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You are here: BAILII >> Databases >> First-tier Tribunal (Tax) >> Beast In The Heart Films (UK)Ltd v Revenue & Customs [2009] UKFTT 230 (TC) (07 September 2009) URL: http://www.bailii.org/uk/cases/UKFTT/TC/2009/TC00180.html Cite as: [2009] UKFTT 230 (TC) |
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[2009] UKFTT 230 (TC)
TC00180
Appeal number LON/07/0800
Repayment Supplement: section 79 VATA - whether a written instruction to make payment was issued by the Commissioners within the relevant period: meaning of "issued", burden of proof – whether an instruction issued to pay to the Appellant at a closed bank account was an instruction to make payment within the section. Appeal dismissed.
FIRST TIER TRIBUNAL
TAX
BEAST IN THE HEART FILMS (UK) LIMITED
- and -
THE COMMISSIONERS FOR HER MAJESTY'S
REVENUE AND CUSTOMS (VAT)
Tribunal:CHARLES HELLIER (Tribunal Judge)
Sitting in public in Cardiff on 28 April 2009
Mr T Potter, director of the Appellant, for the Appellant
Richard Smith instructed by the Acting Solicitor for HM Revenue and Customs, for the Respondents
© CROWN COPYRIGHT 2009
DECISION
Introduction
(i) what was the meaning of "issued" in this context: in particular could a document sent by one HMRC officer to another be the "issue" of such an instruction;
(ii) on whom did the burden of proof in relation to the facts fall?
(iii) on the evidence, and in the light of the answers to the preceding questions, what was the relevant date?
The Hearing and Thereafter
The Statutory provisions
"(1) In any case where–
(a) a person is entitled to a VAT credit, or
(b) ….
and the conditions mentioned in subsection (2) below are satisfied, the amount which, apart from this section, would be due by way of that payment or refund shall be increased by the addition of a supplement equal to 5 per cent. of that amount or £50, whichever is the greater.
(2) The said conditions are–
(a) that the requisite return or claim is received by the Commissioners not later than the last day on which it is required to be furnished or made, and
(b) that a written instruction directing the making of the payment or refund is not issued by the Commissioners within the relevant period, and
(c) that the amount shown on that return or claim as due by way of payment or refund does not exceed the payment or refund which was in fact due by more than 5 per cent. of that payment or refund or £250, whichever is the greater.
(2A) The relevant period in relation to a return or claim is the period of 30 days beginning with the later of—
(a)the day after the last day of the prescribed accounting period to which the return or claim relates, and
(b)the date of the receipt by the Commissioners of the return or claim.
(3) Regulations may provide that, in computing the period of 30 days referred to in subsection (2A) above, there shall be left out of account periods determined in accordance with the regulations and referable to–
(a) the raising and answering of any reasonable inquiry relating to the requisite return or claim,
(b) the correction by the Commissioners of any errors or omissions in that return or claim, and
(c) in the case of a payment, the following matters…
(4) In determining for the purposes of regulations under subsection (3) above whether any period is referable to the raising and answering of such an inquiry as is mentioned in that subsection, there shall be taken to be so referable any period which–
(a) begins with the date on which the Commissioners first consider it necessary to make such an inquiry, and
(b) ends with the date on which the Commissioners–
(i) satisfy themselves that they have received a complete answer to the inquiry, or
(ii) determine not to make the inquiry or, if they have made it, not to pursue it further,
but excluding so much of that period as may be prescribed; and it is immaterial whether any inquiry is in fact made or whether it is or might have been made of the person or body making the requisite return or claim or of an authorised person or of some other person.
(5) …
(6) In this section "requisite return or claim" means–
(a) in relation to a payment, the return for the prescribed accounting period concerned which is required to be furnished in accordance with regulations under this Act, and
(b) in relation to a refund, the claim for that refund which is required to be made in accordance with the Commissioners' determination under section 33.
(7) If the Treasury by order so direct, any period specified in the order shall be disregarded for the purpose of calculating the period of 30 days referred to in subsection (2A) above."
"Computation of period
198. In computing the period of 30 days referred to in section 79(2)(b) of the Act, periods referable to the following matters shall be left out of account—
(a) the raising and answering of any reasonable inquiry relating to the requisite return or claim,
(b) the correction by the Commissioners of any errors or omissions in that requisite return or claim, and
(c) in any case to which section 79(1)(a) of the Act applies, the following matters, namely—
(i) any such continuing failure to submit returns as is referred to in section 25(5) of the Act, and
(ii) compliance with any such condition as is referred to in paragraph 4(1) of Schedule 11 to the Act.
"Duration of period
199. For the purpose of determining the duration of the periods referred to in regulation 198, the following rules shall apply—
(a) in the case of the period mentioned in regulation 198(a), it shall be taken to have begun on the date when the Commissioners first raised the inquiry and it shall be taken to have ended on the date when they received a complete answer to their inquiry;
(b) in the case of the period mentioned in regulation 198(b), it shall be taken to have begun on the date when the error or omission first came to the notice of the Commissioners and it shall be taken to have ended on the date when the error or omission was corrected by them;…"
The Evidence and the Facts
(1) The Appellant's business was the making of a film. The production of the film was completed by April 2006.
(2) On 25 April the Commissioners received a VAT return in which the Appellant claimed repayment of £117,340.97. Miss Reading wrote to the Appellant on the day the return was received requesting various documents to assist in the verification of the return.
