Capital SMA Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 05 July 2017 |
| Neutral Citation | [2017] UKFTT 542 (TC) |
| Date | 05 July 2017 |
| Court | First-tier Tribunal (Tax Chamber) |
Judge Richard Chapman
There was no attendance by or on behalf of the appellant
Mr Gareth Hilton, Presenting Officer, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents
Value added tax – Disallowing credit for input tax – VATA 1994, s. 26A – Whether or not consideration paid within six months of the later of the supply or date for payment – No – Penalty – FA 2007, Sch. 24 – Whether the penalty was properly imposed – Yes – Appeal dismissed.
[1] This appeal relates to whether or not Capital SMA Ltd (“Capital”) paid the consideration for certain purchases of flooring products in respect of which it claims credit for input tax. By a decision dated 10 May 2016, HMRC found that consideration had not been paid in respect of purchases in the sum of £73,533.05 (“the Disallowed Purchases”), made an assessment in the sum of £11,770 and a penalty assessment (which it then suspended) in the sum of £1,765.50. Capital's appeal is against the assessment and the penalty. However, by virtue of partially successful ADR, Capital has agreed that £6,574.67 of input tax is not deductible as £39,448.05 remains unpaid. The appeal is therefore now against the remaining purchases in the sum of £34,085 (“the Disputed Purchases”) and associated input tax in the sum of £5,194.33.
[2] There was no attendance at the hearing for or on behalf of Capital. By emails dated 13 April 2017, Mr Shoket Ali, a director of Capital, applied to the Tribunal to postpone the hearing, primarily upon the basis that Capital's representative was unavailable. HMRC objected. The application to postpone was referred to Judge Mosedale, who gave a decision in a letter from the Tribunal also dated 13 April 2017 refusing to postpone the hearing. The letter included the following:
Judge Mosedale has said that it is in the interests of justice for parties to have the opportunity, in so far as consistent with justice, to be professionally represented in hearings. However, the choice of representative is the party's, and parties ought to ensure that they appoint persons who are able to represent them. It is not consistent with justice to all parties for the Tribunal to delay hearings for long and unexplained absences by a party's appointed representative.
It now appears that the representative, originally said to be absent for 6 weeks (10 April to 26 May 2017) will be out of the country only for about 2.5 weeks (18 April to 7 May). That absence remains unexplained. Moreover, it is clear that the adviser will be in the UK on 8 May 2017, which is the day of the hearing. He is flying into Manchester the day before at 3pm and the hearing is in Leeds. It is therefore not at all obvious why he could not be present at the hearing. And he could prepare for the hearing in advance. The appellant in any event has the option of appointing a different adviser. So the judge is not satisfied that the appellant's appointed representative could not in practice represent him and in any event it was the appellant's choice to appoint someone who might not be available for an extended period during the hearing window.
Taking into account (a) the earlier delays in this case, (b) the unfairness to HMRC who have prepared for a hearing on 8/5/17 and (c) that the appellant, as explained above, has not justified his application for postponement, it is not appropriate for the hearing to be postponed and the application is refused.
[3] By an email dated 19 April 2017, Mr Ali stated, inter alia, that, “As I have no representation at the meeting, and the meeting is not to be rescheduled, on this basis I will not be attending.”
[4] HMRC invited me to proceed with the hearing in the absence of Capital pursuant to rule 33 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 and I decided to do so. It is clear from Mr Ali's correspondence with the Tribunal that he had been notified of the hearing. It was in the interests of justice for the hearing to proceed. I agree with and adopt Judge Mosedale's reasoning for the purposes of HMRC's application to proceed. I also note that Capital did not appeal Judge Mosedales' decision and did not seek to renew any application to postpone.
[5] It is convenient to set out my findings of fact at the outset.
[6] The hearing bundle included a witness statement from the decision making officer, Miss Natalie Felton, which was tendered as evidence in chief. There was no witness evidence on behalf of Capital. I make the following findings of fact upon the basis of Officer Felton's witness statement and the documents relied upon by the parties and contained in the hearing bundle. In doing so, I bear in mind that the burden of proof in respect of the assessment is upon Capital whereas the burden of proof in respect of the penalty is upon HMRC. In both respects, the standard of proof is that of the balance of probabilities.
