Dyer v C & E Commissioners
| Jurisdiction | Scotland |
| Judgment Date | 28 January 2005 |
| Date | 28 January 2005 |
| Court | Court of Session (Inner House) |
Court of Session (Inner House, Extra Division).
Lord Osborne, Lord Johnston and Sir David Edward QC.
DJT Logan (instructed by Campbell Smith WS) for the taxpayer.
ARW Young (instructed by Shepherd & Wedderburn) for the Crown.
The following cases were referred to in the judgment:
Gray (trading as William Gray & Son) v C & E CommrsTAX [2000] BTC 5,373
Henderson (t/a Tony's Fish and Chip Shop) v C & E CommrsTAX [2001] BTC 5,369
Value added tax - Registration - Liability - De-registration - Whether taxpayer continuing to trade - Whether purported re-registration competent - Value Added Tax Act 1994 section schedule 1 subsec-or-para 5Value Added Tax Act 1994, Sch. 1, para. 5(1), 5(3).
This was an appeal by the taxpayer from a decision of Customs to reinstate his VAT registration on the basis that he had continued to trade following his request for de-registration.
The taxpayer was registered for VAT from 16 March 1993 on his own application because he wished to be, but was not required to be registered from that date. Following an inspection of the taxpayer's accounts, Customs raised a query about possible irregularities in the VAT treatment of some payments received in the course of his business. The taxpayer denied that there were any irregularities and, in 1996, informed Customs that he had ceased trading and requested a form for de-registration. Customs subsequently notified him that his VAT registration would be cancelled from 1 September 1996. Following a period of protracted correspondence, which failed to resolve the dispute between the parties regarding the irregularities, Customs imposed penalties under VATA 1994, s. 69 and the taxpayer's appeal against those penalties was dismissed by the VAT and Duties Tribunal in 1999.
Thereafter, Customs attempted to contact the taxpayer without success to arrange to examine his business records and eventually wrote to him stating that they had reason to believe that he was continuing to trade but the taxpayer denied that. They subsequently indicated that his request for de-registration had been withdrawn. The taxpayer denied that that was the case but pointed out that he had not received confirmation of his de-registration. When the taxpayer appealed against his re-registration, Customs accepted that his registration should not have been reinstated but maintained that the taxpayer had continued to trade after 30 August 1996 so that he was liable to be registered from some time after that date. He was accordingly registered from 1 October 1996.
The taxpayer appealed, contending that the purported re-registration was incompetent since, having regard to VATA 1994, Sch. 1, para. 1 and 5, a new registration could not take effect until 1 November 1996. Customs argued that an error in the commencement date of the fresh registration did not mean that it was fatally flawed and the court should order registration to take effect from 1 November 1996.
Held, allowing the appeal:
1.Against a background of unsatisfactory facts, the only appropriate course was to proceed upon the basis of the contemporaneous statement that the taxpayer was registered under the original registration until the end of August 1996. Accordingly, he was a person who had been the maker of taxable supplies and had been registered under VATA 1994 until that time. It followed that Sch. 1, para, 1(1) could not begin to apply to the taxpayer so as to create a prima facie liability for registration until, at the earliest, the start of September 1996.
2.Under Sch. 1, para. 5(2), Customs had a duty to register a person who became liable to be registered by virtue of para. 1(1)(a) with effect from the end of the month following the relevant month unless some earlier date was agreed. In this case there had been no agreement between the parties and a fresh registration could not take effect earlier than from 1 November 1996. Accordingly, Customs' attempt to effect a fresh registration of the taxpayer with effect from 1 October 1996 was incompetent and involved an error of law. The provisions of Sch. 1, para. 5 indicated that the system of VAT registration involved a precise chronology that had to be strictly adhered to. Therefore, a fresh registration which involved an error of law could not be treated as valid.
3.The appeal had been brought under s. 11 of the Tribunals and Inquiries Act 1992 which entitled the court to hold that an error of law had occurred in the tribunal's determination but it was not open to the court to require Customs to proceed with a particular registration in a way different from that in which they had chosen to proceed. Accordingly, the appeal would be allowed and both the tribunal's decision and the re-registration quashed.
