20054

VAT — ASSESSMENTS  —  best judgment  —  no appearance by Appellant  —  assessment made to correct output tax declared having regard to sales invoices left out of account, discrepancies in gross takings and excessive input tax claims  —  assessment found to be in order  —  appeal dismissed with costs summarily assessed 

MANCHESTER TRIBUNAL CENTRE

 
 	
					MICHAEL CALVEY	Appellant

- and -

THE COMMISSIONERS FOR
				HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

Tribunal: Michael Johnson (Chairman)
   Kathleen Ramm FCA

Sitting in public in North Shields, Tyne and Wear on 23 January 2007

The Appellant did not attend and was not represented
 
Andrew Noble, counsel, instructed by the Acting Solicitor for HM Revenue and Customs for the Respondents 

© CROWN COPYRIGHT 2007

DECISION

1.	This appeal is against an assessment for £16,206, plus interest, made pursuant to s 73(1) of the Value Added Tax Act 1994 (“the Act”).  Under that sub-section, where it appears to the Respondents (“HMRC”) that VAT returns are incomplete or incorrect, they may assess the amount of VAT due from the taxpayer to the best of their judgment and notify it to him.  

2.	The assessing officer was Miss Jayne Holden of HMRC.  She issued the assessment under appeal on 18 April 2006.

3.	The Appellant is in the business of transporting freight.  His premises are in Fulwood, near Preston, Lancashire.  However the Notice of Appeal against the assessment was issued on his behalf by Mr T M Flannagan, an accountant practising in Hartlepool.  It thus comes about that the hearing of the appeal has taken place on Tyneside, and not at the Manchester Tribunal Centre.

4.	Neither the Appellant nor Mr Flannagan attended the hearing, nor did anyone else on the Appellant’s behalf.  No explanation for the non-attendance was provided to the tribunal.  Since it appeared to us that due notice of the hearing had been given, we decided to proceed with the hearing of the appeal, as we are empowered to do under rule 26(2) of the Value Added Tax Tribunals Rules 1986 (as amended).

5.	Andrew Noble of counsel represented HMRC.  He provided the tribunal with a folder of documents relevant to the appeal.  He called Miss Holden as his only witness.

6.	The grounds of appeal contained in the Notice of Appeal state as follows:

“We think that [the] assessment by HMRC has been made on the basis of ESTIMATES and not the actual figures.  The assessment made by HMRC is not in accordance with the data as per our client’s books and record[s]”.

Clearly, those grounds were formulated by Mr Flannagan.  

7.	We have not had sight of any correspondence from Mr Flannagan or become aware of anything else that might go to substantiate the allegations set out in the grounds of appeal.  There has been no response to letters sent by Miss Holden to the Appellant at Mr Flannagan’s address seeking clarification of the grounds of appeal.  Nor did Mr Flannagan respond to a letter dated 8 June 2006 sent to him by a reviewing officer of HMRC, in which she requested him to provide evidence supporting the allegations made by him.  We were informed that Mr Flannagan e-mailed Miss Holden with comments on her proposed assessment, but she informed the tribunal that those comments had been taken into account by her in the Appellant’s favour.

8.	Bearing in mind that the burden of proof in this appeal is upon the Appellant, this appeal cannot therefore succeed if the tribunal comes to the conclusion that the assessment is in order.  For that purpose we invited Mr Noble to call Miss Holden as a witness to explain to the tribunal how the assessment had been constructed.

9.	Miss Holden told the tribunal that the Appellant’s records were not in good order.  Firstly Miss Holden discovered a number of sales invoices in respect of the Appellant’s VAT accounting periods 03/05 and 06/05 which had not been included in the Appellant’s books and which she calculated gave rise to an underpayment of output tax of £2,047 in period 03/05 and £6,258 in period 06/05.  

10.	Secondly she noted that bank credits for money received in periods 12/04 and 03/05 were less than gross sales declared, whereas in respect of period 06/05, gross sales declared exceeded bank credits.  She adjusted the Appellant’s receipts accordingly, taking into account the underpayments noted in respect of periods 03/05 and 06/05.  She also took into account comments on the figures which had been e-mailed to her by Mr Flannagan as mentioned in paragraph 7 above.   

11.	Thirdly she listed a number of discrepancies in input tax claimed.  In some instances, documentation was lacking to support the claim for input tax.  In a number of others, the supplies appeared to her to have been made prior to registration for VAT.  One invoice had been duplicated for tax.  

12.	The cumulative effect of these adjustments resulted, as Miss Holden saw it, in an underpayment of VAT due to HMRC amounting to £16,206.  She issued the assessment under appeal in that amount.

13.	What the outcome of this hearing might have been had the Appellant challenged the computation of the assessment before us, we do not know.   It is however clear to us that Miss Holden acted properly and competently in constructing the assessment under appeal.  We have not been able to identify any respect in which her approach to verifying the Appellant’s VAT position and her resultant calculation might be flawed.

14.	Mr Noble, on behalf of HMRC, offered to remind us of the authorities bearing upon the making of assessments “to best judgment” within the meaning of s 73(1) of the Act.  We felt that there was no need for him to do that.  We are entirely satisfied that the assessment in this case is in order and that this appeal is not well founded.

15.	We indicated at the conclusion of the hearing that the appeal was dismissed.  This document records our reasons for the dismissal.  

16.	Mr Noble applied for costs.  He satisfied us that 7 hours had been properly spent by him engaged in preparing for and conducting this appeal.  His hourly rate was what we regarded as the reasonable one of £110.  As the appeal is without merit, we award costs against the Appellant and in favour of HMRC summarily assessed in the amount of £770 plus VAT.

MICHAEL JOHNSON
CHAIRMAN
Release Date:  20 February 2007
MAN/2006/0385