19348

Value Added Tax; expenses of appeal; discretion of Tribunal; appellant achieving substantial success; factors taken into account in restaurant suppression case.

EDINBURGH TRIBUNAL CENTRE

	S K SOULIMAN & N HANNA
	BYZANTIUM RESTAURANT	Appellants

	- and -

	THE COMMISSIONERS FOR 
	HER MAJESTY’S REVENUE & CUSTOMS	       Respondents

			Tribunal:	 (Chairman):  J Gordon Reid, QC., F.C.I.Arb.,
					 (Members):	  Mrs Charlotte Barbour, CA., ATII
							  I R Welch, CA., JP

Sitting in Edinburgh (Heard on Papers Only)

for the Appellants:		Mr Richard Yewdall

for the Respondents:	Mrs Joanna Clark, Shepherd & Wedderburn, WS

© CROWN COPYRIGHT 2005.

DECISION

Introduction
1.	On 2nd August 2005, the Tribunal issued its decision in an appeal against an amended assessment in the sum of £36,866.  The original assessment had been for £45,547, but was amended following discussions between the parties at an early stage (see our Decision paragraphs 22 and 23).  
2.	The assessment related to the operations of a small restaurant and was based upon allegations of suppression which were founded upon certain covert observations made by Customs on two separate occasions.  We refer to our Decision for our detailed findings and conclusions.  The result of our decision was that the amended assessment was, by agreement of the parties, further reduced to £8,812.00 i.e. to about 20% of the original assessment and about 24% of the amended assessment.  Parties have been unable to reach agreement on the question of expenses, and, in the interests of economy, the Tribunal suggested that the issue might be dealt with by written submissions.  Neither party insisted on a formal hearing and both have helpfully produced short written submissions.

Submissions
3.	For the Appellants, Mr Yewdall, who appeared at the Hearing, relied essentially on the extent to which the Appellants have been successful for the proposition that they should be found entitled to the whole of the expenses of the appeal.  He referred to the fact that, in discussions following the issue of the original assessment, he pointed out flaws in Customs’ approach and methodology; this led to the amended assessment being issued (Decision paragraph 23).  He also reminded us that (i) in relation to the covert observations of 30/10/02 on which Customs relied in their calculations, the Tribunal had found there to be no under-declaration at all (Decision paragraphs 13-14), and (ii) Customs failed to examine the Appellants’ balance sheets and profit and loss accounts; had they done so their approach would have been different (Decision paragraphs 24-25).
4.	For Customs, Joanna Clark, who also appeared at the Hearing, proposed that no expenses should be found due to or by either party.  She submitted, in summary, that (i) there had been mixed success, (ii) the Appellants had been found guilty of significant suppression (Decision paragraphs 18, 35, and 37), (iii) the Tribunal took account of evidence which was not aired in discussions with Customs and in particular with the Review Officer; had this been done Customs might have reached a different view (Decision paragraphs 16, 18 and 29).  She also referred to Summer Palace Ltd v CC&E 2005 STC 564.

Discussion
5.	Parties accepted that we have a wide discretion on the question of expenses.  Here, the Appellants have achieved substantial success.  Had that been the only relevant consideration, we might well have awarded them all of their “judicial” expenses.  However, we consider that our finding that the Appellants have been guilty of significant suppression to be important.  We also consider it significant that crucial evidence about Lorna Strachan’s Birthday Party was not drawn to Customs’ attention at an earlier stage in discussions.  On the other hand, we note that no penalty for dishonesty was levied in this case (Decision paragraph 35), although the Appellants’ record keeping was not good (Decision paragraph 8).  In Summer Palace, a restaurant suppression case, the Tribunal reduced the assessment by about 50% and found no expenses due to or by either party, but gave no reasons for that finding.  On appeal, Lawrence Collins J refused to disturb that finding.  While he concluded that the case was one in which the Tribunal could have decided to award the Appellant the whole or part of its expenses, he was satisfied in the light of the history of the appeal, the finding of suppression and the fact that the appeal was allowed to a limited extent, that there was an entirely rational basis for the decision not to award the Appellant any part of its costs (see paragraph 20 at page 568).  We agree that these are relevant matters to take into account.
6.	Here, on the question of expenses, the finding of significant suppression over a prolonged period, the Appellants’ poor record keeping and their failure to raise the issue of the Birthday party and its effect on calculations until a very late stage, are factors which persuade us that the Appellants should not be entitled to all their expenses.  We consider that the correct award lies somewhere between 50% and 80%.  In these circumstances we consider that an award of about 60% is appropriate.

Result
7.	The Appellant is entitled, in terms of Rule 29 of the Tribunal Rules, to the expenses of, incidental and consequent upon the appeal but restricted to 60% thereof, as the same shall, failing agreement, be taxed by the Auditor of the Court of Session on a party and party basis on the Court of Session Scale.

J GORDON REID, QC., F.C.I.Arb.,

CHAIRMAN

RELEASE:  22 NOVEMBER 2005

EDN/04/83

££S K Souliman & N Hanna Byzantium Restaurant v Revenue and Customs [2005] UKVAT V19348 (22 November 2005)