20547

VAT – Registration – Deregistration – Applicability of para 1(3) and 4(1) Schedule 1 VATA – Deregistration under para 13(1) Schedule 1 – Date to which Commissioners must have regard – Effect of unreasonable decision by Commissioners not to deregister – Appeal allowed in part

LONDON TRIBUNAL CENTRE

	AMANDA MICHELLE VAUGHAN	           Appellant

-	and –

	THE COMMISSIONERS FOR HER MAJESTY’S REVENUE & CUSTOMS 	 Respondents

				Tribunal:	CHARLES HELLIER (Chairman)
						MICHAEL JAMES

Sitting in public in Cardiff on 13 December 2007

K W Whittaker of Whittaker Le Moël Limited, for the Appellant

Pauline Crinnion, instructed by the solicitor for HMRC, for the Respondents

© CROWN COPYRIGHT 2007

DECISION

1.	Mrs Vaughan appeals against decisions made by the Respondents that she should remain registered under Schedule 1 VATA 1994.  She acquired the business of the Bank Tea Rooms (the Tea Rooms) in Newtown, Powys on 1 October 2005.  Under the guidance of her then accountants she applied shortly thereafter to be registered for VAT.  She was registered with effect from 1 October 2005.  But in February 2006 she appointed Mr Whittaker’s firm.  Mr Whittaker wrote to the Respondents asking for revocation of the registration.  On 1 August 2006 the Respondents wrote refusing (a) to declare the original registration `void’, and (b) to deregister her on the grounds that her turnover was below the relevant limit.  She appeals against that decision.

2.	Mrs Vaughan did not attend the hearing.  We were told by Mr Whittaker that she had ceased to run the tea room, left home and was not contactable.  However he was confident that he had all the information necessary to present her case in her absence and that her evidence would not be required.  We decided to proceed in her absence.  No adjournment was sought.

The Evidence and The Factual Findings

3.	We heard oral evidence from Mr Whittaker and from the Respondents’ officer Steve Owens who also provided a witness statement. A witness statement was also provided from Victoria Edge, one of the Respondents officers in the registration team; she did not attend to give oral evidence but Mr Whittaker took no objection to her statement.  We also had a bundle of copy correspondence and other documents before us.

4.	We find the following facts in relation to which we need to make no comment as to the evidence:

(1)	Mrs Vaughan acquired the Tea Rooms on 1 October 2005 and started business in them forthwith;

(2)	The previous owner of the Tea Rooms had been registered for VAT.  The aggregate of his VATable supplies in the 12 month ending on 30 September 2005 was £85,521.

(3)	On the advice of her former accountants Mrs Vaughan completed a VAT registration application form `VAT1’.  It was submitted on her behalf on 1 November 2005.  In the form she declared that her estimate of the value of taxable supplies that she expected to make in the next 12 months was £80,000.  The form indicated that she had acquired the business as a going concern.

(4)	Mrs Vaughan changed accountants to Whittaker Le Moël Ltd in early 2006.  At that time Mr Whittaker had some discussions with Mrs Vaughan (and her daughter and sister who worked in the Tea Rooms) and considered the level of supplies being made (no doubt as part of a consideration of the figures for the VAT returns).  He concluded that the level of turnover she was achieving did not meet the registration threshold.  Accordingly he wrote to the Respondents on 20 February 2006 indicating that the level of turnover achieved did not reach the registration threshold and requesting “that the registration should be cancelled retrospectively from the outset on the basis that it was incorrectly submitted”.

(5)	The Respondents replied on 13 March seeking further information (and the 12/05 VAT return) and 4 days later, on 17 March Mr Whittaker replied:

(i)	he did not send the 12/05 VAT return;
(ii)	he set out output figures for January and February 2006 and for the first 15 days of March (being £4,163, £3,948, and £1,430); and
(iii)	in response to a question which indicated that in the Respondents’ view the earliest possible deregistration date would be 23 February but asked if a later date was sought, replied “Deregistration from outset. Registration should not have been submitted.”

