Gooch Technology Ltd
| Jurisdiction | UK Non-devolved |
| Judgment Date | 10 May 2021 |
| Neutral Citation | [2021] UKFTT 149 (TC) |
| Court | First-tier Tribunal (Tax Chamber) |
[2021] UKFTT 149 (TC)
Judge Tracey Bowler, Mrs P Gordon
Value added tax – Alcohol trading – Best judgment assessments carried no appeal right as no VAT returns had been submitted – appeal only against decision appellant should have been VAT registered – Cash deposits into supplier's bank account – Appellant claiming to act as principal in purchasing and selling within a French bonded warehouse without an account at the warehouse – Whether evidence showed supplies outside the UK.
[1] Gooch Technology Ltd (“Gooch”) appeals against the Commissioner's (“HMRC”) decision that it should have been registered for VAT with effect from 12 January 2012 until it ceased trading on 24 December 2012 and.
[2] In 2012 Gooch was involved in transactions in alcohol with one supplier, Elbrook Cash and Carry Ltd (“Elbrook”). Gooch says that it sold the alcohol on to one purchaser, Hasselt Grocerie BVBA (“Hasselt”). All of those transactions are said to have taken place within a bonded warehouse in France, MT Manutention (“MTM”), even though Gooch did not have an account with MTM. Nearly £27.7 million was paid to Elbrook in cash. Gooch says that the cash was either brought to it in Birmingham from Hasselt by couriers and its director, Mr Adris, then took the cash to Elbrook's business premises in Mitcham; or it was paid into Elbrook's bank account directly by the couriers. Gooch says that its only supplies were in France (when selling to Hasselt under bond in MTM) and therefore no taxable supplies were made in the UK.
[3] HMRC has treated the cash payments as payments for supplies made by Gooch in the UK and have issued a best judgment assessment for the amount of £4,614,648 of output tax. That assessment does not carry a right of appeal as Gooch has not submitted any VAT returns.
[4] HMRC maintain that Gooch's supplies were more likely than not to have been part of an inward diversion fraud i.e. the goods were smuggled into the UK and Gooch then supplied them to persons unknown in the UK. As a result, those supplies were taxable supplies made by Gooch in the UK. HMRC maintains that Gooch's account of the transactions is not plausible or credible.
[5] In essence, this case is about whether Gooch has provided sufficient evidence to show that on the balance of probabilities it only made supplies outside the UK.
[6] In a letter dated 11 January 2016, HMRC enclosed a letter dated 23 December 2015 setting out its decision that Gooch should have been registered for VAT and was liable to pay output tax of £4,614,648.
[7] Gooch requested a review of the decision, saying that it acted as an agent and only received commission for brokering alcohol deals between the supplier and the supplier's customer. In a letter dated 6 April 2016 HMRC notified Gooch that the decision was upheld.
[8] Gooch submitted a Notice of Appeal on 4 May 2016.
[9] Gooch's initial grounds of appeal included the ground that it had no liability to register for VAT in the UK because it made all of its supplies in France within an excise bonded warehouse.
[10] On 6 February 2018 Gooch, having changed representatives, applied for permission to amend its grounds of appeal based on an application prepared by Adam Tolley QC in which he said that the Appellant's previous representatives had failed to properly articulate the grounds of appeal.
[11] HMRC did not object. As a result the grounds of appeal were amended. In summary, they were changed to state as follows:
- At all material times Gooch acted only as a broker or agent in relation to the transactions in alcoholic drinks. Accordingly, it did not supply goods within the meaning of section 1(1) Value Added Taxes Act 1994 (VATA) in the relevant period;
- Alternatively, if Gooch did supply goods, it did not supply any goods in the UK and any goods supplied were supplied on a duty suspended basis;
- In any event, Gooch was not knowingly involved in any inward diversion fraud as HMRC allege;
- Gooch was not obliged to be registered for VAT on 12 January 2012 because the value of its taxable supplies in the period of one year then ending did not exceed £73,000 and there were no reasonable grounds to believe that the value of its taxable supplies in the period of 30 days then beginning would exceed £73,000.
[12] By the time of the hearing it had become apparent from Mr Brown's skeleton argument that Gooch no longer relied upon acting as a broker or agent in relation to the transactions. This was confirmed by Mr Brown at the hearing. Instead, Gooch relies on the alternative basis described above – that it acted as principal and the supplies of goods made by it as principal took place outside the UK.
