Casa Frattini Ltd v Revenue & Customs

Factual and Procedural Background

The Appellant, Company A, appealed against tax assessments issued by the Respondents covering multiple periods from 03/04 to 03/05. The assessments included a total tax and interest amounting to over £47,000. Additionally, a misdirection penalty was raised, but no appeal was lodged against it; however, it would fall if the appeals against the assessments succeeded.

Company A was represented by its director, Attorney A, who gave evidence. The Respondents presented evidence from two officers involved in the investigation and appeal process.

The core dispute concerned whether Company A was carrying on a restaurant business at the relevant premises or whether the business was carried on by an individual, hereafter referred to as Director A. Company A held the lease to the premises, but Director A contended that she, not Company A, conducted the restaurant business. Director A did not attend the hearing and was not represented, believed to be residing abroad.

The Respondents based their assessments on the view that Company A was operating the restaurant business. Company A denied this, asserting a legal distinction between the company and Director A as separate entities.

Subsequent events included a change of directorship in Company A, with Attorney A becoming director after Director A resigned. Company A’s shareholding also changed hands. There was a sale agreement concerning the restaurant business and lease, and correspondence relating to outstanding tax and payments was exchanged with the Respondents.

Legal Issues Presented

1. Whether Company A was carrying on a restaurant business and thus liable for the tax assessments issued by the Respondents;
2. Whether Director A, as an individual separate from Company A, was the true operator of the restaurant business, thereby affecting the validity of the tax assessments against Company A;
3. Whether the assessments and the misdirection penalty were properly issued given the facts and evidence presented.

Arguments of the Parties

Appellant's Arguments

• Company A never carried on the restaurant business; it only held the lease for the premises.
• Director A was the actual operator of the restaurant business throughout the relevant periods.
• The Respondents misunderstood the distinction between Company A and Director A, failing to recognize them as separate legal entities.
• Assertions were made that the Business Sale and Purchase Agreement did not reflect the true position, and that the Respondents’ evidence was flawed or unreliable.
• Letters and documents were produced to suggest that Director A, not Company A, was responsible for trading activities, including VAT payments and supplier dealings.
• Challenges were made to the credibility of certain evidence, including a letter from a third party described as having conflicts of interest.

Respondents' Arguments

• Company A was incorporated as a restaurant business and registered for VAT as such.
• Company A held a lease to the premises and submitted VAT returns showing significant turnover.
• Visits and investigations revealed that supplies, invoices, and business operations were conducted in the name of Company A.
• Evidence included signed documents, VAT returns, supplier invoices, and sales invoices bearing Company A’s name and trading style.
• The Respondents maintained that the assessments were properly made against Company A, who was the legal entity carrying on the business.
• The Respondents rejected the contention that Director A alone was the operator, emphasizing the absence of evidence to displace the presumption that Company A was the taxable person.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The tribunal carefully examined the evidence presented by both parties, focusing on the legal distinction between Company A and Director A. The court acknowledged that Company A was incorporated and registered as a restaurant business, held the lease to the premises, submitted VAT returns, and issued invoices in its name or trading style.

Although the Appellant argued that Director A was the true operator, the tribunal found that the Respondents had made the assessments with full recognition of the separate legal identities of the company and the individual. There was no evidence of piercing the corporate veil.

The court noted that some invoices lacked the trading style statement, but given the limited number of such invoices and absence of other evidence (such as signage or menus), the tribunal could not conclude that Director A alone carried on the business.

Assertions regarding the Business Sale and Purchase Agreement and subsequent correspondence were considered but found insufficient to overturn the Respondents’ position. The tribunal was not persuaded by the Appellant’s challenges to the credibility of certain evidence or to the validity of the assessments.

Overall, the tribunal concluded that the Appellant had not discharged the burden of proof to show that the assessments against Company A were incorrect.

Holding and Implications

The tribunal DISMISSED the appeals by Company A against the tax assessments and the misdirection penalty.

The direct consequence is that Company A remains liable for the tax and penalty amounts assessed by the Respondents. No new legal precedent was established by this decision, and the ruling primarily affirms the application of established principles regarding corporate identity and tax liability in the context of business operations.