(6)	On 2 May 2006 Mr Owen made a surprise visit to the Tea Rooms.  His object was to investigate why a VAT return had not been sent, but he had also seen a copy of Mr Whittaker’s letter of 20 February 2006 and came prepared to communicate the Respondents’ initial view that deregistration might not be allowed from 1 October 2005.  Shortly after he arrived Mr Whittaker came round.  Mr Owen was given figures for the 12/05 VAT period indicating £2,013 of output VAT (or supplies of £11,502) for the quarter.  He had a discussion with Mrs Vaughan, Mr Whittaker and Mr Whittaker’s assistant.  He asked to see Mrs Vaughan’s sales records.  He was shown sheets showing daily takings but no supporting documentation.  He was told that the till roll did not work.  He suggested that Mrs Vaughan kept all the meal under tickets in the future, and in particular for the period 3 May to 31 May so that deregistration could thereafter be considered on that month’s figures.

(7)	Mr Owens visited Mr Whittaker on 19 June 2006 to examine the records.  His visit was in connection with the application to deregister and he came to examine the records kept for May.  He concluded on the information provided to him that turnover in May was representative of that during other months of the year.  He did a spot check for one day of the meal bills against a summary provided by Mr Whittaker’s firm.  He concluded it was satisfactory.  He checked the postings to the accounts and found them O.K. too.

(8)	The figures provided to Mr Owens showed taxable outputs of £4,677.98 for the 25 days for which the Tea Rooms were open to May.  That May had two bank holidays in it.  He computed an estimate of the taxable outputs for 12 months by adding 2/25 to the turnover (to allow for the two bank holidays which in a normal month would have been days when the Tea Rooms were open), and multiplying by 12:

25 days turnover			£4,677.98
2 day’s					     374.24
a “normal month”			£5,052.22
12 normal months		          £60,626.64

This figure of £60,626 was higher than the Deregistration Threshold (see later below): he concluded that the business did not qualify for deregistration.

(9)	On 1 June 2006 Mr Whittaker wrote to the Respondents seeking an answer to his request for deregistration and mentioning Mr Owens’ visit.  The Respondents replied on 21 June 2006 indicating (a) that retrospective deregistration from 1 October 2005 was not possible land (b) asking for the 12/5 VAT return as “in order that your current deregistration request [could] be processed”.

(10)	On 11 July 2006 Mr Whittaker wrote to the Respondents with details of the June figures which had been extracted from Mrs Vaughan’s meal bills.  His letter indicated that the takings for June were £3,828.48.  Taking them together with those for May showed, he said, that 12 months turnover would have been £51,038 – below the Deregistration Threshold and as a result he sought `at least’ immediate deregistration.

(11)	On 1 August 2006 the Respondents wrote to Whittaker Le Moël indicating (a) that they did not consider that the original registration could be declared void, and (b) that “after communication received from my colleague Steve Owens, deregistration on the grounds of reduced turnover cannot be allowed.  This is due to Mr Owens advising this office following a visit to your client on 19 June 2006 that he recommended that we cannot allow deregistration on the grounds of reduced turnover as he was not satisfied on the forward look that your client will be trading below the appropriate threshold.” [our italics]. 

(12)	The Appellant appealed against this decision on 29 August 2006.

5.	We now turn to some findings of fact where we need to make comment on the evidence or on particular features.

6.	Mr Owens told us that he was not able to form a view on Mrs Vaughan’s honesty, but was able to conclude that she was not very commercially experienced, had little accounting background, and was probably competent in basic mathematics but no whiz kid.  Mr Whittaker’s view of her experience and abilities was similar.  He also regarded her as honest.  In his view her commercial and accounting nous was not sufficient for her to successfully conceal takings.  We conclude that on 1 August 2007 the Commissioners knew that Mrs Owens was likely to be honest in her dealings but was lacking in commercial experience and expertise.

7.	Mr Whittaker prepared accounts for Mrs Vaughan’s business for the year to 30 September 2006.  They were prepared on the basis of the information provided to his firm by Mrs Vaughan including her manuscript figures for takings in the first few months trading, the daily meal order tickets thereafter, and the supplier’s bills and the bank statements.  They showed gross turnover of £56,365.  Mr Whittaker accepted that it was not possible to be certain of the accuracy of the accounts in circumstances such as these but said that in his view they were fair because:  he was happy with the way the information have been provided, he believed Mrs Vaughan was honest, he had used third party suppliers statements and reconciled the figures to the bank accounts, and because the gross margin from month to month had remained fairly constant and had overall been in line with the kind of margin he would expect to see from a business of this kind.  We found Mr Whittaker to be an experienced accountant.  We accept Mr Whittaker’s conclusion and find that the accounts were likely fairly to have represented Mrs Vaughan’s turnover for the year.

