J & W Waste Services Ltd v Revenue & Customs [2009] UKFTT 315 (TC)

FTT-Tax
J & W Waste Services Ltd v Revenue & Customs
[2009] UKFTT 315 (TC) · 2009-11-19
[1]This is an appeal by the company J & W Waste Services Limited (“the Appellant”) against a notice served on it by The Commissioners for Her Majesty’s Revenue and Customs (“the Commissioners”) requiring the Appellant to give security by way of third party guarantee or cash deposit as a condition of the Appellant supplying taxable goods or services. The notice of requirement to give security (“the Security Notice”) was dated 16 April 2009 and required the Appellant to give security in the sum of £202,964.83, or the reduced sum of £183,464.05 if the Appellant opted to make monthly, rather than quarterly, returns. The Security Notice was served by the Commissioners pursuant to the powers they have under paragraph 4 of Schedule 11 to the Value Added Tax Act 1994 (“VATA 1994”).[2]On 1 May 2009 the Appellant served its notice of appeal against the Security Notice. The grounds given for the appeal were as follows:
“The request for a cash deposit of £202,964.83 is excessive and unreasonable and there is already a cash deposit in place as requested previously by HM Revenue & Customs”
. The reference to the existing cash deposit relates to the deposit made by the Appellant pursuant to an earlier notice of requirement to give security served by the Commissioners on the Appellant as described below. The Appellant appealed against that earlier notice to the VAT and Duties Tribunal, and that tribunal (Chairman: Edward Sadler; Member: S K Das) dismissed the Appellant’s appeal in a decision released on 7 January 2009 (Decision number 20908) (“the January Decision”).[3]On 15 October 2009 (the day before the date fixed for the hearing) Mrs M M Ashley faxed a letter to the Commissioners stating:
“Regrettably due to illness, we are unable to attend the appeal hearing as arranged for 16 October 2009 and would ask you to agree an adjournment.”
As will appear, Mrs Ashley is the company secretary of the Appellant. We treated this as an application by the Appellant to postpone the hearing, and dealt with that matter at the commencement of the hearing on 16 October 2009.[4]At the hearing Mr Chambers objected to the Appellant’s application to postpone the hearing, on a number of grounds, including the following: the letter from the Appellant did not specify who was ill, nor was evidence supplied as to the illness of any relevant person; no explanation was given as to why some other officer or representative of the Appellant should not attend the hearing; enquiries made of the Appellant by the Commissioners and the listing office at the tribunal centre revealed that Mrs Ashley herself was not ill, but was on holiday at the date of the hearing (in the appeal papers Mrs Ashley is named as the Representative of the Appellant); the Appellant has twice previously appealed to the tribunal (once against an earlier notice of requirement to give security, and once against an assessment) and in each case has failed to attend or to be represented at the hearing of the appeal, and the Appellant also failed to comply with Directions in relation to the assessment appeal resulting in the Appellant’s appeal being struck out by the tribunal; since the notice of requirement was served on the Appellant in April 2009 the Appellant’s debt to the Commissioners has increased to over £337,000, and the Appellant has failed to submit its VAT returns for at least the last four quarters, so that there is severe risk to the revenue and any postponement increases that risk.[5]We decided in these circumstances to proceed to consider the appeal in the absence of the Appellant under Rule 33 of the Tax Chamber Tribunal Rules 2009, taking the Appellant’s case to be as set out in its Notice of Appeal. We were satisfied that the Appellant had been notified of the hearing. We considered that it was in the interests of justice to proceed with the hearing, since the Appellant had a history of not attending tribunal hearings to pursue appeals it had made, since we were not persuaded that an officer or other representative of the Appellant could not have attended the hearing, and since, by reference to the Appellant’s past conduct with respect to tribunal hearings, we had little confidence that the Appellant would attend any postponed hearing. Further, since the Appellant continues to trade but is not, as we were told by Mr Chambers, complying with its obligations to make VAT returns or pay VAT assessments, there would likely be further losses to the revenue should the hearing be postponed.