[7] Capital has been VAT registered since 13 May 2014, carrying on business in CCTV installation. In the period 1 February 2015 to 30 April 2015 (“04/15”), Capital apparently made purchases of flooring and was sent invoices in respect of the same (“the Flooring Purchases”). Capital filed its VAT return for 04/15 seeking a repayment, primarily as a result of the Flooring Purchases.
[8] I note at this point that the VAT return is not included in the hearing bundle and that there are small discrepancies in various recitals of the figures which are said to have been included on it. HMRC's Statement of Case and Officer Felton's witness statement state that Capital sought a net repayment of £3,761.12 based upon input tax claimed of £17,435.78. However, after the return had been submitted, Capital provided to HMRC (at Officer Felton's request) a schedule setting out the sales and purchases for the 04/15 quarter which provides for a net repayment of £3,781.77 based upon input tax claimed of £17,456.43. On the balance of probabilities, I find that HMRC's figures are correct. This is because Capital has not disputed the figures put forward by HMRC, the schedule was not attached to the return and there are entries in the schedule which are demonstrably wrong in that they do not match the invoices in the hearing bundle (for instance, the invoice dated 9 April 2015).
[9] On 17 August 2015, Officer Felton requested the purchase invoices that were referred to in the schedule. Capital duly provided these. On 30 August 2015, Officer Felton requested bank statements and further invoices. Again, these were duly provided. On 14 September 2015, Officer Felton asked for evidence of the payment of the Flooring Purchases in the sum of £87,742.82.
[10] In response, Capital referred to the bank statements, which showed direct payments to suppliers of £14,624.57. £500 had already been allowed and Officer Felton allowed input tax of a further £2,354.12.
[11] On 19 October 2015, Miss Felton wrote to Capital to the effect that she intended to disallow input tax in the sum of £11,770 on purported purchases of £73,533.05 for which she had not seen any evidence of payment (“the Disallowed Purchases”). Mr Ali disputed this on behalf of Capital on 16 November 2015 but Officer Felton nevertheless made a decision on 14 December 2015 to disallow input tax in the sum of £11,770. Capital wrote to Officer Felton on 17 December 2015 taking issue with this and arguing that the Disputed Purchases are evidenced by cash payments from withdrawals shown in the bank statements.
[12] Officer Felton states that the bank statements show cash withdrawals of £34,085 and that these do not correlate with the unallocated purchase invoices in amounts or timing. I have considered the bank statements and accept Officer Felton's evidence in this regard.
[13] On 15 December 2015, Officer Felton sent a notice of assessment to Capital in the sum of £11,770. Capital challenged this in an email dated 31 January 2016. By a letter dated 1 February 2016, Miss Felton refused to change her decision. On 19 February 2016, a penalty assessment was issued in the sum of £1,765.50. On 10 February 2016, Capital requested a review.
[14] On 29 March 2016, the review officer, Mrs Heather Gibbs, upheld the decision to assess and to impose a penalty but decided that they should have been issued in respect of the period 10/15 rather than 04/15.
[15] Pursuant to the review decision, a new assessment was notified by a letter dated 5 April 2016 in the sum of £11,770. A notice attached to this letter confusingly refers to a very slightly lower figure of £11,769, but it appears that the parties have approached this appeal upon the basis that the assessment was for £11,770. A new penalty assessment was also issued on 8 June 2016 on the same basis as the original penalty assessment and again in the sum of £1,765.50. I have not been provided with the suspension conditions or the basis for imposing them. However, the Statement of Case states that on 8 June 2016 HMRC received a signed declaration from Capital dated 1 June 2016 to the effect that it accepted the penalty suspension conditions (and as there is no contradiction with any documents or dispute taken by Capital, I find that this is correct as a matter of fact).
[16] Capital's Notice of Appeal is dated 20 April 2016. The grounds for appeal state as follows:
HMRC's decision is fundamentally flawed.
On one hand they state they are allowing the claim for input tax and then on the other hand they dispute the invoices, claiming that the transaction/invoices are not genuine.
This is simply incorrect, they cannot pick and choose in the sense they consider part of the invoice to be genuine and part of it not. It's either one or the other.
My evidence supplied to HMRC has not been considered fully. I have paid the client through various bank transactions and cash withdrawal transactions, evidence to this effect...
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