8.	The summaries of the daily meal order tickets for May 2006 (see paragraph 4(6) above) showed four days where there was no figure for takings because, Mr Whittaker understood, the tickets for that day had been bundled together with those for the following day.  If this was correct our examination of the figures indicated to us that some but not all of the figures made sense.  We conclude that there may have been some inaccuracy in the figures but that it was unlikely to have been significant.

9.	It was accepted by Mr Whittaker that the transfer of the Tea Rooms to Mrs Vaughan was a transfer of a going concern.  That concession was not at variance with any of the evidence before us, and we conclude that it was a transfer of a going concern.

10.	We conclude from the Respondents’ letter of 1 August 2006, that this decision as to whether to deregister the Appellant was based solely upon Mr Owens’ conclusion reached after his meeting on 19 June with Mr Whittaker and did not take into account the June 2006 figures.  Whilst it may have taken into account Mr Owens’ view on the honesty and competence of Mr Vaughan, there is no indication that any consideration was given to the earlier figures provided by Mr Whittaker.

The Statutory Provisions

11.	Section 49 VATA 1994 provides that where a business is transferred as a going concern then:- 

“for the purpose of determining whether the transferee is liable to be registered under the Act he shall be treated as having carried on the business before as well as after the transfer and supplies by the transferor shall be treated accordingly.”

Thus in relation to the question of her registration, Mrs Vaughan is to be treated as if in the 12 months prior to the transfer of the business to her on 1 October 2005, she had made supplies of £85,521.

12.	Paragraph 1 of Schedule 1 VATA 1994 deals with liability to be registered.   Paragraph 1(2) relates to the circumstance where a business is transferred as a going concern:-

“(2)	Where a business carried on by a taxable person is transferred to another person as a going concern and the transferee is not registered under this Act at the time of the transfer, then, subject to sub-paragraph (3) to (7) below, the transferee shall become liable to be registered under this Schedule at that time if – 

(a)	the value of his taxable supplies in the period of one year ending at the time of the transfer has exceeded [the Registration Threshold] ;”

The Registration Threshold was £61,000 from 1 April 2006 and £60,000 from 1 April 2005.

Thus, unless any of paragraphs (3) to (7) applied Mrs Vaughan became liable to be registered on 1 October 2005 since the value of the supplies she was deemed to have made up to that date exceeded £60,000.

13.	The only potentially relevant subparagraph is 1(3).  It provides that- 

“(3)	A person does not become liable to be registered by virtue of paragraph (1)(a) or (2)(a) above if the Commissioners are satisfied that the value of his taxable supplies in the period of one year beginning with the time at which, apart from this sub-paragraph, he would become registrable would not exceed [The Registration Threshold].”  From 1 April 2006 the Deregistration Threshold was £59,000, and £58,000 in the preceding year.

14.	Paragraph 1(1)(a) (with which we are not directly concerned) deals with liability to register arising as a result of a person’s taxable supplies in the period of one year ending at the end of any month exceeding the Registration Threshold.  It too is subject to subparagraph (3).  The interaction of paragraph (1)(a) and (1)(3) were considered by Ferris J in Gray (t/a William Gray & Sons) v Customs and Excise Commissioners 2000 STC 880.  We shall return to that consideration shortly but need first to advert to the consequences of liability to register arising under paragraph (1)(a) or (2)(a).

15.	Paragraph 5 provides that if a person becomes liable to register under paragraph 1(1)(a) he must notify the Commissioners within 30 days of the end of the  month at the end of which he becomes registrable (the `relevant month’) and that the taxpayer be registered by the Commissioners from the end of the month following the relevant month (or from an earlier time with the agreement of the taxpayer).

