednesbury sense.  It was within the range of reasonable decisions that an HMRC officer properly instructed could have arrived at.
17.	Accordingly, I dismiss the appeal.  I make no orders to costs.

Adrian Shipwright
CHAIRMAN
RELEASE DATE: 28 January 2009

LON 2007/1118