18976

	SECURITY  — public house — poor compliance record — previous bond paid and set off — was request for security reasonable — yes — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

 
 	
	ANTHONY JOHN HAMSON	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	 Lady Mitting (Chairman)
						 Robert Grice	

Sitting in public in Birmingham on 8 February 2005

The Appellant did not appear and was not represented

Mr Richard Mansell of the Solicitors’ office of HM Customs and Excise for the Respondents 

	© CROWN COPYRIGHT 2005

DECISION

1.	The decision under appeal was that of the Commissioners contained in letters dated 29 June 2004 and 12 July 2004, requiring the Appellant to give security in the sum of £6,947.74 pursuant to paragraph 4(2)(a) of schedule 11 of the Value Added Tax Act 1994.   
2.	The Appellant did not appear either personally or by representative.  The clerk telephoned the office of his accountants who requested that the tribunal should proceed in the absence of the Appellant but the accountant faxed to us a set of representations which we took into account and refer to below.
3.	Mr Anthony John Hamson carries on business running an independent public house, The Chequers Inn at 1 Nottingham Road, Stapleford, Nottingham.  He registered for Value Added Tax with effect from 16 November 1998 and the registration remains extant.  
4.	We heard oral evidence on behalf of the Commissioners from Mr Martin Whitelegge and Mr Ian Pumphrey, both senior officers with the security team.  On the basis of the evidence which we heard and the documentation in front of us, we find the facts to be as follows.
5.	Mr Hamson’s business first came to the attention of the security team in April 2003 when four returns were outstanding, namely those from 04/02 to 01/03 inclusive.  A notice of requirement for security was served on 28 May 2003 in the sum of £5,340.  After an extension was granted, Mr Hamson paid the security in mid July 2003.  By September 2003, Mr Hamson’s compliance had deteriorated.  The four outstanding returns had still not been filed and neither had returns for 04/03 and 07/03.  Centrally issued assessments had been raised and the debt to the Commissioners totalled £13,991.  The security held was taken as partial offset against this debt.  
6.	On 6 November 2003, a further notice of requirement was served, again in the sum of £5,340.  Unknown to Mr Whitelegge when he raised this second requirement, Mr Hamson had in fact paid £7,000 the previous day.  By December 2003, Mr Hamson had cleared his outstanding debt and had paid the security.  The position was looked at again in May 2004.  The four early returns had still not been rendered.  The returns for 07/03 and 10/03 had been rendered but no payment had been made.  By letter dated 18 May 2004, Mr Hamson was warned that his outstanding debt stood at £9,934.36 and that failure to pay immediately would result in the security currently held being offset and a further amount of security probably being required.
7.	No payment was received and the security was offset.  The return for 01/04 had been received on 22 June but no payment had accompanied it.  The return for 04/04 was outstanding and yet another centrally issued assessment and default surcharge was raised.  As at 29 June, Mr Hamson’s debt stood at £9,009.  Given the current state of the debt, the poor compliance history and the fact that the four returns for 04/02 to 01/03 had still not been filed, despite being expressly requested, Mr Whitelegge decided that for the protection of the Revenue, Mr Hamson should be required to give further security.  He was notified of this by letter dated 29 June 2004, the amount required being £18,109.40 or £15,009.40 if monthly returns were submitted.  On receipt of the notice of requirement, Mr Hamson’s accountants, Messrs P J Hamson & Co, by letter dated 8 July 2004, requested a local reconsideration which was carried out by Mr Pumphrey.  
8.	The letter of 8 July had included the return for 04/04 and a cheque for £3,750.  The effect of the receipt of this payment was that Mr Hamson owed a residual amount to the Commissioners of £1,622.74, against which no security was at that time held.  Although the receipt of the return for 04/04 brought the most recent returns up to date, the four earlier returns were still outstanding and in the light of this, Mr Pumphrey was of the view that the requirement for security was still justified and necessary.  Following receipt of the 04/04 return, however, Mr Pumphrey was able to recalculate the amount due.  Based on the last four submitted returns for 07/03 to 04/04 inclusive, and taking into account Mr Hamson’s agreement to go on to monthly returns, the amount of security now required was £5,325 (based on four months tax).  To include the residue of the original debt to the Commissioners, Mr Pumphrey wrote to Messrs P J Hamson & Co upholding the requirement for security and seeking £6,947.74.  
9.	The representations made by Messrs P J Hamson & Co to the tribunal were as follows:
(i)	Mr Hamson had taken steps to rectify his poor compliance record by engaging the services of a bookkeeper to help keep his VAT affairs in order. 
(ii)	He had agreed to submit monthly returns.
(iii)	The payment of the previous two bonds had severely affected Mr Hamson’s cash flow.