[1] The appellant was registered for the purpose of value added tax (VAT) with effect from 16 March 1993, on his own application and upon the basis that he wished to be, but was not required to be, registered from that date. At that time his main business activity was that of racehorse trainer. His VAT registration number was 607 6702 42. Subsequently, at some unspecified date, the appellant also commenced business as an insolvency practitioner at various addresses in and around Dundee, including premises at 10 Douglas Street, Dundee. However, by letter, dated 30 August 1996, the appellant intimated to the respondents that he had ceased trading and requested a form for de-registration for VAT purposes, as appears from production 1/3.1. By letter, also dated 30 August 1996, production 1/10, the respondents wrote to the appellant in inter alia the following terms:
Your VAT Registration is cancelled with effect from 1 September 1996. In order to finalise your VAT affairs you now need to send in a final VAT Return.
Prior to these events, on or about 21 May 1996, the appellant had been visited by one of the respondents' officers for a routine check on his VAT returns. Following an inspection of the appellant's accounts, the officer raised a query concerning his VAT treatment of certain interim payments received in relation to insolvency work. The appellant contested the view that there were any irregularities in such matters and, after his de-registration described above, maintained that the Value Added Tax Act 1994 ("the 1994 Act"), Schedule 11, paragraph 7 did not apply to him, as an unregistered person.
[2] By letter, dated 22 October 1996, production 1/3.2, the respondents wrote to the appellant requesting him to arrange an appointment
… to undertake the following:
(i) to clarify the outstanding points raised by Mrs. Grieve on the occasion of her visit to your premises at Wallace Craigie House on 21 May 1996, namely the VAT treatment of interim payments for insolvency work made by the SCA;
(ii) to address the matter of the outstanding VAT return for the period 1 June 1996 to 31 August 1996 and the VAT debt for this registration which stands at £7,488.00 at 21 October 1996; and
(iii) to ensure that de-registration of this VAT registration has been correctly effected at 1 September 1996 and all outstanding matters have been dealt with.
The appellant declined to arrange an appointment as requested and also did not provide documents requested by the respondents. Following a period of protracted correspondence between the parties, the respondents imposed penalties upon the appellant under section 69 of the 1994 Act. The appellant appealed against these penalties, but his appeals were dismissed by the VAT and Duties Tribunal (referred to herein as "the Tribunal") on 17 November 1999.
[3] By letter dated 8 December 1999, production 1/3.3, the respondents wrote to the appellant repeating their request for him to arrange an appointment to enable one of their officers to examine his business records and to resolve the matters raised in the letter of 22 October 1996. The respondents also made numerous attempts by telephone and fax to contact the appellant, but these were all unsuccessful.
[4] On 14 February 2000, the respondents wrote to the appellant informing him that they had reason to believe that he was continuing to trade. That letter is production 1/3.4. In that letter, the respondents wrote:
However, on 23 September 1997, you forwarded a letter to our Greenock office dated 16 May 1997 issued by the Caledonian Blind Company and naming you as their finance adviser at that date. I understand too, that in the course of a recent VAT inspection of another business by my colleague, Mr. Wood, you advised him that you continue to act as a financial adviser. As you have denied me access to the records of the business and declined my requests for a meeting, I am forced to act on the information available to me. Consequently, I will take steps to reinstate the VAT registration of Thomas Dyer as the above indicates that trading did not cease as you advised in your letter dated 30 August 1996 referred to above. You will shortly receive correspondence in this respect …
[5] The appellant replied by letter dated 21 February 2000, production 1/3.5, in which he stated inter alia:
You state that there is evidence that I am trading, but have not once produced evidence of any economical (sic) activity.
You will be receiving a statement from Mr Tosh of Caledonian Blind Company, who will confirm that as the company had no assets, it was looking for a creditor to put the company into liquidation and that I did send out six or seven letters for him to help him out of his predicament. No fee was paid …
I am employed by Paratus (No. 403) Ltd as a financial adviser for the renovation of the Egyptian Halls in Union Street, Glasgow, but if I am not mistaken the employment of an advisor is outwith the scope of the VAT legislation. I trust this information will clarify my position.
A letter, dated 22 February 2000, production 1/3.6 was then sent to the respondents by Mr Tosh...
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