20059
VAT ASSESSMENT – Appellant buying and selling Viagra on behalf of a doctor – Appellant denied carrying on a business – the doctor making the supplies – Appellant advertising the Viagra on internet, taking customers’ orders, issuing invoices in his own name – Appellant carrying on a business – agent for the doctor acting in his own name – Appellant making standard rated supplies of Viagra – assessment accurate and to best judgment – Appeal dismissed

MANCHESTER TRIBUNAL CENTRE

	PETER W TOMLINSON	Appellant

	- and -

	HER MAJESTY’S REVENUE and CUSTOMS	Respondents

			Tribunal: MICHAEL TILDESLEY OBE	 (Chairman)
				      SUSAN STOTT FCA CTA		  (Member)

Sitting in public in York on 18 January 2007

The Appellant did not appear

Brian McCluggage, counsel instructed by the Acting Solicitor for HM Revenue & Customs, for the Respondents

© CROWN COPYRIGHT 2007

DECISION
The Appeal
1.	The Appellant was appealing against an assessment dated 26 November 2004 for unpaid VAT in the sum of £11,398.95 for the period 1 April 2000 to 30 November 2001.
2.	 The Appellant’s grounds of Appeal were that the Appellant was not trading and that the supplies were not subject to VAT.
The Hearing
3.	The Appellant did not attend the hearing. The Tribunal contacted the Appellant’s representative, Webster & Co, who denied receiving the hearing notice from the Tribunal. 
4.	The Respondents applied for the Appeal to be heard in the absence of the Appellant pursuant to rule 26 of the Tribunal Rules 1986. The Respondents were sceptical about the claim of the Appellant’s representative that he had not received the hearing notice. The notice was correctly addressed and had not been returned.
5.	We granted the Respondents’ application and proceeded to hear the Appeal in the Appellant’s absence.
6.	We heard evidence upon oath from Mr Peter Green, the officer who made the assessment. The Respondents provided the Tribunal with a bundle of documents.
The Facts
7.	The Appellant was registered as a sole proprietor for VAT from 1 April 2000 trading in health products. The Appellant’s business was transferred to a limited company, Healthwise Clinic Limited, on 30 November 2001. 
8.	The Appellant’s principal business activity was arranging the supply of Viagra to customers. The Appellant advertised Viagra on the internet, through which he received orders and completed medical questionnaires from customers. The orders and the questionnaires were then passed on to a Dr Sim who issued private prescriptions and arranged for the Viagra to be supplied to the customers. The Appellant would pay Dr Sim for the Viagra and issue invoices with the appropriate mark up to the customers.
9.	Up to 1 March 2001 Dr Sim would send the completed prescriptions to an independent pharmacist, who in turn would forward the Viagra direct to the customers. From 1 March 2001 Dr Sim used a different supplier which enabled him to supply the Viagra direct to customers.
10.	On 28 October 2004 Mr Green visited the offices of Webster & Co, the Appellant’s accountants in connection with a VAT repayment return for the period 1 April 2000 to 30 November 2001. Mr Green formed the view that output tax had been under declared, and input tax wrongly claimed on the return. On 18 November 2004 he raised an assessment for £24,707. On 19 November 2004 Mr Webster telephoned Mr Green, asserting that the supplies of Viagra up to 1 March 2001 were zero-rated because they were supplied by a registered pharmacist.  Mr Webster also confirmed that the claim for input tax in respect of the Appellant’s payments to Dr Sim up to 1 March 2001 for the Viagra was a mistake.  Dr Sim had only been registered for VAT from 19 March 2001 and did not issue for invoices for the Viagra supplied prior to the 1 March 2001.
11.	 In view of the three year capping provision which would come into effect on 30 November 2004, Mr Green conceded that the supplies of Viagra which took place before the 1 March 2001 were zero-rated. He also accepted that the disbursed prescription charges were not subject to VAT. However, he considered that the supplies of Viagra from 1 March 2001 were standard rated as they did not involve a registered pharmacist. Mr Green decided to disallow the input tax claim on payments for Viagra purchases prior to 1 March 2001, but allowed input tax on subsequent purchases because Dr Sim was then registered for VAT. Mr Green issued a revised assessment on 26 November 2004 for £11,398.95.
12.	Mr Green produced a letter dated 18 September 2003 from Baker Tilley, the Appellant’s previous accountants. Baker Tilley notified the Respondents that the Appellant had been trading as a sole proprietor and was liable to be registered for VAT from 1 April 2000.
The Appellant’s submissions
13.	The Appellant contended that from 1 March 2001 Village Health Centre (Dr Sim) supplied the Viagra on prescription to customers.  The Appellant collected the payments from customers which were then forwarded to Dr Sim.  The Appellant did not at any time own or handle the Viagra. The Appellant submitted that on these facts he made no supplies of Viagra and was outside the scope of VAT.
The Respondents’ submissions
14.	The Respondents submitted that the Appellant was operating a business. He marketed the Viagra as a serious activity, which was conducted on a regular basis and on sound business principles. The Appellant received monetary consideration from the supplies of Viagra. Further he was acting as an undisclosed agent for Dr Sim by buying and selling the Viagra on behalf of him.  In those circumstances the Appellant was acting in his own name and making the supplies of Viagra.
Reasons for our decision
15.	The facts clearly demonstrated that the Appellant was operating a business. He advertised the Viagra for sale on the internet, collected the orders and issued invoices to customers. The Appellant performed these activities on a constant basis conforming to sound business principles with a view to making a profit. The Appellants’ claim that he was not in business was contradicted by Baker Tilley acting on his behalf in their letter dated 18 September 2003 when they confirmed that the Appellant was a sole trader liable to VAT who transferred his business as a going concern to Healthwise Clinic Limited.
16.	We find from the facts that the Appellant was buying and selling the Viagra on behalf of Dr Sim. Thus he was acting as Dr Sim’s agent. Further the Appellant was dealing with the customers in his own name. He did not disclose that he was acting on behalf of a named principal, Dr Sim. Under section 47(2A) of VATA 1994 where goods are supplied through an agent acting in his own name, the agent is receiving and making the supplies. As the supplies of Viagra from 1 March 2001 made on behalf of Dr Sim were standard rated for VAT purposes, the Appellant was liable to account for VAT on those supplies. 
17.	Mr Green’s assessment was based on the records and accounts provided by the Appellant. The Appellant has not challenged the computation of his revised assessment issued on 26 November 2004.
18.	We hold that
(1)	The Appellant was carrying on a business which was registered for VAT.
(2)	The Appellant was acting in his own name as the agent of Dr Sim for the buying and selling of Viagra. 
(3)	The Appellant was making standard rated supplies of Viagra from 1 March 2001.
(4)	The revised assessment issued on 26 November 2004 was made to best judgment and accurate.
Decision
19.	We dismiss the Appeal for the reasons given above.
20.	The general rule is that the Respondents make no application for costs against unsuccessful Appellants. However, the Hansard Statement of 24 July 1986 entitled “Costs in Tribunal Cases” sets out several exceptions to the general rule. One exception is where the Appellant has misused Tribunal procedure by failing to appear at the Tribunal hearing without sufficient explanation. We are satisfied that the Appellant falls within this exception. We order the Appellant to pay the Respondents’ costs of £880 plus VAT. 
21.	The Appellant can apply to the Tribunal to set aside this decision provided he makes application in writing to the appropriate Tribunal centre (Manchester) within 14 days from the release date of this decision.   

                                 MICHAEL TILDESLEY OBE
CHAIRMAN
RELEASE DATE: 8  March   2007

MAN/06/0035