[2012 UKFTT 225 (TC)
TC01919
Appeal number: TC/2009/10366
VAT PENALTY - section 60 Value Added Tax 1994 penalty-
appellant’s dishonest repayment claim of £60,038 – no invoices or other
evidence to justify repayment – costs awarded against the appellant arising
from her failure to respond to correspondence from the respondents or to attend
the hearing.
FIRST-TIER TRIBUNAL
TAX
STELLA
WALKER Appellant
-
and -
THE
COMMISSIONERS FOR HER MAJESTY’S
REVENUE
AND CUSTOMS Respondents
TRIBUNAL:
DAVID S PORTER (TRIBUNAL JUDGE)
ANN
E CHRISTIAN (MEMBER)
Sitting in public at City
Exchange, Leeds on 6 March 2012
No one appearing for the
Appellant
Mr Josh Shields, of counsel,
instructed by the General Counsel and Solicitor to HM Revenue and Customs, for
the Respondents
© CROWN COPYRIGHT
2012
DECISION
1.
The Appellant, Miss Walker, appeals against a penalty of £60,038 raised
by the Respondents (HMRC) on 4 February 2008 arising from her purchase of a
supercar, an aeroplane and a piano acquired for the purposes of her business
“Dreams in Reality”. She had not been able to produce appropriate invoices to
justify the purchases but had asked for time to do so. HMRC say that Miss
Walker never acquired the supercar, aeroplane and piano and that her repayment
claim was dishonest.
2.
Josh Shields (Mr Shields) appeared on behalf of HMRC and produced a
bundle of HMRC’s evidence for the Tribunal. No one appeared for Miss Walker.
Preliminary matters
3.
Having heard Mr Shields, of counsel, for HMRC and no one appearing for Miss
Walker the Tribunal decided to hear the matter in the absence of Miss Walker. Miss
Walker had indicated an unwillingness to attend due to ill-health. She had
provided a statement of fitness for work from 31 January 2012 to 31 January
2013 which indicated that she was unable to work due to depression. HMRC wrote
to Miss Walker on 29 February 2012 indicating that the Tribunal, in a letter
dated 24 January 2012, had asked for a medical certificate confirming Miss
Walker’s medical condition. As only the statement of fitness had been provided
in response, the Tribunal required evidence of Miss Walker’s impaired state of
mind or other condition at the time of the repayment claim in April 2007. The
Tribunal were referred to a letter dated 19 March 2009 signed by Will Day, an
officer from HMRC, outlining in excess of 20 attempts that had been made by
HMRC to contact Miss Walker. On the one occasion, when she had responded, she
had not provided any meaningful answers.
4.
Judge Porter asked the Clerk to telephone Miss Walker using the
telephone number on the Notice of Appeal. The Clerk had attempted to phone Miss
Walker, but she advised that there was no response. In the light of the above, the
Tribunal decided to hear the case under Rule 33 of The Tribunal Procedure
(First-tier Tribunal) (Tax Chamber) Rules 2009 (the Rules) being satisfied
that Miss Walker was aware of the hearing coming on today and that reasonable
steps had been taken to ensure that she attended.
5. At
the request of HMRC the Tribunal also decided, in the light of the correspondence,
Miss Walker had capacity to deal with her VAT affairs as she, or those looking
after her, had had sufficient warning to be able to provide the appropriate
information as to her capacity, if they had so wished.
The facts
6. In
a letter dated 18 January 2007, responding to a request from HMRC to her
further application to register the business Miss Walker stated:-
“For the last thirty two years
I have been employed by numerous companies in the catering industry, the hotel
trade and latterly retail sales in a managerial capacity. In recent years I
have been heavily involved in organising wedding fayres and wedding clothes
hire…As a consequence of my employment I saw an opportunity in the market place
to offer people their dream of a lifetime on their one and only special day and
came up with the idea of Dreams in Reality, … I formed the idea of Dreams in
Reality back in September 2005 and have been working in my own time since then,
obtaining information and data on all the relevant services and companies I
need to utilise and assist me…..I have made numerous purchases over the last
fourteen months which include an exotic super car, a luxury six seater touring
aircraft and a grand piano. Shortly I will add another super car, I believe a
Ferrari 360 Spyder would be best for my needs as I have numerous requests for
the use of one and this will be more in line with the business model in the
future….I made my first taxable supply on 14 January 2007, value added tax was
not charged as I am not registered for Value Added tax. .. “ She considered
that her turnover for the first year would hopefully be around £150,000
7. In
her notice of appeal dated 2 April 2009, however, and in a letter dated 7 May
2009 to Mr Day, the Local Compliance officer in Sheffield, Miss Walker
indicated that having married in 2000 she had suffered an abusive relationship
with her husband such that she had moved out of the matrimonial home to a small
property in Ashby, near Scunthorpe. Her husband had traced her to that address
and the police had been unable to assist her as there was no evidence of verbal
abuse or physical damage. It appears that she lost her job at a department store
in Scunthorpe in October 2006, in circumstances in which she did not obtain a
good reference. We infer from that that the abuse had affected her ability to
work properly.