[6]The Appellant has the right, under Rule 38 of the Tax Chamber Tribunals Rules 2009, to apply in writing to the tribunal to set aside our decision, provided such application is received at the London tribunal centre no later than 28 days after the date on which the tribunal sent notice of the decision to the Appellant. The evidence and the facts[7]We had in evidence before us a substantial bundle of documents relating to the VAT registration of the Appellant; the Appellant’s record of compliance and statement of account prepared by the Commissioners and various papers in support of those documents; certificates of the Commissioners provided as evidence under paragraph 14(1) of Schedule 11 to VATA 1994 as to the registration of the Appellant, the failure of the Appellant to make certain of its VAT returns, and the amount of VAT due and unpaid by the Appellant as at 16 April 2009; the previous notice of requirement to give security served on the Appellant and the cash deposit made by the Appellant pursuant to that notice; certain reports as to information concerning the Appellant and its officers as appearing in the Companies Registry; the VAT “history” of eleven other companies which the Commissioners claimed were associated with the Appellant; a certificate of the Commissioners for each of those eleven other companies stating the amount of VAT due and unpaid by the company in question, provided as evidence under paragraph 14(1) of Schedule 11 to VATA 1994; entries from the Companies Registry in relation to the Appellant and certain of those eleven other companies (including details of the directors and company secretary of the Appellant and those other companies); a list of the company secretary appointments held by Marguerite Ashley and a list of the director appointments held by Christopher Ian Collins, as appearing in the Companies Registry.[8]Mr Chambers told us that the evidence presented by the Commissioners in relation to the VAT registration of the Appellant; the eleven companies which the Commissioners claimed were associated with the Appellant; the relationship of the Appellant to those eleven other companies through common directorships and appointments of company secretary; the nature of the business undertaken by those eleven other companies; the failure of those eleven other companies to comply with their VAT return and payment obligations and, in certain of those cases, the attempts by the Commissioners to use the procedure for requiring security; and the insolvent winding up of certain of those companies owing amounts to the Commissioners, was the same evidence presented to the tribunal in the Appellant’s earlier appeal against a notice requiring security which was determined (by dismissing the Appellant’s appeal) by the January Decision. In relation to those matters he invited the tribunal to make the same findings of fact as the tribunal had made in the January Decision.[9]Mrs Susan Ogburn, a Higher Officer in the VAT Insolvency and Securities Team of the Commissioners in Southampton, gave evidence. Her duties extend to authorising notices of requirement of security, serving those notices, and reconsidering any decisions to issue such notices where the taxpayer requests that such a decision is reconsidered. In relation to the present case, Mrs Ogburn was the officer responsible for issuing and serving the Security Notice, and in that capacity, in accordance with standard procedure, had reviewed the file before the Security Notice was served. Mrs Ogburn’s evidence related to the VAT compliance record of the Appellant; the application by the Commissioners of the cash deposit held by them as security pursuant to the earlier notice of requirement served on the Appellant; the information taken into account by the Commissioners in deciding to issue the Security Notice; the reasons the Commissioners had come to their decision to serve the Security Notice on the Appellant; the method of calculation used to determine the sum required by way of security in the Security Notice; and the service of the Security Notice on the Appellant in person.[10]From the evidence we find the facts set out below. In relation to the eleven companies associated with the Appellant, we have reviewed the evidence, and see no basis for departing from the findings of fact made by the tribunal set out in the January Decision. For the sake of completeness we set out those findings below, as our own findings of fact:(1) The Appellant was incorporated on 30 August 1996. On 30 August 2007 it applied to be registered for VAT, and was so registered with effect from 28 August 2007 (the date given by the Appellant as the date it commenced making taxable supplies). In its application for registration the Appellant described its business activities as “Operation of a waste recycling business”, and it estimated the amount of its taxable supplies in its first twelve months as being £1 million. The principal place where the business is carried out is shown as Willments Shipyard, Hazel Road, Woolston, Southampton.(2) The form for application for registration completed by the Appellant (and signed by M M Ashley, as company secretary) has this question:
“Are you (or any partners or directors in this business) currently involved, or in the last two years have been involved, in any other business in the UK or Isle of Man (VAT registered or not) either as a sole proprietor, partner or director? If Yes, complete the boxes below.”