(iv)	Part of the amount requested as security was in fact outstanding arrears of VAT which were paid off on 30 July 2004
(v)	Until Mr Hamson had read the Commissioners’ statement of case, he was not aware that the four returns were outstanding and these are currently being compiled.  It was pointed out that centrally issued assessments had been raised for these four periods and paid and that those payments would be more than sufficient to cover the liability.
(vi)	Since the recalculation of the amount of security, Mr Hamson’s business had dropped and the size of the bond would now represent over half a year’s VAT liability, the payment of which would have a devastating effect on the business.
(vii)	Mr Hamson has now submitted and paid his last six returns on time.
10.	The jurisdiction of the tribunal is strictly circumscribed.  The question which we must address is whether or not the Commissioners have acted in a way in which no reasonable panel of Commissioners could have acted; if they have taken into account any irrelevant matters or have disregarded something to which they should have given weight or have made an error in law.  We have to limit ourselves to considering the facts and matters as they were at the time when the decision to require security was made.
11.	Mr Whitelegge’s decision to request a third security was based on Mr Hamson’s very poor compliance record going back over a number of years.  Two previous requests for security had been made and paid and both had been used to offset debts but there was still £9,009 owing to the Commissioners.  Returns were not up to date, in that the four earlier returns had still not been rendered and the return for 04/04 was also outstanding.  When Mr Pumphrey came to review the decision, although a further payment had been made and the return for 04/04 had been rendered, the four earlier returns had not and there was still outstanding £1,622.74.  
12.	Given these factors, we believe that the decision to require security was perfectly reasonable.  The compliance record was very poor and was quite clearly highly relevant and we can see no factors which should have been taken into account but which were not.  The decision to require security was, in our view, not one which no reasonable body of Commissioners could have made.  The revised amount of the security was clearly correctly calculated in that it was based upon the last four submitted returns and represented four months’ tax.
13.	Looking at the representations made on behalf of Mr Hamson, our jurisdiction is limited to considering the facts as they were at the time the decision was made.  We are not, therefore, in judging the reasonableness of the decision to require a security, able to take into account the post decision compliance record.  Nor are we able to take into account the effect which the payment of security could have on the business.  We also question whether the statement that Mr Hamson was not aware that the returns for 04/02 to 01/03 were outstanding was strictly correct.  Mr Mansell referred us to a letter to Mr Hamson dated 7 November 2003 in which it was quite clearly pointed out to him that these returns remained outstanding and should be completed immediately.  We note that centrally issued assessments have been raised for these four periods but no evidence has been produced to verify the assertion that the centrally issued assessments will exceed the amount due on the returns and indeed we were referred by Mr Mansell to the period 04/03 where the return was finally submitted almost one year late but the tax due on the return did exceed the centrally issued assessment for that quarter.
14.	As far as the amount of the requirement is concerned, the Commissioners do, as a matter of good practice, take into account post decision returns rendered with a view to advising the tribunal whether or not the amount required still holds good.  In this case, Mr Pumphrey had looked at the returns up to and including 10/04.  He took the view that the return for the 07/04 quarter should be discounted because it declared an abnormally high level of input tax and was not representative of the overall level of trading.  If this return was to be discounted, the amount required by way of security would be only a little short of the security element of the requirement, namely £5,325.  We assume that this is in fact all that the Commissioners now wish to collect by way of security as the balance of the requirement was made up of then unpaid VAT which has since been paid.
15.	In summary therefore, we find that the decision to raise a requirement was reasonable both in substance and as to amount and the appeal is dismissed.  No application was made for costs and we make no order.  
16.	We should however make reference to two matters.  One is to draw Mr Hamson’s attention to the fact that he can apply to the security team (Mr Whitelegge or Mr Pumphrey) to see if they will agree to accept payment by instalments.  There is no right to pay by instalments but in certain circumstances, the Commissioners do agree to such a request provided that the trader then sticks rigorously to any agreement reached.  Secondly, we would urge Mr Hamson to lodge the four outstanding returns as soon as possible because Mr Pumphrey did say in evidence that he would review the security once the outstanding returns had been submitted. 

LADY MITTING

MAN/04/0437

CHAIRMAN
Release Date: 1 March 2005