16.	Paragraph 7 provides that a person who becomes liable to be registered under paragraph 1(2) must notify the Commissioners within 30 days of the time the business is transferred and that the Commissioners are to effect registration with effect from the time of transfer.

17.	It will be noted that whereas registration pursuant to paragraph 1(a) takes place a month after the relevant month, there is no time lag of a month in the case of registration by virtue of paragraph 1(2).

18.	In Gray Ferris J addressed two issues.  The first was at what date should the Commissioners look at the position in making their decision under paragraph 1(3).  He said:

“19.	I think that two points stand out clearly.  First paragraph 1(3) requires a decision to be made by the Commissioners.  It does not prescribe a set of criteria which, if satisfied, lead to a particular result.  It says that a certain conclusion will follow if the commissioners are satisfied that a particular state of affairs exists.  A VAT tribunal, or this court itself, can only interfere with the decision of the commissioners if it is shown that the decision is one which no reasonable body of commissioners could reach. 

20.	Secondly, paragraph 1(3) is directed primarily to the case where a person making taxable supplies (the trader) complies with his duty to notify the commissioners of his liability to be registered in accordance with paragraph 5 … it deals with a position in which the trader … submits that [the last 12 months] were exceptional and that the [Deregistration] threshold will not be exceeded during the next twelve months.  The commissioners make their decision on that submission by looking forward and considering whether or not … the value of the trader’s taxable supplies for that period “will not exceed” the taxable amount.  All this is envisaged as being done within a short time of the notification of liability being made …  This means that it must be made as at the date when the registration would otherwise became effective.”  [Our italics]

He went on to hold that even when the trader did not comply with paragraph 5 the exercise must be carried out at the date when registration would in the absence of a decision under paragraph 1(3) have been effective.

19.	The second question addressed by Ferris J was what evidence was to be taken into account by the Commissioners in making their decision under paragraph 1(3).  He held that the only information which they can or should act upon was that available to them at the date from which registration would otherwise become effective.  This conclusion was made in relation to a paragraph 1(1) registration and in recognition again of the trader’s notification requirement under paragraph 5.  Ferris J’s conclusion was not specifically addressed to paragraph 1(2) where the registration date will precede rather than follow the date by which the trader is required to produce information to the Commissioners.  Nevertheless Ferris J agreed with a passage from a tribunal decision in relation to paragraph 1(2) registration in which the tribunal said that under paragraph 1(3) the Commissioners were required to make a forward judgment:-

“The judgment is to be exercised at the date of transfer.  It cannot be right that a taxpayer, by failing to comply with his legal obligations [by notifying late] can put himself in a more advantageous position by expecting the Commissioners to take into account matters which they would not have been able to take into account had they been making their judgment at the correct time.  The test which the Commissioners apply must be the same test and must use the same facts wherever they were asked to apply it.”

20.	It seems to us that, given the importance attached by both Ferris J and by that tribunal to the obligation put upon the taxpayer to notify (whether under paragraph 5 or paragraph 7), these comments in relation to paragraph 1(2) must be read as referring not to such information as the Commissioners have at the date of transfer, but to the information which they have at the date they receive any notification delivered to them within the 30 day period mentioned in paragraph 7.  To hold that a decision in relation to the applicability of paragraph 1(3) to a going concern transfer should be limited to information held by the Commissioners at the date of the transfer would in very many cases deprive paragraph 1(3) of any effective possibility of operation, and would not be in accord with the timetable provided by the statute.

21.	Thus we conclude (1) that our jurisdiction in relation to the interaction of paragraph 1(2) and paragraph 1(3) is a review jurisdiction only; (2) that the Commissioners should look at the position as at the date of the transfer; and (3) that they should have regard to information held by them at the date of any notification made under paragraph 7 within the time limits in that paragraph.

The Initial Registration

22.	With this guidance in mind we consider the initial registration of the Appellant.  The Appellant submitted (on VAT1) her notification on 1 November 2005: that was one day after the end of the 30 day period prescribed for notification by paragraph 7.  Thus as at the end of the 30 day period the Commissioners would have had no information on which they could be satisfied as in paragraph 1(3).  However, even if the information on that notification were taken into account it seems to us that the only conclusion which was open to the Commissioners at that time was that paragraph 1(3) was not satisfied and that accordingly Mrs Vaughan was liable to be registered.  At the end of the 30 day period the Commissioners would have had no grounds to conclude that paragraph 1(3) was satisfied.  Since it is only information which was available to them at the relevant time which is to be considered there appear to us to be no grounds upon which the Appellant’s initial registration can be impeached.