The form was completed with the name and VAT number of C I Collins Limited, and no other companies. (3) As at 16 April 2009 (the date of the Security Notice) the only director of the Appellant was Christopher Ian Collins (“Mr Collins”) and the company secretary was Marguerite Ashley (“Mrs Ashley”). (4) On 29 November 2007 a notice of requirement was served by the Commissioners on the Appellant under the provisions of paragraph 14(1) of Schedule 11 to VATA 1994 requiring the Appellant to provide security to the Commissioners in the sum of £15,800 as a condition of the Appellant continuing to make taxable supplies. The Appellant appealed to the tribunal against that notice on the grounds that the notice was unreasonable in that the Appellant had then only recently commenced trading. The Appellant’s appeal was heard by the VAT and Duties Tribunal on 11 December 2008 and that appeal was dismissed by the tribunal by the January Decision. (5) The Appellant duly deposited the sum of £15,800 with the Commissioners pursuant to the November 2007 notice of requirement. On 24 February 2009 the Commissioners wrote to the Appellant to point out that the Appellant at that date owed the Commissioners outstanding VAT of £117,839, and advising the Appellant that, if the outstanding VAT were not paid, or if the Appellant had not made arrangements with the Commissioners for payment, the deposited cash would be applied by the Commissioners towards payment of the outstanding VAT. On 2 April 2009 the Commissioners wrote to the Appellant advising the Appellant that the Commissioners had applied the security deposit of £15,800 towards payment of outstanding VAT, that at that date the total VAT debt outstanding was £182,741.35 (including default surcharge and interest), that the Appellant’s VAT returns for the quarters ended 10/08 and 01/09 had not yet been received by the Commissioners, and that a further notice of requirement to provide security might be required by the Commissioners for an increased amount. (6) The Appellant submitted VAT returns on time, and paid VAT due in time, in relation to its VAT quarters 10/07 and 01/08. (7) In relation to its VAT quarter 04/08 there was a thirteen day delay in the Appellant’s submission of its VAT return and payment of the VAT due for that quarter, so that the Appellant was warned that subsequent delays could result in the Appellant becoming liable to a default surcharge payment. Further, the Appellant’s return for this quarter was subsequently reviewed by the Commissioners, and as a result of that review the Commissioners issued an amended assessment on the Appellant of VAT for a further £4,555 in relation to the VAT quarter 04/08 (on the basis that the Appellant had under-declared its VAT by that sum, the Commissioners being of the view that the Appellant was liable to account for VAT for that quarter totalling £37,458.21). The Appellant did not appeal against the amended assessment, nor did it pay the additional VAT assessed by that assessment. The Commissioners applied part of the cash held as security deposit from the first notice of requirement proceedings in payment of that additional VAT. (8) The Appellant’s VAT return for its VAT quarter 07/08 was submitted three days late. The Appellant’s return showed VAT due of £42,477.59, which was paid three days late on 3 September 2009. This return was reviewed by the Commissioners, and as a result on 10 October 2008 the Commissioners issued an amended assessment on the Appellant of VAT for a further £36,718 in relation to the VAT quarter 07/08 (on the basis that the Appellant had under-declared its VAT by that sum, the Commissioners being of the view that the Appellant was liable to account for VAT for that quarter totalling £79,195.59). The Appellant appealed to the VAT and Duties Tribunal against that further assessment. That appeal had not been concluded by 16 April 2009, the date on which the Security Notice was issued and served. (The appeal was subsequently dismissed by the tribunal by reason of the Appellant’s failure to comply with the tribunal’s directions.) (9) The Appellant has made no VAT return, and paid no VAT, in relation to the Appellant’s VAT quarter 10/08. On 12 December 2008 the Commissioners assessed the Appellant to VAT in the sum of £76,566 in relation to its VAT quarter 10/08. That assessment was centrally issued, based on the VAT assessed by the amended assessment for the previous quarter. That assessment was unpaid when the Security Notice was issued. The Appellant has not, following that assessment, made its own return for its VAT quarter 10/08 (which would have resulted in the assessment being reconsidered by the Commissioners in the light of the return made), nor has the Appellant appealed against that assessment, nor has it paid the VAT assessed. The Commissioners applied the balance of the cash