20965

Security – Requirement for – Whether requisite for protection of the Revenue – Appeal dismissed – VATA 1994 Sch 11 para 4(2)

LONDON TRIBUNAL CENTRE

	MARK WILLIAM MUMMERY	           Appellant

-	and –

	THE COMMISSIONERS FOR HER MAJESTY’S REVENUE & CUSTOMS 	 Respondents

				Tribunal:	DR K KHAN (Chairman)
						MRS SHAHWAR SADEQUE

Sitting in public in London on 9 February 2009

The Appellant in person

Simon Chambers, advocate, for the Respondents

© CROWN COPYRIGHT 2009

DECISION

1.	The disputed decision of the Commissioners for Her Majesty’s Revenue and Customs (hereinafter called “the Commissioners”) is a Notice of Requirement to give security dated 5 July 2007.

2.	The Notice of Requirement requires the Appellant to give security in the sum of £47,900 or £44,400 should the Appellant wish to render monthly returns.  

3.	The Appellant is a roofing contractor who is the sole proprietor of a business which was registered for Value Added Tax on 1 April 2004.  The Appellant operates his business from Whitchurch Lane, Edgware HA8 6LR.

4.	The security required are £47,900 or £44,400 should the Appellant wish to render monthly returns, was calculated using information rendered by the Appellant on his last four submitted VAT returns. The last payment made on account by the Appellant was for £300 paid on 12 July 2006.  

5.	The calculation of the security amount is based on six months tax liability plus the outstanding VAT debt.  

6.	The notice was served on 5 July 2007.  At that time the VAT balance was £37,486.90.  There was added to that figure six months tax liability as calculated by looking at the last twelve month period of trading shown on the VAT return submitted.

7.	The VAT returns showed the following:

02/05			£4,309.56
05/05			£3,450.39
08/05			£6,721.98
11/05			£6,403.46

8.	These amounts were added together and divided by two to calculate the six months figure.  The four months figure was calculated by dividing the twelve months amount by twelve and multiplying by four.  

9.	On 17 July 2007, the Commissioners responded to the Appellant’s representative explaining that security requirement was necessary because of the substantial debt owed by the Appellant and the non-submission of return.  He was considered a risk to the Revenue.

10.	The Appellant appealed.

11.	The Appellant contends in their grounds of appeal that the sum required is excessive and due to the Appellant’s illness, should be reduced since this should be taken to account.  

The Commissioners’ arguments

12.	The legal provision to serve the Notice under appeal is provided by the Value Added Tax Act 1994 Schedule 11 paragraph 4(2).  Security is required where the Commissioners believe there is a risk to future revenue.

13.	In this case, the Appellant issued as a risk for the following reasons:

(a)	He has debts to the Commissioners of over £40,000
(b)	He has not submitted VAT returns for the periods 02/06, 05/06, 	08/06, 11/06 and 02/07.
(c)	The last payment made by the Appellant to the Commissioners 	was £300 and it was paid on 12 July 2006.
(d)	He has been in the default surcharge regime eight times and has 	been in the regime at the 15% rate for the periods 05/06, 08/06, 	11/06 and 02/07.
(e)	The amount of security requested has been calculated using the 	most accurate information which is the four most return 	submitted by the Appellant.  The Commissioners then added to 	the security requirement the quantum of that owed by the 	Appellant.

14.	The Commissioners contend that the reasons described above are sufficient for the Notice of Requirement to provide security to be reasonable both in principle and amount and the appeal should be dismissed.

15.	There was one witness, Mr Paul Johnston, HMRC officer with the security team in London.

16.	When considering the Commissioners’ requirement for security, the Tribunal jurisdiction is appellate rather than supervisory.  The Tribunal has to consider whether the Commissioners acted reasonably and took account of all relevant materials, it cannot substitute its own decision for one reached on an incorrect basis.  The Tribunal has to consider whether the Commissioners acted in a way which a reasonable panel of commissioners could have acted and whether they took into account any irrelevant matters or disregarded something to which they should have given weight.  The Tribunal must limit itself to considering facts and matters which existed at the time of the challenged decision and not consider matters subsequently arising.

17.	The role of the Tribunal was best described by Farquharson J in Wishmore Ltd v Commissioners of Customs and Excise [1988] STC 723 at page 728g as follows:

“The Tribunal … should restrict itself, on the hearing of an appeal, to deciding whether the taxpayer company has established that the decision arrived at by the commissioners was unreasonable, or … whether the decision had been arrived at by taking into account matters which are not relevant or by ignoring matters which are relevant”.

18.	In the case of John Dee Ltd v Customs and Excise Commissioners [1995] STC 941, the Court of Appeal held that the Tribunal had to consider whether the Commissioners acted in a way in which no reasonable panel of commissioners could have acted or whether they had taken into account some irrelevant matter, or had disregarded something to which they should have given weight.  The Court went on to say that the tribunal could not exercise a fresh discretion and their protection of the Revenue was not a responsible view of the tribunal.  

19.	The Appellant provided medical evidence to show that between 1992 and 2007 he had various illnesses.  This included a broken back sustained from a fall, a hip replacement and almost continuous pain over several years.  He has been on medication for many years.  These illnesses resulted in difficult times for the business but slowly, the Appellant seems to be making a recovery.

20.	However while the Appellant acknowledges that his illness has been the major cause of his poor VAT payment and return record and deteriorating income from his business, these are not matters which the Tribunal can take into account in making their decision.  The legislation clearly provides that the Commissioners must act “for the protection of the Revenue” and the Tribunal could only allow an appeal against a decision of the Commissioners to require security if it was not a reasonable decision taken by a reasonable body of Commissioners.

21.	In the circumstances, therefore the Tribunal feels that the Commissioners acted reasonably and the decision to require security was a reasonable decision and was not arrived at taking into account matters which were irrelevant nor by ignoring matters which were relevant. 

22.	The Tribunal understands that the Appellant would be approaching the Commissioners with suggestions as to how his VAT liability may be met.  

DR K KHAN
CHAIRMAN

RELEASED: 25 February 2009

LON 2007/1331