23.	That leaves Mr Whittaker’s second ground of appeal.  He says that the registration should have been cancelled at a later date.  We therefore now need to consider the statutory provisions enabling cancellation of registration.

24.	The principles to be drawn from Gray, it seems to us, also apply in relation to the following provision dealing with deregistration.  Paragraph 4(1) provides that:

“(1)	Subject to paragraph (2) below [which is irrelevant in the present circumstances], a person who has become liable to be registered … shall cease to be so liable at any time after being registered if the Commissioners are satisfied that the value of his taxable supplies in the period of one year in the period then beginning will not exceed [the Deregistration Threshold]”.

25.	In approaching those provisions which contain the phrase “if the Commissioners are satisfied”, it seems to us that we are bound in relation to paragraph 4 by the reasoning of Ferris J in relation to paragraph 1(1) and his conclusion (at paragraph 19 of his judgment) that the tribunal can interfere with the decision of the commissioners only if it is shown that the decision is one which no reasonable body of commissioners could reach.  In L H Fenning VTD 19297 the tribunal put it thus:-

“Our jurisdiction is strictly supervisory … in order to succeed in his appeal, [the taxpayer] has to satisfy us that the Respondents acted unreasonably in either registering him in the first place or failing to cancel his registration … it is not open to us to reach a completely fresh decision and direct what the deregistration date should be.”

26.	And in M J Clements (VTD 19216) the tribunal (at paragraph 24) expounded the concept of an unreasonable decision: “the tribunal can only properly allow an appeal on this point `if it were shown that the Commissioners had acted in a way which no reasonable panel of commissioners could have acted, if they had taken into account some irrelevant matter or have disregarded something to which they should have given weight’.”  To which we would add `or if they had erred in law.’

27.	Paragraph 9 provides that an unregistered person who satisfies the commissioners that he makes taxable supplies or is carrying on a business and intends to make such supplies shall be registered “if he so requests”.  The paragraph is entitled: “Entitlement to be Registered”.

Cancellation of Registration

28.	Paragraph 13 provides:-

“13-(1)	Subject to subparagraph (4) below, where a registered person satisfies the Commissioners that he is not liable to be registered under this Schedule, they shall, if he so requests, cancel his registration with effect from the day on which the request is made or from such later date as may be agreed between them and him.

(2)	Subject to subparagraph (5) below, where the Commissioners are satisfied that a registered person has ceased to be registrable, they may cancel his registration with effect from the day on which he so ceased or from such later date as may be agreed between them and him.

(3)	Where the Commissioners are satisfied that on the day on which a registered person was registered he was not registrable, they may cancel his registration with effect from that day.

(4)	The Commissioners shall not under subparagraph (1) above cancel a person’s registration with effect from any time unless they are satisfied that it is not a time when that person would be subject to a requirement to be registered under this Act.

(5)	The Commissioners shall not under subparagraph (2) above cancel a person’s registration with effect from any time unless they are satisfied that it is not a time when that person would be subject to a requirement, or entitled, to be registered under this Act.

(6)	…
(7)	…
(8)	…”

and paragraph 18 provides:-

“18.	In this Schedule “registrable” means liable or entitled to be registered under this Schedule.”

29.	We note first that paragraph 13(1) is mandatory:  where the Commissioners are so satisfied the registration “shall” be cancelled.  Second we note that the cancellation so required takes effect from the day `the request is made’ or a later date and not from an earlier date.  There is no provision in paragraph 13(1) for any retrospection.

We note, however, that paragraph 13(2) and 13(3) permit the Commissioners to cancel a registration with retrospective effect.