held as security deposit from the first notice of requirement proceedings towards payment of the VAT so assessed, leaving a debt due to the Commissioners as at the date the Security Notice was issued of £65, 400. (10) The Appellant has made no VAT return, and paid no VAT, in relation to the Appellant’s VAT quarter 01/09 (due on 28 February 2009). As with the 10/08 quarter, the Commissioners proceeded to issue an assessment based on the 07/08 amended assessment, issuing on 13 March 2009 an assessment in the sum of £78,977 for the 01/09 quarter. Similarly, that assessment was unpaid when the Security Notice was issued, and the Appellant has not made a late return in respect of its VAT quarter 01/09, nor appealed against the assessment, nor has it paid the VAT assessed. (11) The Security Notice is dated 16 April 2009 and was served on that date in person by Mrs Ogburn on Mrs Ashley at the premises of the Appellant, Mrs Ashley signing an acknowledgement of service. (12) The Security Notice requires the Appellant to provide security to the Commissioners (by way of either a cash deposit or a third party guarantee in prescribed form) in the sum of £202,964.83 as a condition of the Appellant continuing to make taxable supplies. It provides that, alternatively, the Commissioners will accept security in the reduced sum of £183,464.05 if the Appellant submits monthly returns. (13) The Commissioners calculated these sums on the following basis: (a) they first estimated the future VAT which the Appellant might be liable to pay, and which they considered would be at risk if the Appellant failed to comply with its future VAT obligations. To determine this the Commissioners took the VAT return figures submitted by the Appellant for the VAT quarter 01/08 (£24,664.30); for the VAT quarter 04/08 (£35,237.21 – this is the figure derived from the amended assessment, since although the increased amount was not paid by the Appellant, it was not disputed by the Appellant appealing against it); and for the VAT quarter 07/08 (£42,477.59 – this is the amount returned by the Appellant: at the time of the issue of the Security Notice the additional amount assessed by the amended assessment (£36,718) was still the subject of an appeal and was therefore not taken into account for these purposes by the Commissioners). This gave a total for nine months of trading of £102,379.10 (the Commissioners did not take into account for these purposes the first VAT return (for the period to 10/07) made by the Appellant, since that was not for a complete three month period and in any event was, in the view of the Commissioners, likely not to be representative of the established trading pattern of the Appellant); (b) the VAT of £102,379.10 as returned by the Appellant for the nine months was then pro rated to give the figure for six months, on the basis that, if the Appellant is to continue with quarterly VAT accounting, the Commissioners have an exposure to unpaid tax for at least two quarters if the Appellant fails to comply with its payment obligations. The pro rated six month figure is £68,252.73; (c) this figure for a six months period was then adjusted (by way of reduction) to take account of the reduction in the rate of VAT from 17.5 per cent to 15 per cent, giving a figure of £58,502.34; (d) alternatively, if the Appellant were to agree to account for VAT on a monthly, rather than a quarterly, basis, the Commissioners considered that they could have a future exposure to unpaid tax for at least four of those monthly periods. Using the same process they calculated a four-monthly figure of £39,001.56; (e) as explained below, the Commissioners are entitled to require security for VAT which is due (that is, assessed but unpaid VAT) as well as VAT which may become due in the future. The Commissioners therefore took the amount of VAT assessed on the Appellant but unpaid, as at 16 April 2009 (together with penalties and interest then due). They did not, however, include in that amount the sum of £36,718 (the additional amount assessed by virtue of the amended assessment for the 07/08 quarter), since as at 16 April 2009 that amount was still the subject of an appeal by the Appellant. The amount of VAT assessed but unpaid on this basis amounted to £144,462.49; (f) in consequence the Security Notice required the Appellant to provide security (by way of cash deposit or bank guarantee) in the sum of £202,964.83 if the Appellant continued with quarterly returns, or £183,464.05 if the Appellant moved to monthly returns. (14) The Security Notice offers the Appellant the right to apply to the Commissioners for them to reconsider their decision to issue the Security Notice by bringing to their attention any information which the Appellant wishes to be taken into account. The Appellant did not avail itself of this right, but instead served its notice of