20958

VALUE ADDED TAX – Requirement for security under para. 4(2)(a), Sch. 11, VATA – no returns made for 10 consecutive VAT periods – Appeal considered in the absence of the Appellant – Held, the requirement had not been shown to be unreasonable – Appeal dismissed  

LONDON TRIBUNAL CENTRE

	EDWARD THOMAS 
	trading as ABACUS CONSTRUCTION	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S 
	REVENUE AND CUSTOMS	Respondents

			Tribunal:	JOHN WALTERS QC (Chairman)
					MRS. NORAH CLARKE

Sitting in public in Cardiff on 12 March 2008

The Appellant did not appear and was not represented

Ms. Gloria Orimoloye, Advocate, for the Respondents

© CROWN COPYRIGHT 2009

DECISION

1.	This was an appeal against a requirement by the Respondents that the Appellant give security pursuant to paragraph 4(2)(a), Schedule 11, VAT Act 1994 for the payment of VAT that is or may become due from the Appellant. 
2.	When the appeal was called on for hearing Ms. Orimoloye for the Respondents applied for an extension of time to serve an application to strike out the appeal for non-compliance by the Appellant with the condition laid down by section 84(2) VAT Act for the entertaining of an appeal, viz: that the Appellant must have made all VAT returns which he was required to make and paid the VAT shown in those returns as payable by him.
3.	The Tribunal refused this application and decided to proceed to consider the appeal on the merits in the absence of the Appellant pursuant to rule 26(2) of the VAT Tribunals Rules 1986.
4.	The Tribunal heard oral evidence from Mrs. Giuliana Cradle, a Higher Officer in the Respondents’ Insolvency Compliance and Security department.  Mrs. Cradle had made the decision to require security in this case.
5.	From her evidence and the documents before the Tribunal we found that the Appellant had actually registered for VAT in 2004, although the Respondents considered that he should have been registered on 12 January 2003.
6.	The Appellant’s registration was accordingly back-dated and an assessment for VAT due was raised.
7.	On 1 March 2007 Mrs. Cradle authorised the requirement that the Appellant should give security, primarily because of the non-compliance history of the Appellant at that time.  Ten VAT returns covering the periods from 07/04 to 10/06 inclusive were outstanding.  There had been assessments to VAT raised centrally in respect of these periods and default surcharges had been imposed.  None of the assessments or surcharges had been paid.
8.	Further, Mr. Thomas, the Appellant, had been a director of PP Building Services Limited, a company which had been declared insolvent on 12 February 2003 owing £15,486 to the Respondents.  
9.	Mrs. Cradle considered that further VAT revenue would be at risk if the Appellant continued to trade, unless security was given.
10.	She had authorised the quantum of security required, which was £32,988.10 if quarterly returns were submitted, or £30,088.10 if monthly returns were submitted.
11.	Since the Appellant had only made one return, for the period 04/04 (which was a repayment return), Mrs. Cradle had had difficulty in gauging his actual turnover for the purposes of calculating the amount of security required.  She had therefore used the figure of £150,000 annual turnover projected in the Appellant’s application for VAT registration, while giving allowance for an estimated deduction for input tax due.
12.	She had added to the amount of security required the debt for VAT which had already accrued by reference to the unpaid VAT assessments.
13.	The Appellant’s grounds of appeal were that the security bond was excessive and would cause unnecessary hardship to the business cash flow, having regard to the Appellant’s need to pay wages and suppliers before receiving payment from his customers.
14.	The Tribunal noted that in this appeal it had a supervisory, rather than a full appellate, jurisdiction, and its function was to determine whether Mrs. Cradle had acted reasonably in making the requirement for security, having regard to the Respondents’ power to require security if they consider it to be necessary for the protection of the revenue.
15.	The Tribunal noted that correspondence on the file indicated that there may be some dispute about the Appellant’s liability in respect of the period 04/04, being the only period for which (as noted above) a return had been made – which was a repayment return.  Nevertheless, on the evidence before it, the Tribunal concluded that the Respondents’ requirement for security in this case had not been shown to be unreasonable.
16.	The Tribunal therefore dismissed the appeal.  The Chairman announced the Tribunal’s decision at the conclusion of the hearing. 

JOHN WALTERS QC

CHAIRMAN
RELEASE DATE: 19 February 2009

LON/2007/1273