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Notice to require security — off-licence — poor compliance — problem with accountants — loss of business records — estimated returns submitted — appropriate procedure not followed — appeal dismissed — time lapse should be considered by Customs
MANCHESTER TRIBUNAL CENTRE
MARSHDRY SERVICES LIMITED Appellant
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THE COMMISSIONERS FOR
HER MAJESTY'S REVENUE AND CUSTOMS Respondents
Tribunal: Elsie Gilliland
Gilian Pratt
Sitting in public in Manchester on 8 March 2007
Ciaran Keaney, company secretary, for the Appellant
Bernard Haley, general counsel and solicitor to Her Majesty's Revenue and Customs for the Respondents
© CROWN COPYRIGHT 2007
DECISION
- The appeal before the tribunal is that of Marshdry Services Ltd (the Appellant) against a Notice of Requirement to give security under Schedule 11 paragraph 4 (2)(a) of the Value Added Tax Act 1994 (the Act), contained in a letter from the Commissioners dated 9 May 2006 in the sum of £11017.00, subsequently by letter on 19 June 2006 reduced to £9804.00, the amount under appeal. The business of the Appellant is an off-licence and it makes monthly returns.
- The grounds of appeal set out in the Appellant's Notice of Appeal are:
"The amount sought is, in our opinion, excessive & takes no account of commercial reality. We agree we have had compliance difficulties in the past but are making every effort to resolve these".
- Edward Beattie the officer who issued the security notices told the tribunal in his evidence that the main factors in his decision to require security were the non-compliance of the business, the difficulties there had been over its submission of Vat returns and the amounts involved. For the initial calculation of 9 May 2006 Mr Beattie had based liability on the then 4 most recent returns of the Appellant namely for the periods ending 31/12/05, 31/10/05, 30/09/05 and 31/08/05. The reason for the later reduction in the security figure on 19 June 2006 was that the return for 30/04/06 had been received and was used in the calculation with those for 31/12/05, 31/10/05 and 30/09/05. The certificate of the Commissioners as at 24 July 2006 listed 14 periods where no returns had been received. The tax shown as due on the same date was £10,063.44.
- Ciaran Keaney, the Company Secretary of the Appellant, presented its case and gave evidence. He informed the tribunal of problems the company had encountered with the accountants who had originally provided them with book-keeping and accountancy services as a result of which a number of its business records had disappeared. It had instructed another firm to bring its affairs up to date and that firm had been in correspondence with Customs.
- Mr Keaney referred to a number of returns which had been submitted but which were "rejected" by Mr Beattie. These used estimated figures because of the loss of the earlier records. They were received by Customs on 9 August 2006. However Mr Beattie made it clear in his evidence that he had no authority to accept returns based on estimated figures and that a taxpayer had to obtain permission before seeking to submit the same. There was a procedure in place for this which had not been followed through by the Appellant or its accountants.
- Mr Beattie's evidence was that he was satisfied that the 14 returns referred to on page 8 of the bundle were outstanding. The estimated returns had not been re-submitted though nine returns for 2006 had been received. The returns for January, February and March 2006 could not have been submitted without his knowledge. However there had been central assessments and the payments made had been duly credited.
- The role of the tribunal is to consider whether Customs acted reasonably in coming to their decision. In doing so we examine the facts and matters which existed at the time the challenged decision was taken rather than at subsequent events. It is not for us to exercise a fresh discretion; nor is the protection of the revenue an obligation placed on the tribunal. In testing reasonableness we apply Wednesbury principles (Associated Provincial Picture Houses Ltd. v Wednesbury Corporation [1948] 1KB 223): that matters which ought to be taken into account were, that irrelevant matters were excluded and that the law was properly applied.
- We are satisfied that neither the Appellant nor its accountants sought prior consent for the use of estimated figures through the local VAT business centre or through general enquiries. We accept the evidence of Mr Beattie that the Appellant was written to on 14 August 2006 and that he had taken steps for the relevant VAT Notice explaining the position to be sent to the Appellant direct. Both taxpayer and accountants should already have known or made themselves aware of these provisions. Nor do we consider that there was any misleading information in the letter from Mrs Turton to the Accountants as to the acceptance of estimated returns in her letter to them of 11 May 2006.
- We are accordingly satisfied that the decision taken by Customs in June 2006 was reasonable in view of the facts and circumstances at that time. We dismiss the appeal and make no direction as to costs.
- We have to observe however that these facts and circumstances relate to June 2006. The Appellant's representative has confirmed that its compliance record has substantially improved and payments made to reduce the balance owed. Mr Keaney submitted that the imposition of the security requirement would still cause hardship to the Appellant. It is our view that it would be appropriate for Customs to reconsider the security requirement figure in the current circumstances of the liability.
ELSIE GILLILAND
CHAIRMAN
Release Date: 22 May 2007
MAN/06/0481