appeal on the tribunal. The Appellant has had no contact with the Commissioners in relation to the Security Notice following the occasion on which the Security Notice was served. (15) Mr Collins is, or has been, a director of the following companies (together, “the Associated Companies”) carrying on the following respective trades as categorised by the Commissioners: J & W Demolition & Recyling Limited (collection and treatment of waste); J & W Recycling Limited (recycling of non metal and scrap); J & W Waste Management Limited (recycling of non metal and scrap); J & W (Aggregates) Limited (construction work involving special trades); J & W Plant and Tool Hire Ltd (machinery and equipment rental); J & W Tipper Hire Limited (storage and warehousing); Swanwick Homes Ltd (development and selling of real estate); Swanwick Civil Engineering Limited (agricultural services); Swanwick Communications Limited (alterations of civil engineering constructions); Swanwick Construction Co Ltd (alterations of civil engineering constructions); C I Collins Ltd (holding company providing management services to subsidiary companies). All of the “J & W” companies trade or traded from the same address as the Appellant. The “Swanwick” companies trade or traded from various addresses in the Southampton area. (16) Mrs Ashley is, or has been, the company secretary of C I Collins Ltd and all the “J & W” companies except for J & W (Aggregates) Limited and J & W Tipper Hire Limited. (17) Mr Collins is or was the sole director of each of the Associated Companies except for C I Collins Ltd, Swanwick Construction Co Ltd, J & W Recycling Limited, J & W Waste Management Limited and J & W (Aggregates) Limited (where, in each case, there is one other director, being either a Mr Ian Cox or a Mr Conrad Collins). (18) In relation to the Associated Companies, on the date on which the Security Notice was served: (a) J & W Demolition & Recycling Limited was in default with its VAT compliance, having an outstanding VAT liability of £170,929.92 and default surcharges for nineteen periods of default totalling £13,557.33; (b) J & W Recycling Limited (which was deregistered for VAT on 22 March 2006 following its insolvency on 8 February 2006) was in default with its VAT compliance, having an outstanding VAT liability (including default surcharges for three periods of default) of £122,189.13; (c) J & W Waste Management Limited (which was deregistered for VAT on 19 August 2004 following its insolvency on 28 April 2004) was in default with its VAT compliance, having an outstanding VAT liability (including default surcharges for ten periods of default) of £144,495.47; (d) J & W (Aggregates) Limited (which was deregistered for VAT on 15 January 2002 following its insolvency on 10 April 2001) was in default with its VAT compliance, having an outstanding VAT liability (including default surcharges for thirteen periods of default and default interest) of £969,747.74; (e) J & W Tipper Hire Limited (which was deregistered for VAT with effect from 1 September 1994) was in default with its VAT compliance, having an outstanding VAT liability (including default surcharges for three periods and default interest) of £151,352.65; (f) Swanwick Communications Limited (which was deregistered for VAT on 11 June 2007 following its insolvency on 19 March 2007) was in default with its VAT compliance, having an outstanding VAT liability (including default surcharges for four periods) of £262,526.23. The Commissioners served a notice of requirement of security on the company in January 2007, but the notice was not enforced as the company went into an insolvent winding up; (g) Swanwick Construction Co Limited (which was deregistered for VAT on 2 May 2007 following its insolvency on 20 December 2006) was in default with its VAT compliance, having an outstanding VAT liability (including default surcharges for five periods) of £513,378.28. The Commissioners served a notice of requirement of security on the company in November 2006, but the notice was not enforced as the company went into an insolvent winding up; (h) Swanwick Civil Engineering Limited had an outstanding default surcharge liability for the VAT quarterly period ending 08/07 in the sum of £1,196.74; (i) Swanwick Homes Limited had an outstanding VAT liability of £753.00; and (j) C I Collins Limited had no outstanding VAT liability, but has been in the default surcharge regime since the VAT quarterly period ending 03/02, with default surcharges for fourteen periods. The Appellant’s submissions[11]The Appellant, in its notice of appeal, stated that, in relation to the Security Notice, the request for security in the amount of £202,964.83 is excessive and unreasonable, and that there is already a cash deposit in place as requested previously by the Commissioners.