18774
CATCHWORDS — SECURITY — Company Director's involvement in previously failed companies — Whether respondents where reasonable in requiring security — Yes — VAT Act 1994 Schedule 11 Paragraph 4 — Appeal dismissed
MANCHESTER TRIBUNAL CENTRE
CAV ELECTRICAL LIMITED Appellant
- and -
THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents
Tribunal: Lady Mitting (Chairman)
Mr J D Kippest (Member)
Sitting in public in Birmingham on 6 September 2004
The Appellant did not appear and was not represented
Mr B Hayley, of the Solicitor's Office of HM Customs and Excise, for the Respondents
© CROWN COPYRIGHT 2004
DECISION
- The decision under appeal is that of the Commissioners contained in a letter dated 7 May 2003 to require the Appellant to give security under Schedule 11, Paragraph 4(2) Value Added Tax Act 1994 in the sum of £3500.
- This case had previously been heard on the 16 January 2004 when the appeal was dismissed. The appeal was heard then in the absence of the Appellant under Rule 26(2) Value Added Tax Tribunals Rules 1986. That decision was set aside on the application of the Appellant and came on for hearing again before us. Yet again, the Appellant did not appear and was not represented and we also proceeded to hear the case under Rule 26(2).
- The grounds of appeal given by the Appellant were as follows:
"Only started trading January 03 on a much smaller scale, most of our payments are on 60-90 days due to the type of contracts we do. As we are just getting 'back on our feet', having to pay this amount of money would cause us to have a cash flow problem, as we just haven't got a surplus of £3500.00 that we could leave for 12 months and we would be grateful if this amount could be greatly reduced or if the terms could be shortened to say a 3 month period."
- We heard oral evidence from Mr Martin Whitelegge, a senior officer of the Commissioners. On the basis of his evidence and the bundle of documents put before us, we find the following facts.
- The Appellant company trades from 3 Ilkeston Road, Nottingham NG7 3GD and carries on an electrical and telecommunications business. The company was registered for VAT with effect from 27 January 2003, the registration still being current. One Anthony Thomas Cavanagh was appointed a director of the company on 23 December 2002 and as far as is known remains so.
- In January 2003, an officer of the Commissioners attended a creditors meeting for a company called Chedcrest Limited. This company also traded from 3 Ilkeston Road, Nottingham, its stated business being one of electrical wirings and fittings. Mr Anthony Thomas Cavanagh was a director also of this company, which had become insolvent with effect from 24 January 2003, owing the Commissioners in unpaid VAT £89,946.86. The creditors' meeting was chaired by Mr Cavanagh and it was established at the meeting that Mr Cavanagh was in the process of setting up the Appellant company. The officer attending the meeting spoke to Mr Cavanagh and advised him that in the light of the unpaid VAT liability of Chedcrest Limited, the Commissioners would be considering requiring security, given that the new company was working from the same premises, with the same workforce and in the same line of business as Chedcrest.
- Further research then showed that Mr Cavanagh had also been involved in two previous registrations. A company called Rainbow Systems (Beeston) Limited had traded in telecommunications and had become insolvent with effect from 3 October 2002 owing the Commissioners £18,569.92. Mr Cavanagh had been a director of Rainbow Systems. It was also found that Mr Cavanagh had been director and company secretary of a company called A & T Systems Limited trading in electrical wiring and fittings. There was no unpaid VAT liability for this company but its compliance record had been poor with returns and payments frequently rendered late.
- Mr Whitelegge, once in receipt of all the above information, formed the view that the Appellant company represented a threat to the Revenue and that security should be required. He reached this view given the involvement of Mr Cavanagh in three previous companies, all in a similar line of business, two of which had ceased trading owing large sums of money to the Commissioners and the third of which did not enjoy a good compliance record.
- Mr Whitelegge also decided that the Appellant should be put onto monthly returns and the amount of security required was therefore based on four months' turnover. To reach the estimated turnover, Mr Whitelegge relied upon the estimated turnover given in the application for registration and the actual turnover as derived from Chedcrest's returns. The amount sought was £3500.
- The Appellant then appealed to the Tribunal, it's grounds of appeal being as stated above. Our jurisdiction is supervisory and the test to be applied is whether the decision of the Commissioners was one which no reasonable panel of Commissioners could have taken; whether they took into account some irrelevant matter or disregarded other matters to which weight should have been given. The facts are to be considered as they were at the time the decision was made.
- We believe that Mr Whitelegge's view was perfectly reasonable. The factors which he took into account were all relevant and we can think of none which he should have considered but did not. The view he reached on the evidence before him that the Revenue was at risk cannot in anyway be seen as unreasonable and we also believe that his calculation of the amount required was entirely reasonable.
- For all these reasons we find the Commissioners decision was reasonable and the appeal is dismissed. Mr Haley made an application for a contribution towards costs in the sum of £100 which we grant.
LADY MITTING
CHAIRMAN
Release Date: 30 September 2004
MAN/03/0601
