Dolphin Fish Bar Ltd v Customs and Excise [2004] UKVAT V18993 (24 March 2005)

 18993
REGISTRATION – VAT-registered partnership business transferred to sole trader – Sole trader did not register for VAT – Appellant company subsequently ran same type of business from same premises – Whether transfer of business as going concern – Appeal dismissed

LONDON TRIBUNAL CENTRE

	DOLPHIN FISH BAR LTD	Appellant

-	and –

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	MISS J C GORT  (Chairman)
						JOHN G ROBINSON 

Sitting in public in London on 7 February 2005

Mr R M Patel, accountant, of Harrison Bernstein Ltd, for the Appellant 

Mr Jonathan Holl, of the office of the Solicitor for the Customs and Excise, for the Respondents

© CROWN COPYRIGHT 2005

DECISION

1.	This is an appeal against a decision of the Commissioners contained in a letter dated 27 October 2003 that the Appellant was liable to be registered for value added tax with effect from 06/04/03.  The Appellant was compulsorily registered from that date.  Subsequently the Commissioners reviewed that decision, and the reviewing officer by a letter dated 06/02/04 upheld the original decision.

2.	The issue before the Tribunal was whether the Appellant had taken over the business as a going concern.  There was no assessment and no penalty. 

3.	The Commissioners produced a bundle of documents and the Tribunal heard evidence from Mr John Greene, a VAT officer.  No evidence was called on behalf of the Appellant.  

4.	The background to this case is that as from 17 July 1991 Mrs G Kaur was the sole proprietor of a business called the Dolphin Fish Bar.  There was no dispute that on 1 February 2001 Mr Gurjinder Singh Ranji and Mrs Mandeep Kaur Ranji took over that business as a going concern from Mr Kaur and registered for value added tax as from that date.  The value of their taxable supplies were anticipated to be £80,000.  The business was then run by Mr and Mrs Ranji as a partnership.  Mr and Mrs Ranji rendered returns for value added tax for the periods from 01/02/01 to 08/02/02 during which period net sales were declared as being £89,562.  The average monthly takings were £7,464.  The partnership cancelled its registration for value added tax with effect from 07/02/02, on which date it ceased trading.  Between 07/02/02 and 11/03/02 the business rates were paid by Mrs G Kaur.  From 11/03/02 until 6/04/03 they were paid by her son Mr Tajindgrjit Singh.   Mr T Singh did not register for value added tax and was not visited by the Commissioners at any stage.  As from the 6 April 2003 the Appellant company ran the business from the same premises and the nature of the business did not change.

5.	Mrs G Kaur, who was the sole proprietor of the business between 1991 and 2001, is a director of the Appellant company.  She is also the mother of Mr Gurjinder Singh Ranji as well as of Mr Tajindgrjit Singh.  She owned the freehold of the premises which are at Unit 3, Egremont Shopping Parade, Bearsted, Maidstone in Kent, at all material times.  The business itself is a fish and chip shop, all its business is takeaway.  

6.	Mr Greene visited the premises on 18 June 2003 and interviewed Mr T Singh who was working at the premises.  Mr Singh told Mr Greene that his father, Joginder Singh, was running the business. He believed the business must be registered for value added tax but he himself did not know the number.  Mr Greene left his details with Mr Singh and requested that he be contacted.  No contact was made.

7.	Mr Greene paid a further visit to the premises and on that occasion spoke to the staff who told him that the business was run by Joginder Singh.  Again Mr Greene asked that contact be made with him, but again no contact was made.  Mr Greene carried out computer checks but found nothing to indicate that the business was registered.  He carried out various checks on the businesses that had traded from that address and obtained information as to who had paid the business rates in respect of the premises on which dates.

8.	By a letter dated 14 August 2003 Mr Greene advised Harrison Bernstein Ltd, accountants acting for the Appellant, that the Appellant was liable to have notified the Respondents of its liability to be registered as from 06/04/03.  A form VAT 1 and a pre-paid envelope were sent to the accountants.   In an earlier telephone conversation Mr Greene had spoken with Mr Gupta of Harrison Bernstein Ltd and had enquired whether he acted for Mr T Singh.  By a letter dated 28 August 2003 Harrison Bernstein Ltd advised Mr Greene that they had acted for Mr T Singh to complete his tax return for year 2002 but had not heard from him since.  Their client, the Appellant, had told them the shop was not trading when the shop was taken on.  They had no annual accounts for Mr T Singh and had no contact with him.  

9.	Mr Greene attempted to contact Mr T Singh but failed.  Harrison Bernstein Ltd had given Mr T Singh’s last known address as 12 Curzon Road, Chatham, but Mr Greene received no reply to a letter he sent to that address, nor was the letter returned to him. Following this attempt at contact with Mr T Singh and further correspondence with the Appellant’s accountants, Mr Greene notified the Appellant of its liability to be registered, and subsequently the business was compulsorily registered as from 06/04/03.

