20961

VALUE ADDED TAX – Appeal with respect to Notice of Requirement for security for tax – Employee of appellant company previously sole proprietor of failed business – Whether reasonable for Commissioners to take account of fact that that employee convicted of making taxable supplies without providing required security – Commissioners’ decision reasonable – Appeal dismissed

LONDON TRIBUNAL CENTRE

	ELIZABETH RODGERS RESOURCING LTD	           Appellant

-	and –

	THE COMMISSIONERS FOR HER MAJESTY’S REVENUE & CUSTOMS 	 Respondents

				Tribunal:	MISS J C GORT (Chairman)
						MR R L JENNINGS FCA FTII

Sitting in public in London on 16 January 2009

Mr N Rodgers director, for the Appellant

Mrs G Orimoloye, advocate, of the Solicitors Office, for the Respondents

© CROWN COPYRIGHT 2009

DECISION

1.	This is an appeal against a decision of the Respondents contained in a letter dated 20 February 2008 to issue a Notice of Requirement to give security under Schedule 11 paragraph 4(2)(a) of the Value Added Tax Act 1994.

2.	The Notice of Requirement required the Appellant as a condition of supplying goods or services under a taxable supply to give security to the Respondents in the sum of £28,600 or £19,000 if monthly returns were rendered.

3.	The background to the Requirement is that the Appellant, which was incorporated under the Companies Act 1985 on 14 December 2007, was registered for value added tax as from 1 February 2008.  The directors of the company at that time and at the time of the issuing of the Notice of Requirement, were Mr Nick Rodgers and Miss Reannah Garcia.  The company secretary was a Miss Joanna Wapienik.  Mrs Elizabeth Rodgers was named as an employee of the company.

4.	Between 1 February 2002 and 9 January 2008 Elizabeth Rodgers, trading as Elizabeth Rodgers Associates, was registered for VAT as sole proprietor.  The business operated from the same principal place of business as the Appellant, namely: 5 London Wall Buildings, Finsbury Circus, London EC2.  

5.	A Notice of Requirement had been served on Elizabeth Rodgers Associates on 7 March 2007 as the business had VAT debts of £19,922.81.  The security remained unpaid and Elizabeth Rodgers was prosecuted at the City of London Magistrates Court for making taxable supplies without providing the required security.  Elizabeth Rodgers failed to make an appearance at two court hearings and in her absence she was found guilty.  She was subsequently declared bankrupt on 23 November 2007 and at the time the Notice of Requirement was served on the present Appellant Elizabeth Rodgers Associates had an outstanding VAT liability of £86,431.52.  

6.	The quantum of the security required in the present case was calculated using the last full four quarterly returns rendered by Elizabeth Rodgers Associates, it being considered by the Respondents to be an associated business.  

7.	The Tribunal heard evidence from Paul Johnstone, higher officer with the Commissioners, who had issued the Notice in the present appeal.  He gave evidence that in the opinion of the Commissioners the Appellant company represented a risk to the revenue and a risk of tax being unpaid because of its links with Elizabeth Rodgers, the proprietor of Elizabeth Rodgers Associates.  It was Mr Johnstone’s opinion that the Appellant is a successor of the failed business run by Elizabeth Rodgers, sharing a similar business name as well as undertaking more or less a similar business activity, namely that of a recruitment agency.  The fact that Elizabeth Rodgers herself was employed as the Appellant’s business manager also gave cause for concern. 

8.	The Appellant’s estimated annual turnover declared on its VAT 1 is £400,000, the turnover of the associated business in its final year of trading was just about £500,000 per annum.  The amount of security required was considered to be in proportion to the revenue. 

9.	The VAT returns submitted by the Appellant up until the time of hearing the appeal were very small repayment returns, and no returns had been submitted since July 2008.  An assessment had been raised for the period 10/08.  In July 2008 a company called Nicholas Rodgers Associates Ltd had been registered with Companies House, but had not registered for value added tax.  Mr Rodgers made a statement to the Tribunal in which he said that he was the son of Elizabeth Rodgers.  We were informed that Elizabeth Rodgers had been unwell and that she had informed HMRC that she would be unable to attend the hearing of the case against her and had in fact for a long time been unaware of the verdict.  She had not been on the payroll of the Appellant company since March 2008, and her bankruptcy was now discharged.  

10.	Mr Rodgers seemed to think that because the turnover of the Appellant was currently, and for some time had been, lower than the VAT threshold, that he therefore did not have to render VAT returns.  This is a matter which is irrelevant to the decision of this Tribunal but we mention it as we consider it important that Mr Rodgers and those involved with him in the running of this and any other associated company should be aware of the company’s liabilities.  Since the Requirement for Security was issued in respect of the Appellant, Nicholas Rodgers Associates Ltd had been formed (as stated above) trading from the same London address, and with its directors being Nicholas Rodgers and his father Vincent Rodgers.  At the time of the hearing both that company and the Appellant were trading from Vincent Rodgers’ home address, and not from the London address. 

11.	Mr Johnstone accepted that, because of the low level of turnover of the Appellant company, he would not be pursuing the security.  

12.	The Tribunal in security appeals has a supervisory and not an appellate function.  This means that it is only if the Commissioners have been found to have acted in a way which no reasonable body of commissioners would act in issuing the Requirement for Security, both as to the requirement itself and as to the quantum, that we may allow an appeal.  In the present circumstances we do not consider that at the time the Notice was issued the Commissioners did act unreasonably.  There was ample cause for concern in the then existing circumstances.  It was not unreasonable to assess the amount of the quantum on the basis of the figures of Elizabeth Rodgers Associates, given the various connections between the Appellant company and Elizabeth Rodgers Associates.  

13.	In view of the low level of trading of the company, the Commissioners gave an undertaking to the Tribunal that they would not seek to enforce any payment of security and in those circumstances and for the above reasons this appeal is dismissed.

MISS J C GORT
CHAIRMAN

RELEASED: 20 February 2009

LON 2008/1286