20106

SECURITY — no attendance by or on behalf of Appellant — directors of Appellant company linked to several previously failed companies — was the request for security reasonable — yes — was the amount reasonable — yes — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

 
 	
					MANGE ROUGE LIMITED	Appellant

- and -

THE COMMISSIONERS FOR
				HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

Tribunal: Lady Mitting
				Marjorie Kostick BA FCA CTA

Sitting in public in Birmingham on 2 April 2007

The Appellant did not appear and was not represented
 
Bernard Haley, of the Solicitor’s Office of HM Revenue and Customs for the Respondents 

© CROWN COPYRIGHT 2007

DECISION

1.	The decision under appeal is that of the Respondents contained in a letter dated 15 June 2006 and amended by letter dated 17 July 2006 to require the Appellant company to give security under paragraph 4(2)(a) Schedule 11 Value Added Tax Act 1994.  The amount of security required is set out in the letter of 17 July 2006 and is in the sum of £6,000.  
2.	When the case was called on for hearing, there was no attendance on behalf of the Appellant company.  The clerk to the Tribunal telephoned the trading premises, asking to speak to Mr Barry Sherwin, the lead director who had been responsible for all correspondence and submitting the Notice of Appeal.  The Clerk spoke to a gentleman who knew nothing of today’s hearing but told her that Mr Sherwin was on holiday in Spain and was not due to return for another few days.  We satisfied ourselves that the notice of hearing had been properly addressed and sent out and not returned and we proceeded to hear the case under Rule 26(2) Value Added Tax Tribunals Rules 1986.  
The Facts
3.	We heard oral evidence from Mr Nigel Ridsdel, whose decision it was to require the security.  The Commissioners had, for some time, had concerns about a number of companies in which Mr Sherwin had been involved.  A chain chart was produced to us which listed the following eight companies (including the Appellant):
(i)	Iceford Catering Limited was registered 25 April 1983 to 1 April 1995.  The company went into insolvency owing the Commissioners £1,256.84.
(ii)	Jazz Enterprises Limited was registered from 14 May 1991 to 26 September 2001 and went into insolvency owing the Commissioners £157,629.83.
(iii)	Broomco Limited was registered from 8 August 2001 to 30 September 2003 and went into insolvency owing the Commissioners £59,950.47.
(iv)	Shoutoutloud Limited was registered from 16 October 2002 to 10 January 2005 and went into insolvency owing the Commissioners £21,050.53.
(v)	Mackenzie’s Bar & Dining Room Limited was registered from 7 June 2004 to date and went into insolvency owing the Commissioners £25,647.40.
(vi)	The Bar & Dining Room Company Limited was registered on 7 June 2004 and still is, and went into insolvency owing the Commissioners £5,672.97.
(vii)	Red Bar & Lounge Limited was registered on 1 November 2004 and remains so and went into insolvency owing the Commissioners £22,556.50.
(viii)	The Appellant was registered on 1 January 2006.
4.	Mr Barry Sherwin was a director of all eight companies.  They were all in a similar line of business – licensed restaurant, licensed club, public house.  A Notice of Requirement for Security had been issued against both Mackenzie’s and Red Bar & Lounge Limited.  No security had been paid and both companies had gone into insolvency.  A co-director of the Appellant company is Mr Ian Ross-Mackenzie, who was also a director of Red Bar & Lounge Limited and the Bar & Dining Room Company Limited and was director and company secretary of Mackenzie’s Bar & Dining Room Limited.  
5.	The Appellant is on monthly returns and Mr Ridsdel fixed the security initially at £10,600.  However, he received a letter from Mr Sherwin dated 12 July 2006 in which Mr Sherwin accepted the need for the requirement but asked for reconsideration of the amount as the tax due on the monthly returns would be in the region of £1,500.  Mr Ridsdel accepted this and amended the amount required to £6,000 representing four months tax.  
6.	The grounds of appeal given to the Tribunal Centre were as follows:
“The company is on monthly accounting and a typical month is less than £1,500.  I consider £6,000 to be unfairly high, representing as it does 4 months plus as security.  I accept there is a requirement and wish to lodge £1500.”
Conclusions
7.	Our jurisdiction is supervisory and we are limited to considering the reasonableness of the Commissioners’ decision, such consideration to be limited to those matters prevailing at the time the decision was made.  Mr Ridsdel had before him the compliance record of no fewer than seven companies of which Mr Sherwin was a director, all of which had become insolvent owing substantial sums of money to the Commissioners.  Additionally, Notices of Requirement had been issued against two of the companies but nothing paid.  This is quite clearly an appalling compliance record and we find Mr Ridsdel’s decision to require security perfectly reasonable.  The factors which he took into account were reasonable and relevant and we know of no factors which he should have taken into account but did not.  
8.	As to the amount, Mr Ridsdel took into account representations made by Mr Sherwin and reduced the amount required to equivalent to four months estimated tax.  Again, we find this to be fully reasonable.  Mr Sherwin suggests that one month’s tax should be lodged but the reality is that the Commissioners are at risk for considerably longer than one month before a compliance problem can be identified and addressed.  This would normally take approximately four months allowing for non payment of a return to be spotted; a computer generated assessment to be raised and debt management procedures to be undertaken.  We therefore find the amount to be perfectly reasonable.  
9.	Having found that Mr Ridsdel’s decision was reasonable both in principal and in amount, the appeal is dismissed.  Given the failure of the Appellant to attend the Tribunal, Mr Haley asked for a contribution to costs of £100 which we grant.

LADY MITTING
CHAIRMAN
Release Date: 3 April 2007
MAN/06/0654