10.	Further correspondence ensued, and by a letter dated 03/11/03 Harrison Bernstein Ltd notified the Commissioners that an appeal was being made against the decision to register the Appellant stating that “the business had ceased when they took over the premises, i.e. turnover for the purposes of section 49(1) (of the) Value Added Tax Act 1994”.  Furthermore the shop had been run down prior to the Appellant taking it over and the Appellant was of the opinion that the turnover of the new business would not exceed the £56,000 threshold.  Harrison Bernstein requested copies of the information which had been relied upon to determine the liability to registration.  By a further letter dated 27 November 2003 Harrison Bernstein stated inter alia that the Appellant had spoken to Mr T Singh who had stated that if the VAT registration limit was £56,000, the Appellant would not have been above the VAT threshold.  

11.	By a letter dated 8 December 2003 a Ms Bourgein, a member of the Appeals and Reconsideration team at the Southampton VAT office, wrote to Harrison Bernstein. She invited them to submit any further information within 45 days and specifically requested a copy of the contract of sale showing the transfer of assets and details of the staff employed.  By a letter dated 11 December 2003 Harrison Bernstein advised Ms Bourgein that there was no contract of sale since Mr Singh was running the business under a licence to occupy.  Mr Singh had defaulted on the rent and closed the shop.  The shop had remain closed for a while and then had been re-opened by the Appellant.  The Appellant had spoken to Mr T Singh who had confirmed that the shop was trading below the VAT threshold in the twelve months prior to the shop re-opening.  Ms Bourgein subsequently upheld the decision that the Appellant was liable to be registered for VAT with effect from 6 April 2003.

12.	The Appellant’s notice of appeal is dated 19 February 2004.  The grounds of appeal are:

“Requirement to register on a date earlier than is required.  No evidence  provided by HM Customs and Excise to confirm that Dolphin Fish Bar Ltd was required to register for VAT as at 6/04/03.”

13.	By a letter dated 15 March 2004 Harrison Bernstein sent a copy of a letter from Mr T Singh to the Commissioners.  That letter stated as follows:

“To Whom it may concern

I can tell you that I ran a shop 11.3.02-15.3.03 since when I took the shop on it was closed.  The shop was doing good at the beginning but due to personal problems I have problems running the shop.  The shop taking was only about £700 per week when I decided to close the shop and I did not earn more than £50,000 taking from the shop in total.”

14.	Following receipt of this letter  Mr Greene sent a letter dated 24 March 2004 to Mr Singh requesting that he produce the records of his business for examination and produce till rolls, records of daily gross takings, purchase invoices and records and bank statements.  No reply was received from Mr Singh who had been written to at the address provided by Harrison Bernstein.  Mr Greene in his evidence confirmed that the Inland Revenue could not trace a self-assessment return from Mr T Singh for a relevant period.

15.	Harrison Bernstein had acted for all of the relevant entities connected with the running of the fish shop at the premises.  

16.	It was the Appellant’s case that the Tribunal should not take account of the fact that the business had previously been run by the son of the directors of  the Appellant company.  The Commissioners had produced no evidence to show that the turnover of the previous owner of the business was above the VAT threshold.  It was incumbent upon the Commissioners to obtain evidence from the suppliers or by other means.  There were no specific conditions of the legislation which applied to the situation where there was a transfer between connected persons.

17.	It was submitted by Mr Patel that the Appellant had provided evidence in the form of the letter from Mr T Singh to show that the turnover was below the threshold in the relevant period.  The Commissioners should not be entitled to rely on the evidence that the turnover during the period when Mr and Mrs Ranji ran the business was above the threshold as this was outside the twelve month period.  The Appellant had made reasonable efforts to obtain evidence but had not been able to do so.  

Reasons for decision

18.	In this appeal the burden of proof is upon the Appellant to satisfy us that the business was not liable to be registered for value added tax with effect from 06/04/03.  We accept the Respondents’ argument that Mr and Mr Ranji’s partnership, which was a taxable person within the meaning of section 3(1) of the Value Added Tax Act 1994, was transferred as a going concern to Mr T Singh within the meaning and provisions of section 49(1)(a).  The records relating to that business were required to be preserved by Mr T Singh who himself became liable to be registered under the provisions of section 1(2)(a) of Schedule 1 of the VATA 1994.  The burden of proof in this appeal is on the Appellant and the evidence provided by the Appellant in respect of Mr T Singh’s turnover is not sufficient to satisfy us that at the date of transfer he came within the provisions of paragraph 1(3) to Schedule 1 of the VATA 1994, nor that he ceased to be a taxable person at any time during his period of trading.  

19.	We find that upon the transfer of the business from Mr T Singh to the Appellant the Appellant was required to be registered for value added tax with effect from 06/04/03 on the transfer of the business as a going concern.  We accept the Respondents’ argument that the payment of business rates by Mr T Singh and the Appellant during the relevant periods demonstrate that the business was operating throughout the period and that a transfer of a going concern had taken place.  

20.	 In all the circumstances this appeal is dismissed.  No order for costs.

MISS J C GORT
CHAIRMAN

RELEASED: 24 March 2005

LON/04/161