" to 31.3.03 to 31.3.04 to 31.3.05 to 31.3.06 Accounts mark up 100.77% 75.36% 60.88% 97.24% Cash introductions £32,471£76,763£101,000£36,200 Revised mark up 111.75% 107.40% 101/39% 112.31%"
Mrs. Hewitt went on to raise an assessment. Her assessment was based solely on the cash introductions into the accounts, treating these as undeclared takings. She calculated the quarterly assessments by pro-rating the VAT on the cash injections in line with the quarterly declared output tax. It is this assessment which is now before the tribunal.[6]Mr. Craine told us that he had first come to the Pickwick in March 2000. The public house had at that time been brewery owned and was poorly decorated and generally run down. Mr. Craine was to be the employed manager. Almost immediately, the brewery decided to sell 1,000 of its pubs and Mr. Craine was served with a redundancy notice but given the option of taking over the lease. This he and his wife decided to do and since November 2002 they have run the pub in partnership. They paid £38,000 to purchase the lease, paid for out of his redundancy money and personal savings. The rent has increased from £58,000 per annum when they started trading to the current level of £82,000. Since Mr. Craine first started working for the brewery in 1984 he had managed to build up a considerable amount of savings. Living in the pub cost nothing as everything, including all outgoings, was provided by the brewery. He was good at his job and regularly earned bonuses which were generally 2% of takings or occasionally when he beat his budget 25% of the excess. In his last year of employment he told us that he earned from the brewery £28,000 plus a £2,000 bonus and his wife £10,000. Mr Craine estimated that at the time they took over the lease, they would have had some £70,000 or £80,000 in savings. This would all have been in cash and kept in a safe in the house. Although the brewery would over the years have paid his salary and bonuses into his bank account it had been his practice to withdraw cash and store the cash in his own personal safe. Additionally, over the years, Mr. And Mrs. Craine had raised as much capital as they could, saving whatever they could. In July 2003, they sold the family home which realised an equity of £27,800. He sold a caravan for £10,000. During the refurbishment they took out a loan of £20,000 from Unique, their leasing company, this being paid over by way of a credit to the trading account, thus enabling payments which would have been made in rent to be applied elsewhere.[7]In 2003/2004 Mr. And Mrs. Craine carried out a major refurbishment, internal and external, which necessitated a short period of closure. The refurbishment was paid for out of personal savings and mostly in cash. Mr. Craine could not remember the total cost but gave examples of paying £19,000 for carpets, £4,000 for decorating and £2,000 for tiling – all payments being in cash. Over the years it has also been Mr. And Mrs. Craine's practice to make business purchases, for example replacement of kitchen equipment, and to pay utility bills out of personal monies but putting the receipts with the business records.[8]Trade had always fluctuated greatly, being sensitive to local forces and competition. When they began trading they took £5-6,000 per week, rising to £10,000 after the refurbishment and now down again to £6,000. It was Mr. Craine's contention that he could never have consistently taken the figures suggested by the assessment. The Pickwick is situated in a village in which there are three other public houses. Two are associated clubs and are both free trade whereas Mr. and Mrs. Craine are tied. This means that the clubs can buy stocks of beer in at a considerably cheaper price – sometimes even from the same wagon on the same delivery round. The remaining competitor is owned by a local millionaire who has invested greatly and has a motel attached to it. This pub has recently spent £600,000 in refurbishment and is now extremely smart and with the financial backing behind it can offer very attractive deals which Mr. Craine cannot match.[9]When the hearing was adjourned on 13 January, the tribunal made a detailed direction listing the documentation to be produced by the Appellants by 31 January 2009. The case, with the agreement of Mr. Craine, was adjourned to 16 March. When the case was called on for hearing on 16 March, not only were we told that the Appellants had produced no documentation whatsoever but there was no attendance by or on their behalf. The clerk telephoned Mr. Craine and was told that he had been confused by correspondence received from the Commissioners (possibly the Debt Management Unit) and had thought that the hearing was not going to take place. In the light of this the hearing was further adjourned to 2 June, again with the agreement of Mr. Craine. A further direction was made for production of the earlier listed documents. The Appellants were further notified of the new hearing date in writing by letter dated 24 March 2009. The Commissioners themselves wrote to the Appellants on 22 April 2009 requesting the documentation by 15 May. When the case was called on for hearing on 2 June, not only had there still been no production of documents but again there was no attendance by or on behalf of the Appellants. The clerk attempted to telephone Mr. Craine but received no response. It was the view of the tribunal that abundant opportunity had been given to the Appellants to produce further documents but they had failed to do so. They were fully aware of the date of the hearing on 2 June and indeed the earlier direction of 16 March stipulated that no further adjournment would be allowed. It was thought that no useful purpose whatsoever could be served by a further adjournment and the interests of justice would best be served by proceeding with the case in their absence. The tribunal therefore reached its conclusions on the basis of the evidence of Mrs. Hewitt and the evidence in chief of Mr. Craine and the documents before the tribunal on the first hearing.[10]The assessment had been raised on the basis of the figures inserted in the annual accounts, stated to be capital introduced. It was the Commissioners' case that that capital could only be from undisclosed takings. It was the Appellant's case that in fact it originated from various other sources. Mr. Craine put forward a number of such sources. The only one that was evidenced was a completion statement dated 8 July 2003 for the sale of a property. This realised £27,803. If this sum had been introduced into the business it would have been reflected in the annual accounts to 31 March 2004, which shows capital introduced of £76,763. Not only is there no evidence whatsoever that the sale proceeds did actually find their way into the business but it also forms only a small part of the capital introduced for that year. Of the other assertions raised by Mr. Craine there just is no evidence. The burden of proof is on the Appellants and they quite simply have not satisfied it. In the absence of any further oral or documentary evidence we can only uphold the assessment in its entirety and the appeal is dismissed.[11]Mr. Chapman made an application for costs. As this case commenced before 1 April 2009, the question of costs can be dealt with under the old rules and we therefore grant Mr. Chapman's application in part. There have been three hearings. The first hearing proceeded perfectly properly with attendance and full cooperation by Mr. Craine. The case could have been concluded in that single day had it not been adjourned solely for the benefit of the Appellants. Instead of taking advantage of the adjournments, there has been no further cooperation from the Appellants. The direction of 16 March specifically asked that they should notify the tribunal if it was their intention not to pursue the appeal but they did not do so. That hearings were listed for 16 March and 2 June was totally at the instigation of the Appellants but they have failed to take advantage of either. We believe that the Appellants should therefore bear the costs of those two days. We therefore direct that the Appellants should make a contribution towards the costs of the Commissioners in the sum of £1,000. MAN/08/394 LADY MITTING JUDGE Release Date: 3 June 2009