Commissioners of Customs and Excise v Peachtree Enterprises Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 30 June 1992 |
| Date | 30 June 1992 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
The following case was referred to in the decision:
Mr Wishmore Ltd v C & E Commrs VAT(1988) 3 BVC 311
Requirement to give security - Protection of the revenue - Discretion of the commissioners - Powers of the tribunal on appeal - Value Added Tax Act 1983 schedule 7 subsec-or-para 5Value Added Tax Act 1983, Sch. 7, para. 5(2).
The issue was whether, in requiring the appellant to give security for the protection of the revenue, the commissioners acted reasonably or whether the decision had been arrived at by taking into account matters which were not relevant or ignoring matters which were relevant, and whether the up-to-date position at the time of the hearing of the appeal had altered so that the tribunal could make a different decision from that of the commissioners.
The appellant carried on business as a restaurateur from premises in Newcastle, Staffordshire. One of the two directors was Mrs R. The grounds upon which the commissioners decided to require the appellant to give security were that Mrs R had been a director of other companies, which had been registered for tax and which had subsequently become deregistered or insolvent owing substantial sums of tax, and that the appellant had a poor record of compliance with its obligations to make tax returns and payments. On 30 April 1991 the commissioners notified the appellant of the requirement to give such security in the sum of £10,500, which was subsequently reduced to £7,350.
Realising that the appellant was a new company trading as Pinocchios they also noted that Mrs R had been involved in two previous companies, Acorn Hotels Ltd ("Acorn") and Casa Pinocchio Ltd ("Casa"). Acorn was a hotel of which the directors were Mrs R and her father. It became insolvent owing substantial tax to the commissioners. Casa was a restaurant of which the directors were also Mrs R and her father and it too became insolvent owing the commissioners tax. The appellant was financed out of the sales of the assets of Casa and the name of the restaurant was retained. It was noted by the commissioners that the record of compliance of the companies was very poor.
The commissioners formed the opinion that the revenue had to be protected and imposed the requirement. In response, the appellant wrote through their advisers on 2 May 1991 explaining that Mrs R had no active part in the running of the previous companies, in the case of Acorn not even being aware that she was a director, and that her father was the moving force. The commissioners replied to that letter by maintaining the notice of requirement, albeit in the reduced amount, being at that point, and without further information, sceptical of the points raised by the appellant.
The position at the time of the hearing of the appeal was very different. Mrs R, in evidence, which was accepted by the tribunal, stated that she and her father were at odds over the running of the other two companies and indeed had fallen out over it. It became clear that, having broken away from the uneasy relationship she had with her father, she was able to improve the financial and fiscal standing of the appellant's business.
Held, allowing the company's appeal:
1. The commissioners had acted reasonably in imposing the requirement for security at the time when they issued the notice. It would have been unrealistic and unreasonable to require the commissioners to conduct a full fact-finding investigation before they decided to take action to protect the revenue.
2. In the light of the evidence given to the tribunal it became clear that the risk to the revenue had very largely disappeared since Mrs R had taken over the full running of the restaurant. There was every indication that the returns would continue to be submitted and the tax paid on time. There was no need for the revenue to be protected in the manner envisaged.
The jurisdiction of the tribunal in cases such as this where the commissioners are exercising discretionary powers has been clearly established in previous cases. It is, for instance, clear that the tribunal cannot substitute its own discretion for that of the commissioners for the tribunal has no discretion in these matters. If it is alleged that the commissioners have reached a wrong decision then there can be a question of law but only of a limited character. The question would be whether their decision was unreasonable in the sense that no reasonable panel of commissioners properly directing themselves could reasonably reach that decision. To enable the tribunal to interfere...
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