8. As
she had had difficulty obtaining employment, she decided to set up her own
business “Dreams in Reality”. She had sought advice from Mr Peter Baker, an
accountant, who had helped her to register for VAT on line. Mr Baker had all the
paper work but unfortunately died shortly after her first VAT return and she
had been unable to retrieve her paper work. She subsequently instructed Turner
Warren, accountants, in Scunthorpe but they had done nothing nor responded to
HMRC’s letters. From the information in the bundle, the business provided a
“Luxury Spa day package” at the cost of £375. The business also appears to have
provided transport in chauffeur driven supercars and flights in her aircraft or
helicopter. The business was registered for VAT on 1 September 2005.
9. On
28 May 2007 Miss Walker submitted her first and only VAT Return for the period
04/07 in which she sought a repayment of £60,038. No information as to the super
car, aeroplane and piano has been produced in the form of invoices or otherwise
to HMRC. Nor have any year end accounts been provided. As a result HMRC refused
the reclaim on 14 December 2007 and amended the return to zero. On 4 February
2008 HMRC issued a dishonesty penalty, under section 60 (2) (D) in the sum of
£60,038 equal to the amount of VAT evaded, on the basis that Miss Walker had
dishonestly sought to reclaim VAT to which she was not entitled.
The decision
10. Miss Walker has
produced no evidence to justify the repayment. In fact the letter of 18
January 2007 appears to bear no relation to her subsequent account relating to
the setting up of her business. We observe that a VAT repayment of £60,038 represents
purchases of £343,074 (£60,038 * 100/ 17.5). It appears from the letter of the
18 January 2007 that Miss Walker was fully aware of what she was trying to
achieve, although she does not seem to have appreciated that she was already
registered for VAT. The subsequent references to the way she set up the
business bear no relationship to her earlier letter. She reveals a depressive state
of health; that she had been working in a department store; and no evidence has
been produced to show how she had raised the money to purchase the car, aeroplane
and piano. She has indicated that she had only been trading for 14 months and
it is not credible that she could have raised sufficient money, not only to
purchase the car, aeroplane and piano but also to run them and make a
reasonable living for herself. As she appears only to have purchased the super
car, aeroplane and piano, at some considerable cost, we would have thought that
she would have little difficulty in obtaining copies of the invoices. They are,
after all, not items regularly purchased by small business. We have therefore concluded
that the purchases never occurred and that the repayment claim was dishonest
and that the penalty must stand.
11. HMRC asked that
costs be awarded against Miss Walker under Rule 10 (1) (b) of the Rules on the
basis that Miss Walker had acted unreasonably in bringing, and defending the
proceedings. We note that the appeal had been commenced under the old Rules
(The Value Added Tax Tribunal Rules 1986) in circumstances in which Miss Walker
would have expected that no costs would be awarded against her, if she lost the
appeal, as she has. The Rules came into effect in 2009 and this case has been
heard today in 2012. In normal circumstances there would be no opportunity to
award costs under the new rules unless the case was a complex case, which it is
not. We refer to the decision of His Honour Mr Justice Warren in the Upper
Tribunal decision of The Commissioners for her Majesty’s Revenue and Customs
v Atlantic Electronics Limited FTC/29/2011 in relation to the matters to be
considered when deciding the appropriate costs regime. We have decided,
however, that we can award costs against Miss Walker under Rule 10 of the Rules
because of the consistent failure by Miss Walker to answer appropriate requests
from HMRC and her decision not to attend the hearing today.
12. We direct that
the Respondents submit their application for costs, if they intend to do so, to
the Tribunal and to the Appellant within 28 days from the release of the
decision. The Appellant shall reply within 48 days of the release of the
decision, with the Respondents right to reply within 70 days of the release of
the decision. The tribunal will decide the costs on the basis of written
representations.
13. This document
contains full findings of fact and reasons for the decision. Any party
dissatisfied with this decision has a right to apply for permission to appeal
against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal)
(Tax Chamber) Rules 2009. The application must be received by this Tribunal
not later than 56 days after this decision is sent to that party. The parties
are referred to “Guidance to accompany a Decision from the First-tier Tribunal
(Tax Chamber)” which accompanies and forms part of this decision notice.
TRIBUNAL JUDGE
RELEASE DATE: 27 March 2012
© CROWN COPYRIGHT
2012