[12]We take the Appellant’s case to be that it is unreasonable in principle that in the Appellant’s circumstances security should be required at all, and that even if in principle it is reasonable that security should be required, the Security Notice should be set aside because the amount of security required is unreasonable by virtue of being excessive. The Commissioners’ submissions[13]For the Commissioners Mr Chambers submitted that the circumstances which the Commissioners are faced with are those typical of a so-called “Phoenix” case, where a company, or series of companies, carrying on similar or related businesses, incur substantial debts in the form of unpaid VAT and then become insolvent, with a new company starting up the business again and in due course failing in its VAT compliance.[14]He pointed out that between them the Associated Companies owe the Commissioners in excess of £2.3 million which the Commissioners would be unable to recover because of their insolvency; that each of the Associated Companies has, through the directorship of Mr Collins, a connection with the Appellant; and that most of the Associated Companies carried on a business identical to, or similar to, the business of the Appellant. He said that the tribunal had accepted the Commissioners’ right to require security in the January Decision by reason of the connection between the Appellant and the Associated Companies, and notwithstanding that at that time the Appellant had complied with its VAT return and payment obligations. Now, with the passage of time, the cycle is repeating itself, with the Appellant in continuing default for substantial amounts of VAT and refusing all communication with the Commissioners with a view to rectifying that position. In these circumstances it is imperative that the Commissioners take the action which the legislation permits to protect the revenue.[15]As to the quantum of the security required, with respect to future liabilities, the amount (just over £58,000) has been determined using the formula usually applied by the Commissioners, and using the information in the VAT returns made by the Appellant (including the amended returns in the case where that had been accepted by the Appellant). To this had been added the amount of VAT assessed but unpaid at the time the Security Notice was issued, since in requiring security the Commissioners may look to the payment of any VAT that is due from the taxpayer as well as any VAT which may become so due.[16]Therefore, Mr Chambers submitted, the Commissioners had, having regard to their right to act to protect the revenue, acted reasonably both in the principle of requiring security from the Appellant and in fixing the amount for which security was required. The Appellant had no valid grounds for appealing against the Security Notice, and its appeal should therefore be dismissed. Our decision[17]It is our decision that the Commissioners have exercised their powers reasonably in this case in serving on the Appellant the Security Notice, and that therefore the Appellant’s appeal should be dismissed.[18]The relevant statutory provision is paragraph 4(2) of Schedule 11 to VATA 1994, which is in these terms, so far as relevant to this appeal:
“If they think it necessary for the protection of the revenue, the Commissioners may require a taxable person, as a condition of his supplying or being supplied with goods or services under a taxable supply, to give security, or further security, for the payment of any VAT that is or may become due from the taxable person….”
Paragraph 4(4) provides that any such security “shall be of such amount, and shall be given in such manner, as the Commissioners may determine.”[19]There is a succinct and helpful explanation of the tribunal’s role in a case such as this in the tribunal decision in the case of Christopher John Wraith (VAT Decision 20944) which we are happy to adopt:
“The cases of Mr Wishmore Ltd v Commissioners of Customs and Excise 1988 STC 723 and John Dee Ltd v Commissioners of Customs and Excise 1995 STC 941 have confirmed that the jurisdiction of the tribunal in an appeal is appellate, not supervisory, and that the tribunal must examine whether the Commissioners had rightly exercised their power to require security. The tribunal must consider whether the Commissioners have acted in a way in which a reasonable panel of Commissioners could have acted, whether they have taken into account some irrelevant matter or have disregarded something to which they should have given weight. It is not for the tribunal to exercise a fresh discretion, as the protection of the revenue is not the responsibility of any court or tribunal. In Commissioners of Customs and Excis e v Peachtree Enterprises Ltd 1994 STC 747 Dyson J held that the tribunal should not have regard to facts and matters arising after the date of the decision of the Commissioners to require security.”