(3) The Appellant replied to that letter on 11 May 2006. A hard copy of that reply was received by the Respondents on 15 May 2006 (although an electronic copy was received earlier). On 31 May (which is 17 days after 15 May if one counts both 15 May and 31 May) Miss Reading wrote again to the Appellant setting out her concerns with the information and documents provided, and explaining that the Commissioners were considering disallowing the Appellant's claim.
(4) An appointment was made for Miss Reading to visit the Appellant on 8 June 2006. That appointment was postponed, at the Appellant's request, to 20 June. On that day Miss Reading visited the Appellant and satisfied herself that the claim should be paid.
(5) On 26 June 2006 Miss Reading made, electronically, a recommendation for the repayment to be made. That recommendation was electronically approved by a senior officer, Mr Sheldon, who forwarded the approved recommendation to the Credibility team in Liverpool at about 4pm on 26 April.
"In accordance with section 79(2)(b) of the VAT Act 1994, you are hereby directed to make payment of all sums due under section 25(3) of that Act, and of all refunds due under section 33 or 33A of that Act which are authorised by the computer processing system scheduled for 27 June 2006. "R" Date for run is 27th June 2006"
(i)a statement in Helen Carus-McDonald's statement that Mr Manson had "arranged the necessary documentation forms to be input and repayment…was authorised to the trader's Bank Account on the same date". Helen Carus-McDonald does not state how she knew this and she was not part of the Credibility Team or the Shoebury Team. I was therefore unwilling to place much weight on that evidence; and
(ii) a statement in Mr McGinningle's witness statement that "repayment documents were input on 27 June 2006 by Credibility to release the claim to the Appellant via payable order". That statement is seemingly at odds with that of Helen Carus-McDonald.
However, taking into account the later evidence provided by the Respondents, I find that it is likely that the Instruction form of 27 June 2005 directed that payment be made to the Appellant.
The Parties' contentions at the hearing
(1) Section 79(2)(b) requires an instruction to pay a specified amount to a specified person. The Instruction form did not satisfy that test.
(2) Even if the Instruction form were an instruction directing the payment it had not been "issued" by the Commissioners. "Issued", he says connotes something more than one arm of the Commissioners asking another to do something: it must involve a third party who is directed to make a payment.
(3) There was no evidence that payment had in fact been made as a result of the Instruction form; it should not be assumed that it had.
(4) It was clear that payment had been instructed on 31 July when the payable order had been issued. There may have been some other instruction which gave rise to that order. It had not been produced by the Commissioners. But on what was available to the tribunal, the most likely relevant instruction issued by the Commissioners was that incorporated in the 31 July payable order.
(5) The only evidence of an instruction "issued" by the Commissioners was thus something done on 31 July. Thus the period of delay exceeded 30 days and a repayment supplement was due.
(1) The Instruction form was "a written instruction directing the making of the payment …issued by the Commissioners".
(2) It was issued on 27 June.
(3) The period of delay is thus 24 days and no supplement is due.
(4) Although the payable order and the remittance advice were not produced until 31 July, that payment was likely to have been made in accordance with the Instruction of 27 June. On the evidence it was likely that that Instruction led to an attempt to make payment to the Production Bank account of the Appellant which must by then have been closed, and after some confusion (including the 7 July email information about the other bank account) the result of the Instruction form must have been the provision of the payable order.
Discussion
(i) the meaning of "issued"
(ii) the burden of proof
(iii) when, on the evidence was the instruction to pay issued?
The Additional Evidence
(1) A fax from the Appellant dated 11 February 2005 giving details of the Barclays Bank branch and account number for the Production Account;
(2) A BACS trace information print indicating the processing of a payment of £117,340.97 by HMRC to that Barclays Bank account for the Appellant on 29 June 2006;
(3) An advice from Barclays bank dated 30 June 2006 indicating that a direct credit of £117,340.97 had been received for the credit of the Appellant at that bank account , but that the credit could not be applied because the account had been closed;
(4) A cheque from Barclays bank to the Bank of England dated 30 June 2006 for £117,340.97.
I conclude that a written instruction to make payment was issued by the Commissioners on or before 29 June 2006.
Timing: Counting the days
(1) The Respondents' table appeared to overstate the delay between 15 May and 31 May because that number included both days, and 31 May had been spent writing an inquiry letter to the Appellant. The delay is 16 rather than 17 days. This mistake also gave rise to an arithmetical inconsistency if one cross cast the Respondents' table against the date 31/15/06 which disappeared thereafter.
(2) The Appellant's table treated the period between 20/06/2006 and 29/06/2006 as being 9 days for the purpose of its Total number of days column but 10 days for the purpose of it Net Days (unexcused delay days) column. 10 days seemed to me to double count 20 June.
(1) 4 days between 11 May and 14 May relating to the fax;
(2) 17 days, 15 May to 31 May inclusive accepted by HMRC;
(3) 9 days, from 21 to 29 June , being the days after (and therefore excluding) 20 June on which Miss Reading had become satisfied, up to and including 29 June.
(1) 1 day: namely 25 April;
(2) 15 days: from 26 April to 10 May inclusive, awaiting the Appellant's reply;
(3) 20 days: from 1 June to 20 June inclusive(by section 79(4) the inquiry period clearly includes the day on which Miss Reading became satisfied that a complete answer to the inquiry had been received).
Conclusion
CHARLES HELLIER
TRIBUNAL JUDGE
RELEASE DATE: 7 September 2009