30.	In M P Dennett (VATD 18763) the tribunal said:

“7.	At first sight it may seem strange that the Commissioners do not have at least a discretion to allow a registration to be cancelled from an earlier date.  The legislation does provide for cancellation back to the date of registration where the person was not entitled [nor, we add, liable to registration] to be registered in the first place or back to the date when a person ceased to be entitled [nor, we add, liable to registration] if that is the case, but that is only what might be expected.  It seems likely that the reason for the restriction on back dating, where a person is entitled to be registered, is that third parties can be affected by trading with someone while they are registered and that any back dating could draw in those persons and require them to make adjustments to their affairs which would potentially cause difficulties.  An example might be that a person who wanted to trade with another had legitimately claimed input tax and may even have asked to see his registration certificate or had enquired of Customs and Excise about his status.  Such a person might well feel aggrieved if his trading partner then deregistered retrospectively and the input tax became recoverable.  Further difficulties might then arise if the deregistered trader then refused to reimburse his customer for the tax charged.”  [Our emphasis]

In this passage the tribunal appears to take the view that `entitlement’ to registration is secured where pursuant to paragraph 9 a person has satisfied the conditions in that paragraph and has made the relevant request.  In such circumstances the tribunal there indicates (in the case of paragraph 13(3) because the taxpayer remains registrable because he is entitled to be registered, and in the case of paragraph 13(5) because he remains entitled to be registered) that paragraphs 13(2) and 13(3) cannot be used by the Commissioners to effect deregistration.

31.	Because Mrs Vaughan submitted an application for registration and it was `reasonable’ (having regard to the information then in their possession) for the Commissioners to regard the requirement of paragraph 9 as satisfied she was to be treated as eligible for registration, with the result that her registration could not be cancelled under paragraph 13(2) or 13(3), and therefore could not be cancelled with retrospective effect.

32.	That leaves the question of the proper application of paragraph 13(1).  The Appellant’s letter of 20 February 2006 requested retrospective cancellation of the registration, but it was considered by the Respondents as a request for deregistration more generally.  We think that they were right so to treat it.  It seems to us that in the circumstances it should be regarded as a request for the purposes of paragraph 13(1).

33.	Paragraph 13(1) has effect where the taxpayer “satisfies the Commissioners” that he is not liable to be registered.  Mrs Vaughan would not be liable to be registered if she had ceased to be liable to be registered, and that would be when she satisfied the requirements of paragraph 4(1) namely that the Commissioners were satisfied in relation to a particular time that the value of her supplies for the following 12 months would be less than the deregistration threshold.

34.	This raises the questions addressed by Ferris J in Gray in relation to paragraph 1(3), namely: at what date should the Commissioners look at the position, and what evidence is to be taken into account by the Commissioners?  In relation to paragraph 1(3) Ferris J answered those questions in part by reference to the notification and timetable requirements of paragraph 5, and also in part by reference to the language of paragraph 1(3) which required that the Commissioners be satisfied that the taxable supplies threshold “will not be exceeded”. Whilst those words also appear in paragraph 4(1), the same timetable and notification requirements are not present.

35.	Nevertheless it seems to us that in the context of paragraph 13(1) where the decision as to deregistration is directed to the date of the request a similar answer is to be delivered:-

(i)	the Commissioners should consider the position as at the day of the request and look forward from that day; and
(ii)	they should do so by reference to the evidence available to them on this day.

36.	That means of course that information delivered after the relevant day could not affect their decision; but in our view the presenting of such information should in these circumstances be treated as a refresher of the request so that the date of the request and thus the date from which deregistration can be granted (and must be granted if the Commissioners are satisfied) is made again on each delivery – with the result that there may be more than one such day to be considered.

37.	Thus in our view we are required to consider the operation of paragraphs 13(1) and 4(1) on 20 February, 17 March, 2 May, 19 June and 11 July 2006 by reference to the information available to the Respondents on those dates.  And because when doing so our enquiry is as to whether the Commissioners were satisfied as mentioned in paragraph 4(1) the approach we must adopt is to ask whether the Commissioner’s decision in relation to any of those times was `reasonable’ in the sense set out above.  (We have used the dates on which letters were sent to the Respondents rather than the dates they were received from the Respondents.  The latter would be correct but we cannot identify them accurately: the dates of sending are thus used as proxies hereafter for the dates of receipt.)

