Forge Alliance (A Partnership)
| Jurisdiction | UK Non-devolved |
| Judgment Date | 16 October 2014 |
| Neutral Citation | [2014] UKFTT 966 (TC) |
| Date | 16 October 2014 |
| Court | First-tier Tribunal (Tax Chamber) |
[2014] UKFTT 966 (TC)
Judge Jonathan Cannan
Mr David Haslett, representative appeared for the Appellant
Ms Sharon Spence of HM Revenue & Customs appeared for the Respondents
VAT - Application for an extension of time to bring an appeal - Nature of decisions under appeal - Whether assessments - Time limit for appealing - Balancing exercise - Application refused - Appeal struck out
[1]The Appellant is a partnership which was in business in Northern Ireland buying and selling soft drinks on a wholesale basis. The partners were Mr Ghulam Mustafa Lateef and Mr Siddique Zafar Imam.
[2]On 12 August 2004, following an enquiry into the Appellant's VAT returns, HM Customs & Excise as it then was sent three decision letters to the Appellant in respect of VAT accounting periods 09/03, 12/03 and 03/04 ("the Decision Letters"). The Decision Letters referred to the returns and stated as follows:
As you have been notified, the Commissioners consider that the amounts shown should properly be amended as follows: …
[3]The letters then set out various amendments to boxes on the Appellant's returns for the relevant periods. Those amendments were made principally to reflect increases to the output tax shown as due by the Appellant. In particular the Respondents considered that there was insufficient evidence that certain sales which had been zero rated had been dispatched from the UK.
[4]I shall set out below the dealings between the Appellant and its advisers on the one hand and HMRC as I shall refer to them for convenience on the other hand. Those dealings cover the period from 12 August 2004 when the Decision Letters were issued to 17 January 2014 when a notice of appeal was lodged with the tribunal.
[5]In its notice of appeal the Appellant identified the latest time for appealing the decisions as 11 September 2004, that is 30 days after the Decision Letters and gave reasons as to why the appeal was late. The Respondents opposed any extension of time to make the appeal and applied to strike out the appeal on the basis that it was out of time.
[6]The application to make a late appeal was listed to be heard on 6 May 2014. At the outset of his submissions Mr Haslett on behalf of the Appellant made a submission that the decisions were not in fact assessments and there was no time limit to appeal against the decisions.
[7]For the purposes of this application it is therefore necessary for me to deal with the following issues:
(2) What is the nature of the decisions which the Appellant seeks to appeal?
(3) What is the time limit for appealing those decisions?
(4) In so far as the Appellant is out of time, should I extend the time for the Appellant to give notice of appeal?
[8]I shall deal with the law and facts in relation to those issues separately.
[9]The Appellant's VAT return for period 09/03 gave rise to a repayment claim of £26,416. Following submission of that return a VAT audit visit took place on 20 January 2004. Further visits took place culminating in a visit on 11 August 2004. During that period the Appellant had made further returns for periods 12/03 and 03/04. There was also a return for period 06/04 which is not the subject of this appeal but which is relevant as appears below.
[10]Following the enquiry the Appellant's returns were adjusted by HMRC in the Decision Letters as follows:
09/03 |
12/03 |
03/04 |
Total |
|
£ |
£ |
£ |
£ |
|
Net Repayment Originally Claimed |
(26,416) |
(54,533) |
(36,150) |
(117,099) |
Adjustments Made |
97,182 |
32,840 |
42,252 |
172,275 |
Adjusted Tax Payable / (Repayable) |
70,766 |
(21,693) |
6,102 |
55,175 |
[11]The total repayments claimed by the Appellant in its returns amounted to £117,099. Following the adjustments made by HMRC there was a total sum payable of £55,175. Some time later there were further small adjustments by HMRC which I refer to below.
[12]The Decision Letters were in exactly the same format and contained amendments to boxes on the returns which for period 09/03 were as follows:
Box (1) increased to £155459.23
Box(3) increased to £216333.74
Box (4) decreased to £145568.46
Box (5) increased to £70,765.28
This arises for the following reason(s): Box 1. Satisfactory evidence for despatch of goods not produced. Box 4. Duplication of input tax.
[13]On a VAT return, Box 1 is the VAT due on sales (output tax), Box 3 is the total VAT due including VAT due on acquisitions, Box 4 is the VAT reclaimed on purchases and Box 5 is the net VAT to be paid or repaid by HMRC.
