18792
INPUT TAX – Invoice in name of dissolved company – Supplier therefore not a taxable person – Refusal to apply extra-statutory concession outside Tribunal jurisdiction – Appeal dismissed

LONDON TRIBUNAL CENTRE

	B & B PACKAGING	Appellant

-	and –

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	THEODORE WALLACE   (Chairman)
						 PRAFUL DAVDA, FCA

Sitting in public in London on 14 September 2004 

D C Chisam, partner, for the Appellant 

Eleni Mitrophanos, counsel, instructed by the Solicitor for the Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2004

DECISION

1.	This appeal was against the refusal of an input tax claim on a supply by Plycroft Ltd for which an invoice dated 8 September 2003 showed VAT of £1,787.23.  The refusal was on the basis that the supplier was not a taxable person having been deregistered. Plycroft Ltd had in fact been dissolved on 26 October 1999.

2.	Mr Chisam told the Tribunal that the Appellants partnership had been registered for VAT from 1 September 2003. The invoice in question was for packaging machinery and equipment which the Appellants had bought from Plycroft Ltd trading as J F Foy for £12,000 including VAT.

3.	He said that Mr Foy’s company had two premises one of which was in Unit 1 at Dammerwick Farm, Burnham on Crouch, which was next to a unit occupied by the Appellants. Plycroft Ltd (which we refer to as “Foy”) had been supplying Fresh Clean Ltd, a company of which Mr Chisam was a director with shoulder guards, shirt boards and boxes from Unit 1 but had fallen behind on deliveries. Mr Foy had told the Appellant that he was desperately short of money and offered to sell the machinery to the Appellants so that they could supply Fresh Clean Ltd instead.

4.	Mr Chisam said that Mr Foy was not often there but that Mr Foy had employees. Mr Foy had said that he wanted £20,000 and the Appellants offered £12,000 in total in cash.  The machinery was worth £20,000 but Mr Foy needed the cash and agreed to take £12,000.

5.	Mr Chisam said that Mr Foy could not write although he was good with figures and that Mr Chisam had written the invoice on a form provided by Mr Foy.  The price was inclusive of VAT and he made the invoice out for £10,212.77 plus £1,787.23 VAT.

6.	The invoice exhibited was headed “J F Foy, General Box Manufacturers” with “Plycroft Ltd TA J F Foy” and the registered office in very small print. The address on the invoice was Lubards Farm, Rayleigh, where Mr Foy had another business. The VAT Number was 710 7031 85.  The invoice had no serial number.

7.	Mr Chisam said that he had made out four invoices on behalf of Foy to Fresh Clean Ltd between 31 July and 30 September 2003.  He said that three 2001 invoices by Foy to Essex Hangers Ltd, of which he was also a director, had also been made out by him.

8.	He said that about a week later he had paid Mr Foy £8,000 in cash which they had in personal savings in a safe. He did not get a receipt.  He had not seen Mr Foy since. The Appellants had used the machinery for two to three months in Unit 1 and had then moved it to their premises.

9.	The Appellants had applied for registration on 1 September 2003.  Although they had been given a registration number they had not received a return form and submitted an initial claim on 30 December for the period to the end of the year.  The inputs included the Foy invoice and resulted in a repayment claim of £4,639.50.

10.	Mr Chisam telephoned to inquire about the claim on 16 January 2004 and ten days later Miss Deackes of Chelmsford VAT office visited the Appellants to verify the claim.

11.	Miss Deackes found the Foy invoice which was on a photocopy.  Mr Chisam readily agreed that he had written it because Mr Foy could not read or write.  When she returned to the VAT office she discovered from computer records that Plycroft Ltd had deregistered, the date being given as 2 May 2001.

12.	Mr Ian Brown, of the Central Region Appeals Team, said that according to records Foy applied to deregister on 15 March 2002 stating that the company had ceased to trade on 31 December 1998. He said that the deregistration date was recorded as 2 May 2001 because once a return was issued the programme would not record a deregistration before that date. He produced a print-off from the Companies House website stating that Plycroft Ltd was dissolved on 26 October 1999.

13.	Miss Deackes said that she had considered whether the extra-statutory concession E 3.9 should be applied but concluded that it should not. This was because of the proximity of the two units, the fact that Mr Chisam had written the invoice and because of earlier supplies by Foy to associated companies.

14.	Mr Chisam said that the Appellants had no way of knowing that Plycroft Ltd was deregistered. He said that on 16 March 2004 he had telephoned the National Advice Service as recommended in Notice 700 and was told that the registration number on the invoice was valid but he could not be told to whom it was allocated.

15.	Customs produced a computer note on that day which concluded, “Advised it was not possible to check this [whether the number belonged to a certain company].  Advised called that I could not confirm the validity of the VAT number.”

16.	Miss Mitrophanos, for Customs, said that the right to deduct input tax only applied to tax which was properly due.  It was not sufficient that it was stated in an invoice, see Genius Holding BV v Staatsecretaris van Financien [1991] STC 239.  The company having been dissolved was not a taxable person and could not charge input tax.  A trader’s remedy for input tax wrongly charged is to recover the amount from the supplier not to claim it as input tax see Direct Drilling v Customs and Excise Commissioners (1993) Decision No.11071.  She said that although the Appellants could appeal against the decision to refuse input tax, they could not dispute the operation of the extra-statutory concession.

17.	Mr Chisam said that there was a genuine supply and the Appellants had acted in good faith.  Although Plycroft Ltd had apparently been dissolved Mr Foy kept the business going and on the level of sales was liable to register.

Conclusions

18.	We find as a fact that Plycroft Ltd was dissolved in 1999.  Since it had no legal existence thereafter it could not be a taxable person and as a matter of law the sum showed on the invoice was not input tax.

19.	The concession under E 3.9 is extra-statutory and its operation is outside the jurisdiction of this Tribunal.  This was not a case of whether the Appellants had provided other evidence of the charge for VAT within the proviso to regulation 29(2) of the VAT Regulations 1995, since there was no valid charge on the invoice.  It follows that the appeal must be dismissed.

20.	We would observe that we can see no ground for criticising the refusal to apply E 3.9.  As a matter of equity the Appellants obtained the machinery at a low price not all of which was paid.  Since the company has been dissolved, the Appellant cannot be sued for the unpaid balance and in any event they could not have been sued for the incorrect VAT.

21.	Furthermore the evidence of Mr Chisam as to how the purchase came to be made was much less clear than appears in this decision.  There was no suggestion that the Appellants acted in bad faith, however we accept the conclusion of Miss Deackes that the Appellants were close to Foy.

THEODORE WALLACE
CHAIRMAN

RELEASED: 8 October 2004

LON/2004/913