[20]The facts in this case largely speak for themselves: the Appellant itself is in serious default, both with regard to its obligations to make VAT returns and its obligations to pay VAT properly assessed on it. At the time the Security Notice was served it had failed to make returns, or pay VAT, in respect of the two immediately preceding VAT quarters. The Commissioners had obtained security for payment of £15,800 of the VAT due, but even after that had been applied towards the outstanding VAT debt (including a small amount for penalties and interest), a sum in excess of £144,000 remained due.[21]The Commissioners had every reason to believe that this sum, and any future VAT due from the Appellant, was at risk, having regard to their experience with the Associated Companies. This issue, and the relationship of the Associated Companies to the Appellant, is the subject of the January Decision, to which reference should be made. It was there decided that, even though at the time the Commissioners had issued the notice requiring security on that occasion the Appellant was fully VAT compliant, the Commissioners had acted lawfully in requiring security from the Appellant since it was reasonable to take account of the history of the Associated Companies – in other words, it was a foreseeable risk that the Appellant would in due course follow the default pathway trodden by a number of companies with which it was, in some manner, related. That risk has now proved to be a fact.[22]In deciding whether or not in principle to require security from the Appellant as an act necessary for the protection of the revenue, the Commissioners acted reasonably in taking into account the default of the Appellant with regard to its VAT obligations and their experience with the Associated Companies – those are factors clearly relevant to their decision. There was nothing in the evidence before us to suggest that there were any relevant factors which the Commissioners failed to take into account, or that they had taken into account any factors which were not material to the decision they made. Mrs Ogburn and her colleagues gave the Appellant opportunities to explain its default position, and the Security Notice itself invites the Appellant to request a reconsideration of the requirement for security so as to bring to the attention of the Commissioners any matters which may call into question whether security is required, but the Appellant has chosen not to offer any information or comment, other than by way of its appeal to the tribunal. In principle, therefore, the Commissioners acted reasonably in reaching their decision to require the Appellant to provide security for its VAT payment obligations.[23]The decision of the Commissioners must also be reasonable with regard to the amount of security required. The Appellant’s Notice of Appeal to the tribunal claims that it is unreasonable because the amount of security required is excessive.[24]The basis on which the Commissioners calculated the amount of security is set out in paragraph 10(13) above. There are two component parts. One part looks to future VAT liabilities of the Appellant, using the VAT returns made by the Appellant for nine months of its trading after its initial trading period. The Commissioners took account of the amended return for the 04/08 quarter made after their review since the Appellant did not challenge that return, but where (for the 07/08 VAT quarter) the Appellant had challenged (by way of appeal to the tribunal) an amended assessment and that matter was unresolved at the time of the Security Notice, they left that out of account. The resulting figures were pro-rated to give a figure for two VAT quarters (or four monthly accounting periods if the Appellant opted to move to monthly accounting). That calculation seems to us entirely reasonable as an estimate of the revenue at risk in relation to future trading of the Appellant and for which the Commissioners may reasonably seek security “…for the payment of any VAT that …may become due from” the Appellant.[25]The second component part relates to the debt due to the Commissioners from the Appellant for unpaid VAT as at the date the Security Notice was issued. The Commissioners left out of their reckoning the amount of VAT (£36,718) which at that date was the subject of appeal in relation to the amended assessment for 07/08. In relation to each of the VAT quarters 10/08 and 01/09 the unpaid VAT arises from central assessments made by the Commissioners, the Appellant having failed to make returns for those quarters. We questioned Mrs Ogburn about those assessments and their quantum. She told us that they are generated centrally and essentially by computer in circumstances such as the Appellant’s where no return is made by a taxpayer, and that they are based on the amount of returns made by the defaulting taxpayer for the latest period when actual returns were made. Thus in the present case the last return made by the Appellant (as amended following review by the Commissioners) was in relation to the 07/08 quarter, and the amount of VAT was £79,195. For the 10/08 quarter the VAT assessed centrally was £76,566, and for the 01/09 quarter, £78,977. Mrs Ogburn told us that the Appellant could have challenged those assessments either by appeal, or by submitting their returns for those quarters. The Appellant had failed to take any action, so that the assessments stood and the VAT assessed was, at the date of the Security Notice, due and payable to the Commissioners.