[13] On 4 January 2021 Gooch made an application to admit further evidence: a witness statement from Gooch's sole director, Mr Adris, and an email. The subject matter of the witness statement and the email concerned evidence of “Nectar” points which Mr Adris says supported his evidence about purchasing fuel in order to drive to Elbrook with cash.
[14] HMRC objected on the basis of the application being so late, being prejudicial to HMRC's preparation of the appeal, likely to lead to an adjournment and likely to increase the costs disproportionately, and generally in the interests of justice.
[15] On 7 January 2021 Mr Brown responded to HMRC's objection. He submitted that the evidence had only just come into Gooch's possession. Other than trying to prove the email from Nectar was false, there would appear to be little preparation for HMRC to carry out beyond preparing questions regarding the evidence for their cross-examination and this would have little impact on the time required for the hearing. If admitted, the Tribunal could decide what weight should be given to the evidence and could take into account HMRC's submissions.
[16] In an email dated 7 January 2021 permission to admit the late evidence was granted. In making that decision rule 2 of the Tribunal Procedure (First tier Tribunal) (Tax Chamber) Rules 2020 which requires the Tribunal to give effect to the overriding objective of dealing with cases fairly and justly was applied. HMRC had submitted that admission of the evidence would cause procedural unfairness and prejudice, but in fact the evidence was not only extremely limited in volume, but also raised few, if any, new issues. It showed little more than that Mr Adris bought petrol and used his Nectar card. It was considered that there was little basis to conclude that as such it would cause procedural prejudice to HMRC, applying the principles described in Judge Mosedale's decision in First Class Communications Ltd [2013] TC 02745
[17] However, as this new evidence was being admitted only a few days before the start of the hearing, it was directed that HMRC should indicate if they wished the hearing to start at 2pm on the first day to provide more time to prepare. HMRC confirmed that no such postponement was requested by them.
[18] During the hearing Mr Brown asked whether Mr Khalid (a director of Elbrook) could join the hearing before he gave evidence and while Mr Adris was being cross-examined. We decided that Mr Khalid should not join the hearing until Mr Adris' evidence was complete because there were potential significant issues regarding the consistency of evidence given by Mr Adris and Mr Khalid shown by the evidence in the bundles and the cases presented by the parties.
[19] Gooch originally appealed against HMRC's decision dated 23 December 2015 (confirmed in a review letter of 6 April 2016) which states:
- Gooch was required to notify its liability to be VAT registered for the period 12 January 2012 to 24 December 2012; and
- Gooch is assessed under section 73 VATA to £4,614,468.
[20] HMRC's Statement of Case and Mr Brown's skeleton argument both refer to an appeal against not only the decision that Gooch should have been registered for VAT purposes, but also the best judgement assessment of £4,614,468. HMRC's Statement of Case sets out their submissions regarding the application of the best judgement criteria in some detail.
[21] However, section 83 VATA sets out rights of appeal as follows:
- Subject to sections 83G and 84, an appeal shall lie to the tribunal with respect to any of the following matters–the registration or cancellation of registration of any person under this Act; …… ( p) an assessment–under section 73(1) or (2)in respect of a period for which the appellant has made a return under this Act; or. . .or the amount of such an assessment (underlining added).
[22] Gooch has not made any VAT returns. Therefore on the face of the legislation, Gooch is unable to appeal the assessment. This Tribunal only has the powers granted to it by statute. It does not have any inherent authority to determine appeals beyond those powers. Consequently, after the hearing Judge Bowler asked for submissions on this issue.
[23] Mr Carey and Mr Brown replied with joint submissions which confirmed that both parties accept that Gooch has no right of appeal against the assessment made under section 73 VATA.
[24] Accordingly, we are satisfied that the appeal against the assessment of £4,614,468 must be struck out by for lack of jurisdiction under rule 8 of the First-tier Tribunal (Tax Chamber) Rules 2020.
[25] That leaves the appeal against HMRC's decision that Gooch should have been registered for VAT. Mr Brown and Mr Carey have referred to the decision of Judge McNall and Miss Stott in the case of Withington KFC Services Ltd [2020] TC 07801. We respectfully agree with the approach and conclusions reached there, where it was concluded that an appeal against an assessment should be struck out, but the appeal against the registration of the appellant was...
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