20967

VALUE ADDED TAX – Requirement for security under para. 4(2)(a), Sch. 11, VATA – History of connection of the common director with businesses which had been non-compliant with their VAT obligations – Appeal considered in the absence of the Appellant – Held, the requirement had not been shown to be unreasonable – Appeal dismissed  

MANCHESTER TRIBUNAL CENTRE

	ISAJEN LIMITED
		Appellant
	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S 
	REVENUE AND CUSTOMS	Respondents

	ISAJEN TRADING LIMITED
		Appellant
	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S 
	REVENUE AND CUSTOMS	Respondents

			Tribunal:	JOHN WALTERS QC (Chairman)
					MRS. E.M. POLLARD					

Sitting in public in North Shields on 11 February 2009

The Appellants did not appear and were not represented

Ms. Kim Tilling, Advocate, for the Respondents

© CROWN COPYRIGHT 2009

DECISION

1.	These appeals are against requirements by the Respondents that each of the two Appellants 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 them respectively. 
2.	When the appeal was called on for hearing neither Appellant was present or represented.  Ms. Tilling, for the Respondents, applied to the Tribunal that it should proceed to consider the appeals in the absence of the Appellants pursuant to rule 26(2) of the VAT Tribunals Rules 1986 and the Tribunal decided to do so.
3.	The Tribunal heard oral evidence from Mr. Edward McMahon, a Higher Officer of the Respondents with responsibility for making decisions in relation to security.  Mr. McMahon had made the decisions to require security in these cases.
4.	From his evidence and the documents before the Tribunal we found that Isajen Trading Limited had been registered for VAT since 10 December 2007.  It carries on business as a public house and restaurant at Saltburn by the Sea, Teesside.  A director of Isajen Trading Limited is a Mr. David Harold Stokes.
5.	Mr. Stokes has been or is still involved with several other businesses of the same type which have been non-compliant with their VAT obligations.
6.	One of those businesses is Isajen Limited, which has been registered for VAT since 3 January 2008 and carries on business as a public house and restaurant from Park Hotel in Middlesbrough.  Mr. Stokes is a director of Isajen Limited.
7.	The other businesses with which Mr. Stokes has been involved were businesses of the same type and included Ayresome Leisure Limited (of which Mr. Stokes was a director), which became insolvent on 28 July 1999, owing the Respondents in excess of £145,579, Mr. Stokes (trading under his own name), who was deregistered for VAT on 17 March 2006, owing the Respondents in excess of £26,370 and The Park Hotel Trading Limited (of which Mr. Stokes is a director), which as of 29 July 2008 (the date of both Statements of Case in these appeals) owed the Respondents £26,370.
8.	The security required from Isajen Limited is £10,512.82 calculated on the basis (which is the case) that monthly returns are submitted.  The basis of the calculation of this sum is the annual turnover declared on the Application for Registration of Isajen Limited, which was £400,000.  An allowance has been given for notional input tax.
9.	The security required from Isajen Trading Limited is £8,673.08 calculated on the basis (which is the case) that monthly returns are submitted.  The basis of the calculation of this sum is the annual turnover declared on the Application for Registration of Isajen Trading Limited, which was £330,000.  Again, an allowance has been given for notional input tax.
10.	Mr. McMahon considered that it was necessary for the protection of the revenue, for the Respondents to seek security from both Appellants because of the connection with Mr. Stokes and the poor compliance record of the other businesses of the same type with which he had been associated.
11.	The Appellants’ grounds of appeal in both appeals were that the security bond was excessive and would cause unnecessary financial hardship to the business cash flow, having regard to the Appellant’s need to pay its bills. 
12.	The Tribunal noted that in this appeal it had a supervisory, rather than a full appellate, jurisdiction, and its function was to determine whether Mr. McMahon 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.
13.	On the evidence before it, the Tribunal concluded that the Respondents’ requirement for security in this case had not been shown to be unreasonable.
14.	The Tribunal therefore dismissed the appeals.  The Chairman announced the Tribunal’s decision at the conclusion of the hearing.
15.	Ms. Tilling, for the Respondents, made an application for a direction that the Appellants should pay the Respondents a contribution of £800 towards their costs of the appeals.  This application was made because there had been no attendance by the Appellants at the hearing which was an indication that the appeals were frivolous.  The Respondents’ witness, Mr. McMahon, had travelled specially from Belfast to attend the hearing, as was known to the Appellants – this detail having been mentioned in their Notice of Application dated 23 September 2008 as grounds for the request to have the time of the hearing of these appeals brought forward.  The Tribunal granted this application and directs each of Isajen Limited and Isajen Trading Limited to pay to the Respondents on account of their costs of the appeals an amount of £400 (total: £800), to be paid within 28 days of the release date of this Decision.     

JOHN WALTERS QC

CHAIRMAN
RELEASE DATE: 27 February 2009

MAN/2008/0771; MAN/2008/0770