20459

SECURITY – Notice of requirement – Whether reasonable – Yes 

LONDON TRIBUNAL CENTRE

	R S COURIERS (EUROPE) LTD	           Appellant

-	and –

	THE COMMISSIONERS FOR HER MAJESTY’S REVENUE & CUSTOMS 	 Respondents

				Tribunal:	SIR STEPHEN OLIVER QC (Chairman)
						R S SURI 

Sitting in public in London on 5 November 2007

There was no appearance for the Appellant

Pauline Crinnion for the Respondents

© CROWN COPYRIGHT 2007

DECISION

1.	R S Couriers (Europe) Ltd (“RS Couriers”) appeals against the decision of the Respondents in a letter of 23 August 2006.  The decision is in the form of Notice of Requirement to give Security under Schedule 11 paragraph 4(2) of the Value Added Tax Act 1994.

2.	The Notice of Requirement requires RS Couriers to give security in the sum of £14,250 if quarterly returns are to be rendered or the sum of £9,500 if monthly returns are to be rendered.  

3.	There was no appearance for RS Couriers.  We were informed, by message from RS Couriers, that they would not be attending the hearing.  We decided to go ahead and hear the matter in pursuance of rule 26 of the VAT Tribunals Rules.

4.	The Customs were represented by Pauline Crinnion and the deciding officer, Clare Bell, gave evidence.

5.	RS Couriers has been registered for VAT from 18 July 2006.  It carries on business as a courier company from premises in Bognor Regis, West Sussex.  

6.	The director of the business is Steven Russell Skinner and the company secretary is Sharon Skinner.  

7.	Mr Skinner had been a director of RS Couriers UK Ltd and Sharon Skinner had been the company secretary of that company.  RS Couriers UK had previously been registered for VAT from 1990 and operated from what Customs believed to be the same premises as RS Couriers.  RS Couriers UK had been placed in voluntary liquidation on 8 August 2006 owing a debt to Customs of £70,007.  This had been made up of the tax balance of £69,929 and default surcharges of £5,077.  

8.	The application for registration of RS Couriers has properly disclosed the interests of Mr Skinner and Sharon Skinner in RS Couriers UK.  

9.	Two relevant pieces of information about RS Couriers UK came to the notice of Customs:

(i)	In May 2005 a Notice of Requirement had been issued to that company; appeal had been made and dismissed.  Arrangements had been agreed for payments to be made to clear the then outstanding debt.  Those arrangements were however never honoured prior to the insolvency of RS Couriers UK.

(ii)	The compliance record of RS Couriers UK had been erratic and, on some occasions, exceptionally bad.  Delays in payment had taken place from 1990 until 2006.  On several occasions RS Couriers were over 800 days behind in paying their quarterly VAT.  In 2005/6 RS Courier’s delays had ranged from 282 to 554 days (with part of the debt remaining outstanding).

10.	Shortly after the application for registration of RS Couriers in July 2006, Miss Bell ascertained that proceedings were being taken to put RS Couriers UK into liquidation.  She also ascertained the compliance records of that company.  On the strength of that information it appeared to the Customs that, for the protection of the revenue, it was necessary to require RS Couriers, as a condition of its supplying goods or services under a taxable supply, to give security by guarantee or cash deposit.  On 23 August 2006, therefore, the Customs notified RS Couriers of the requirement as set out at the start of this decision.  

11.	On 12 September 2006 RS Couriers e-mailed Miss Bell explaining how they had by then put in place new procedures to collect outstanding moneys with the result that the company expected to have a good cashflow.  Mr Skinner, in the e-mail, gave an assurance that the VAT would never be missed again.  He could see already that after only a month the benefits of the new procedures were beginning to show.  

12.	Customs took Mr Skinner’s message as a request for a local reconsideration.  This took place.  A further letter operating as a notice requiring security was issued to RS Couriers on 19 September 2006.  In that letter Customs endorsed their earlier decision stating that they still considered RS Couriers to be a risk to future revenue and that it had not rendered sufficient information to suggest that it no longer represented such a risk.  The letter of 19 September 2006 also observed that, in the e-mail of 12 September, it had been stated that “I did not miss any VAT payments”.  That cannot have been the case.  If Mr Skinner had been referring to the existing company, RS Couriers, it had not by then rendered any returns.  If he had been referring to RS Couriers UK, he must have been wrong in the light of the long and serious record of non-compliance from 1990 onwards.  

13.	In all the circumstances we think it was entirely reasonable for Customs to decide to require RS Couriers to provide security.

14.	We turn now to the amount of the security required.  This was calculated by reference to a turnover of £400,000 (as stated on the VAT application form), a “tax performance ratio” of 0.92 and an “expected output tax” of £59,574.  Adjusting that amount for “profit” by taking into account the effect of the tax performance ratio, the anticipated tax liability worked out at £28,546 for a twelve month period.  On that basis six months’ liability was £14,250 as rounded down (assuming quarterly VAT returns).  A four months liability worked out at £9,500 as rounded down for monthly returns.  We think that the method of quantifying the security required is reasonable in the circumstances.  We therefore dismiss the appeal.

15.	It transpired that after the decision appealed against (i.e. of August/September 2006) and notwithstanding Mr Skinner’s assurances, RS Couriers were in arrear in making their quarterly VAT payments for the periods 01/07, 04/07 and 07/07.  The amount of VAT outstanding at the date of the hearing was some £35,000.  It appears to us that this appeal should have come on for hearing many months ago and before the debt had been allowed to accrue.  We note in this connection that the reconsideration letter of 19 September 2006 gave RS Couriers 21 days in which to appeal.  No appeal was received from RS Couriers until 10 January 2007.  In security matters of this sort, extensions of time to appeal should, we think, only be allowed in the most exceptional circumstances.  We cannot see why any extension was given in this case.

16.	But that is not the end of the matter.  The statement of case was lodged on 14 March 2007 by Customs.  On 19 March the Tribunal notified the parties that the matter was ready for hearing.  On 28 March Customs responded with their dates to avoid.  No response was made by RS Couriers.  The Tribunal tried again and received another “dates to avoid” letter from Customs on 2 May; nothing apparently was received from RS Couriers.  On 1 June 2007 the Tribunal again sent out its Trib 19 (dates to avoid) letter.  Customs responded on 20 June but nothing was received from RS Couriers.  Eventually, on 24 July 2007, a hearing date was fixed for 5 November, i.e. the occasion of this appeal.  

17.	It appears therefore that inaction has allowed RS Couriers to run into debt to the tune of £35,000.  Had the matter been brought on for hearing six months ago, as could easily have happened, the debt would have been much less.  It seems to us, therefore, that the public interest requires these cases to be dealt with much more expeditiously.  Extensions of time to appeal should be given only in the most exceptional circumstances and hearing dates should be fixed (and not deferred) for the earliest practicable time.

SIR STEPHEN OLIVER QC
CHAIRMAN

RELEASED: 15 November 2007

LON 2007/0112