[14]I was told that the amendments to Box 4 related to small input tax adjustments in periods 09/03 and 12/03. In 09/03 the input tax claim was reduced by £8,522 to reflect a duplication of input tax reclaimed. In 12/03 the input tax was actually increased by £3,978 to reflect input tax which had not been claimed. Apart from these adjustments, the amendments to all the returns increased the amount of output tax due on sales where there was no proof of removal of the goods from the UK. I should note that the Appellant contends, as I understand it, that at least some of the goods in question were never in the UK but remained in the Republic of Ireland. As such it is the Appellant's case that no output tax was due on those supplies. As for the balance the Appellant contends that it has sufficient evidence of dispatch.
[15]The parties' submissions as to the nature of the decisions under appeal were made without reference to any authorities.
[16]Mr Haslett submitted that the Decision Letters did not constitute assessments and that therefore the tribunal did not have jurisdiction. There was no right of appeal against a decision amending a VAT return. That is a curious submission, because of course it is the Appellant that is seeking to appeal the Decision Letters to the tribunal.
[17]Mr Haslett further submitted that the reason HMRC had chosen to amend the return rather than to make assessments was to deny the Appellant a right of appeal. He invited me to strike out the Respondents' case pursuant to Tribunal Rule 8. I took that to be an application to debar the Respondents from taking further part in the proceedings.
[18]The relief sought by Mr Haslett exposes the difficulty in his argument. If he is right that the Tribunal has no jurisdiction then rather than debarring the Respondents from defending the appeal I should strike out the appeal itself.
[19]Mr Haslett submitted that it was not the normal practice of HMRC to amend a VAT return. Any adjustment to the VAT account must be done through an assessment notified to the trader and against which he would have a right of appeal.
[20]Ms Spence for HMRC submitted that the returns for 09/03, 12/03 and 03/03 had not yet been processed by HMRC at the date of the Decision Letters. They were all repayment returns which HMRC was seeking to verify in the course of its enquiries. The practice of HMRC where a return has not been processed and the repayment claimed appears excessive is to amend the return prior to processing.
[21]Ms Spence submitted that the decision to amend the returns in question was a decision to refuse repayment of a VAT credit pursuant to Value Added Tax Act 1994 section 25 subsec-or-para 3section 25(3) Value Added Tax Act 1994 ("VATA 1994"). In so far as the decisions gave rise to VAT falling due to HMRC in periods 09/03 and 03/04 the letters amounted to an assessment under Value Added Tax Act 1994 section 73 subsec-or-para 1section 73(1) VATA 1994.
[22]Value Added Tax Act 1994 section 25Section 25 VATA 1994 provides for a taxable person to account for output tax (Value Added Tax Act 1994 section 25 subsec-or-para 1section 25(1)) and claim credit for input tax (section 25(2)) by reference to accounting periods. Section 25(3) then provides as follows:
(3) If either no output tax is due at the end of the period, or the amount of the credit exceeds that of the output tax then, subject to subsections (4) and (5) below, the amount of the credit or, as the case may be, the amount of the excess shall be paid to the taxable person by the Commissioners; and an amount which is due under this subsection is referred to in this Act as a "VAT credit".
[23]Section 25(6) then provides:
(6) A deduction under subsection (2) above and payment of a VAT credit shall not be made or paid except on a claim made in such manner and at such time as may be determined by or under regulations;…
[24]Regulation 29 VAT Regulations 1995 provides that a claim to deduct input tax from output tax under section 25(2) must be made on a VAT return. There are no regulations as far as I am aware that provide for the manner in which a VAT credit is to be paid, although there are provisions in section 79 for repayment supplement to be paid in certain circumstances where a VAT credit is not repaid within a certain period.
[25]In relation to the correction of returns I should also note Regulations 34 and 35 VAT Regulations 1995. Regulation 34 sets out the circumstances in which a trader can correct a return it has previously submitted. Regulation 35 provides:
Where a taxable person has made an error-
(a) in accounting for VAT, or
(b) in any return made by him,
then, unless he corrects that error in accordance with regulation 34, he shall correct it in such manner and within such time as the Commissioners may require.
[26]Under Regulation 35 it is still the trader who must make the correction, albeit acting on directions from HMRC.
[27]In so far as the returns showed an excess of input tax over output tax they gave rise to a VAT credit. It is clear from section 25(3) that HMRC must pay the VAT credit to the taxable person. However neither VATA 1994 nor regulations made under that Act specify a time for payment. HMRC is plainly entitled to make reasonable enquiries into whether a return is correct. That will include enquiries as to whether input tax is properly claimed and...
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