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VALUE ADDED TAX – appeal against notice of requirement for security for VAT – public house – whether Customs acted reasonably in requiring security – para. 4(2) of Schedule 11, VATA 1994 – appeal dismissed
MANCHESTER TRIBUNAL CENTRE
CHRISTOPHER JOHN WRAITH Appellant
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THE COMMISSIONERS FOR
HER MAJESTY'S REVENUE AND CUSTOMS Respondents
Tribunal: IAN VELLINS (Chairman)
MARILYN CROMPTON (Member)
Sitting in public in Manchester on 8 January 2009
Christopher John Wraith, Appellant, appeared in person
Mrs Kim Tilling of the Solicitor's Office of HM Revenue and Customs for the Respondents
© CROWN COPYRIGHT 2009
DECISION
The appeal
- In this appeal, the Appellant is Mr. Christopher John Wraith, who carries on a business as a public house at the Chequers Inn, Claypit Lane, Leeds LS25 5LP and who is registered for VAT with effect from 1 July 2005 under registration number 889 0807 71. The Appellant appeals against a notice of requirement to give security under Schedule 11, paragraph 4(2)(a) of the Value Added Tax Act 1994 (VATA 1994), issued by the Respondents by letter dated 11 March 2008 and by an amended letter dated 22 May 2008. The Respondents in the amended letter required the Appellant to give security in the sum of £36,397.45 if quarterly returns were submitted, or £24,464.97 if monthly returns were submitted. The Appellant appealed by notice of appeal dated 11 June 2008.
- At the hearing of this appeal at Manchester on 8 January 2009 the Appellant represented himself, and the Respondents were represented by Mrs. Kim Tilling, a higher officer.
- Oral evidence was heard from the Appellant itself and from an officer of the Respondents, Mr. Andrew Jewers.
- At the hearing of the appeal the facts were not in dispute, and the short issue was whether the Respondents had rightly and reasonably exercised the power to require security in the amount required.
The legal framework
- Schedule 11, paragraph 4(2) of VATA 1994 provides:
"If they think it 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 or to whom relevant goods or services are supplied."
- The cases of Mr. Wishmore Ltd v Commissioners of Customs and Excise 1988 STC 723 and John Dee Ltd v Commissioners of Customs and Excise 1995 STC 941 have confirmed that the jurisdiction of the tribunal in an appeal is appellate, not supervisory, and that the tribunal must examine whether the Commissioners had rightly exercised their power to require security. The tribunal must consider whether the Commissioners have acted in a way in which a reasonable panel of Commissioners could have acted, whether they have taken into account some irrelevant matter or have disregarded something to which they should have given weight. It is not for the tribunal to exercise a fresh discretion, as the protection of the revenue is not the responsibility of any court or tribunal. In Commissioners of Customs and Excise v Peachtree Enterprises Ltd 1994 STC 747 Dyson J. held that the tribunal should not have regard to facts and matters arising after the date of the decision of the Commissioners to require security.
Facts and conclusions
- We make the following findings of fact and reach the following conclusions in this appeal.
- The Chequers Inn, Claypit Lane, Ledsham, Leeds LS25 5LP is a public house. The Appellant and his mother, Annie Rebecca Wraith had carried on that business as a partnership for many years until 1 July 2005, when the Appellant took over the business as a sole proprietor. The previous partnership had been registered for VAT, and had a poor compliance record in the periods from 2000. The partnership which was registered for VAT owed the Commissioners a total of £17,055.01, which included VAT, default surcharge and interest.
- The Appellant did not notify the Commissioners that he had taken over the business until 14 May 2006. He applied to have the previous registration re-allocated to him, but this was refused by the Commissioners due to outstanding debts. The Appellant was registered for VAT in his own name with effect from 1 July 2005. Whilst trading in his own name the Appellant himself did not comply with payment of the VAT in respect of his VAT returns, and towards the end of 2007 the Respondents reviewed the Appellant's compliance with the legislation concerning the submission and payment of VAT returns, became of the opinion that his record represented a risk to the revenue. A warning letter was first issued to the Appellant on 12 November 2007 advising him of the possible need for a requirement to give security due to outstanding returns and a large debt. As no response was forthcoming the Commissioners issued a notice of requirement to give security, on 11 March 2008. On that date the amount of VAT outstanding from the Appellant was £91,679.60. That notice required the Appellant to give security in the sum of £128,125.27 if quarterly returns were submitted, or £115,600.55 if monthly returns were submitted. Following a meeting between the Appellant and the Commissioners on 14 May 2008, the Appellant stated that he could not pay, had no assets and also disputed the level of debt outstanding. The Commissioners were still of the opinion that security was required, but decided that the existing VAT debt portion of the security should be removed from the quantum, and an amended notice of requirement was issued on 22 May 2008 requiring security in the reduced sum of £36,397.45 if quarterly returns were submitted, or £24,464.97 if monthly returns were submitted. The reduced amount of security was based on the four returns submitted by the Appellant, namely 04/07, 07/07, 10/07 and 01/08, which returns totalled £73,394.91.