38.	The Commissioners’ letter of 1 August 2006 simply indicates that the Commissioners have not been satisfied.  If they were not satisfied as at 1 August they cannot in the circumstances of this case we believe have been satisfied as at any earlier date.  We now ask by reference to each of the relevant dates whether that conclusion was reasonable.

39.	On 20 February 2006 the Respondents had Mr Whittaker’s assertions before them and no other evidence.  It was not in our view “unreasonable” for them not to be satisfied as at that time.

40.	On 17 March 2006 the Respondents had in addition Mr Whittaker’s figures for January, February and early March 2006.  They had conducted no verification exercise.  It does not seem “unreasonable” for them not to be satisfied as at that time.

41.	On 2 May Mr Owen visited the tea room.  He gathered information about the lack of till rolls and underlying documentation. It was not unreasonable for the Commissioners not to be satisfied as at the date.

42.	On 19 June Mr Owen examined the test records for May.  His computation suggested that 12 months’ turnover would be £60,626 – in excess of the deregistration threshold.  This computation however was flawed:  Mr Owen obtained his estimate by adding additional amounts to the recorded takings to represent the reduction in the month’s actual takings occasioned by the two bank holidays in that month.  He then multiplied the result by 12.  But this failed to take into account the fact that there are 8 bank holidays in a year and that the tea room would have been closed on those days.  Allowing for the effect of such days would have resulted in an estimate for the annual turnover of less than the deregistration threshold and in line with Mr Whittaker’s figures.  Thus information which should have supported the contention that turnover was below the registration threshold was treated as grounds for concluding it could be above the threshold.  That was a conclusion which it was not reasonable to reach on the information available.

43.	On 11 July 2006 the Appellants were also in possession of the June 2006 figures extracted by Mr Whittaker.  These, and the May figures, pointed towards an annual turnover of £51,038.  At this stage all the information in the Respondents’ hands pointed towards a turnover below the registration threshold.  But the Respondents’ letter of 1 August 2006 refers only to Mr Owens’ advice following his visit of 19 June.  It is clear that the June figures were not taken into account in relation to the position as at 11 July.  But they were clearly relevant to the deregistration question.  Thus to the extent that the Respondents’ decision relates to the position as at 11 July 2006 it is `unreasonable’ in the sense noted above for two reasons:-

(i)	first it does not take into account relevant information – the June figures; and
(ii)	it rests on an estimate for the figures for 12 months obtained in an unreasonable way from the May figures.

We also tend to the view that no consideration was given to the earlier October to April figures simply because they were unverified (and that it is likely that no consideration was given to Mrs Vaughan’s honesty).  But these were relevant factors and their reliability should have been treated as enhanced by the May exercise.  Putting them wholly to one side would have been unreasonable.

44.	It seems to us therefore that to the extent that the Respondents’ decision relates to the position as at 11 July 2006 it can be interfered with by this Tribunal.  That leaves the question of the effect of our determination.

45.	In our view, on the basis of the information available to the Commissioners on 11 July 2006 the only reasonable conclusion would have been that the turnover for the 12 month thereafter would have been less than the deregistration threshold.  It would be useless to remit the decision to the Commissioners to require them to revisit the question.  Therefore we decide that the Appellant should have been deregistered from 11 July 2006.

46.	Whilst we consider that on 19 June it would be reasonable to conclude that test in paragraph 4(1) was satisfied, we cannot say in relation to that date that it would have been unreasonable to conclude (even on the basis of a recalculated estimate of 12 months’ takings) that the turnover for the following 12 months could have exceeded the threshold.  Thus whilst we quash the decision as relevant to that date, we must remit the question as to whether the Appellant should have been deregistered from that date to the Commissioners for fresh consideration.

47.	Finally we note that the approach we are obliged to take by Ferris J’s view of the Tribunal’s jurisdiction has made this decision more complex than it ought to have been.  It would have been better, in our view, if the legislation had provided that the relevant `satisfaction’ could have been that of the Tribunal on an appeal (as it is for example in section 59(7)).  Such an approach would make for less administrative complexity.

48.	The appeal is allowed in part.  Our decision was unanimous.  We make no order for costs.

CHARLES HELLIER
CHAIRMAN

RELEASED: 25 January 2008

LON 2006/0932