[26]We raised the point with Mr Chambers that, at the time the central assessments were made for the 10/08 and the 01/09 quarters (and, indeed, at the time of the issue of the Security Notice), part of the VAT assessed for the 07/08 quarter was under appeal, but that the central assessments were made without regard to that fact. That gave rise to the possibility that the central assessments might, with reference to preceding quarters, be excessive. Mr Chambers’s response was that as the central assessments were unchallenged by the Appellant, the VAT assessed under them was legally due, and as such the Commissioners are entitled to require security for it. He said that there might be an issue as to the judgment applied by the Commissioners in looking at the amount of security required for the payment of any VAT that may become due from a taxpayer, but once VAT has become due no judgment is required on the part of the Commissioners – once they have decided that it is necessary for the protection of the revenue to take security for unpaid tax then it must be reasonable that they require security for all of that unpaid tax.[27]Without necessarily accepting the entire generality of the point made by Mr Chambers, we are able to accept that in the present case it is reasonable for the Commissioners to require security for the amount of unpaid tax owed by the Appellant to the Commissioners at 16 April 2009 (approximately £144,000). The assessments giving rise to that unpaid tax were validly made and were unchallenged in any way. As such they gave rise to an indebtedness due from the Appellant to the Commissioners, which the Commissioners are entitled to recover, and as part of that process they are given the right to require security as a condition of allowing the Appellant to continue making taxable supplies. In our view it is reasonable for the Commissioners to require security for the whole amount due to them where they have concluded that the recovery of those amounts is at risk – any questions as to the correctness of the amounts assessed should be raised by the defaulting taxpayer when those assessments are made and, other than in exceptional circumstances (of which we see no evidence in the present case), not at a much later stage as a ground for challenging the right of the Commissioners to require security for amounts legally due to them.[28]We conclude, therefore, that the amount of security required by the Commissioners was reasonable in the present circumstances.[29]To complete matters we need briefly to deal with the Appellant’s point (in its Notice of Appeal) that the Commissioners have already taken security from the Appellant for the payment of tax. First, the terms of paragraph 4(2) of Schedule 11 to VATA 1994 contemplate that the Commissioners may require further security from a taxable person if they think that is necessary for the protection of the revenue – they can have as many bites of the security cherry as the circumstances warrant, if that is a reasonable decision on their part. In this case, because of the Appellant’s default, and in view of its increasing turnover, it was clearly prudent for the Commissioners to require further security. Secondly, the cash deposit held as the initial security was applied by the Commissioners in payment towards the mounting VAT debt which the Appellant was incurring, so that the balance of that debt, not to mention future VAT which might be due, was no longer to any extent secured. There is therefore no basis for the Appellant to challenge the Security Notice by reason of the Appellant having provided security on a previous occasion.[30]For these reasons we consider that the Commissioners acted reasonably in serving the Security Notice on the Appellant, and accordingly we dismiss the Appellant’s appeal. Right to appeal[31]We refer at paragraph 6 above to the right of the Appellant under Rule 38 of the Tax Chamber Tribunals Rules 2009 to apply in writing to the tribunal to set aside our decision.[32]In addition, the Appellant has a right to apply for permission to appeal against this decision pursuant to Rule 39 of the Tax Chamber Tribunals Rules 2009. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. EDWARD SADLER TRIBUNAL JUDGE RELEASE DATE: 19 November 2009