- The Appellant in his notice of appeal stated that his grounds of appeal were that he had insufficient funding to pay outstanding liabilities and the security. The Commissioners had taken the view that there was no satisfactory reason why the Appellant should not have paid the VAT due in respect of his business, as the Appellant was paid in cash or by credit card by his customers at the time that the customers made their purchases, and it was the duty of the Appellant to pass on the VAT element to the Commissioners.
- Mr. Andrew Jewers, a higher officer of the Commissioners gave evidence at the hearing that the original partnership business at the public house between the Appellant and his mother had a poor compliance record in respect of making payment of VAT to the Commissioners. The Appellant had then continued to trade as a sole proprietor in the same business in the same building. He had notified the Commissioners of the change of ownership of the business at a late stage, almost a year after the event. Whilst trading as a sole proprietor the Appellant himself had failed to pay the VAT due in respect of his trading. An officer of the Commissioners had concluded that there was a risk to the revenue, and the Appellant had not been passing on the Commissioners as VAT the VAT element of his supplies, even though he was running a cash business. The original officer had accordingly issued the original notice of requirement to give security in the sums of £128,125.27 or £115,600.55.
- Another officer of the Commissioners had a meeting with the Appellant on 14 May 2008. The Commissioners took into account that the debt owing by the Appellant himself of £91,679.60 was being pursued by the Commissioners' debt management team, and that it would be reasonable for the Commissioners to reduce the amount of the security required to a sum which reflected the last four returns of the Appellant that had not been paid. The officer then discussed the situation with Mr. Jewers, and recommended that the Commissioners reduce the amount of the security required to £36,397.45 or £24,464.97. Mr. Jewers then issued the amended letter and amended notice of requirement to give security in the reduced amounts. He considered that in all the circumstances it was necessary for the Commissioners to require the Appellant, as a condition of supplying goods or services, to give security of a guarantee or cash deposit in the amount of the reduced figures, for the protection of the revenue.
- The Appellant gave evidence at the hearing, and stated that he was not contesting the reasonableness of the decision of the Commissioners, and that he fully understood how the Commissioners had arrived at the quantum of the security. He stated that his mother had retired because she was elderly, and she had not been intending to evade her responsibilities. He also said that he had not acted deliberately in omitting to notify the Commissioners late that he had taken over the business in his own name. He said that he was not disputing that the Commissioners had dealt with matters correctly. He said that the only reason why he considered that the amount of the security was unreasonable was because he did not have the money to pay the security.
- Having considered all the evidence in this appeal we find that the Respondents acted reasonably in requiring the security of £36,397.45 if quarterly returns were submitted, or £24,464.97 if monthly returns were submitted. We find that the amount of the security is fair and reasonable.
- We find that the Respondents reasonably and properly took into account all relevant matters. The Appellant and his mother who had operated the public house in partnership for many years had had a poor compliance record in connection with payment of VAT and had owed the Commissioners a sum of £17,055.01. The Appellant himself, after taking over the business in his own name, had failed to pay his VAT and by 11 March 2008 owed the Commissioners £91,679.60. There was no satisfactory reason why he had failed to pay the VAT as he received payment immediately on his sales from the customers at his public house, and had failed to pass on the VAT to the Commissioners. We find that the original officer had acted reasonably in requiring the Appellant to give security. We further find that, following a further meeting with the Appellant, the Commissioners acted reasonably in reducing the amount of the security required. We find that the Respondents had reasonable grounds for being concerned that the Appellant was a risk to the revenue, and that security was required. We find that Mr. Jewers acted reasonably in requiring the Appellant to give the security in the reduced amounts, having taken into account all relevant matters.
- We find that the officers of the Respondents had made full and proper enquiries before reaching their decisions. We find that the Respondents were entitled to take the view that there was a considerable risk to the revenue; that the Appellant would not pay his VAT. We find that the Respondents acted reasonably and took into account all relevant material, and did not act in a way in which no reasonable panel of Commissioners could have acted, and that they did not take into account irrelevant matters or disregard something to which they should have given weight. We find that the Respondents have made no error of law.
- We find that the Respondents acted reasonably in establishing the quantum of the requirement, and we find that the amount of the requirement in reasonable.
- We dismiss the Appellant's appeal. Mrs. Tilling at the hearing indicated that if the Respondents succeed in this appeal, the Respondents would not seek an order for costs. We make no order as to costs
- Appeal dismissed.
MAN/2008/801
Ian Vellins
CHAIRMAN
Release Date: 29 January 2009
