BPF Tanks Ltd v Revenue & Customs (VAT - SECURITY- REQUIREMENT FOR : Vat - security- requirement for)

Factual and Procedural Background

The Appellant, a company engaged in the design and manufacture of water tanks and storage systems, appealed against a Notice requiring it to provide security for Value Added Tax (VAT) arrears. The Notice demanded security of £110,930.47 (or £102,580.47 if monthly VAT returns were filed) and was issued by the Respondents on 31 October 2018, later affirmed in a review decision dated 8 April 2019. The Appellant's history includes two predecessor companies in the same trade, both of which became insolvent owing significant VAT and PAYE debts to the Respondents. The Appellant itself had multiple late or unpaid VAT returns, with substantial arrears persisting over several periods. The Respondents considered the Appellant a risk to the revenue and issued the Notice accordingly. The Appellant sought a review and subsequently appealed the requirement to provide security.

Legal Issues Presented

1. Whether it was reasonable for the Respondents to require the Appellant to provide security for VAT arrears on 31 October 2018.
2. Whether the review decision on 8 April 2019 affirming the original requirement to provide security was reasonable.
3. Whether the Tribunal's jurisdiction allows consideration of facts known at the date of the review decision or only those known at the date of the original decision.
4. Whether the history of the Appellant’s two predecessor companies was a relevant factor in assessing the risk to the revenue.
5. Whether the existence of a Time to Pay arrangement covering PAYE arrears affected the reasonableness of requiring security for VAT arrears.

Arguments of the Parties

Appellant's Arguments

• It was unreasonable for the Respondents to require security for VAT arrears when a Time to Pay arrangement was in place covering outstanding PAYE debts.
• The history of the two predecessor companies, which had become insolvent due to external factors, should not be taken into account against the Appellant.
• The requirement to provide security prevented the Appellant from accepting larger contracts, thereby limiting its ability to generate sufficient profit to pay VAT arrears.
• The Appellant sought a Time to Pay arrangement to clear arrears but contended it was unable to both provide security and enter such an arrangement.

Respondents' Arguments

• The Time to Pay arrangement only covered PAYE arrears and did not include VAT arrears, which remained substantial and unpaid.
• The Appellant had a history of late filing and non-payment of VAT returns, creating a risk to the revenue.
• The history of the two predecessor companies was relevant due to the shared director, trade, and business address, indicating a pattern relevant to the risk assessment.
• The reviewing officer confirmed the requirement for security based on the Appellant’s non-compliance alone, independent of predecessor companies.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
John Dee Limited v Customs & Excise Commissioners [1995] STC 941	Defines Tribunal's jurisdiction: whether it appeared to the commissioners requisite to require security, without exercising fresh discretion.	The Tribunal applied this to limit its review to whether the Respondents acted reasonably and lawfully, not substituting its own discretion.
Customs and Excise Commissioners v Peachtree Enterprises Limited [1994] STC 747	Tribunal must consider facts existing at the time of the challenged decision; subsequent facts cannot vitiate a lawful decision.	The Tribunal held it must focus on facts as they stood at the time of the original and review decisions, rejecting consideration of later events.
Gora v HMRC [2003] EWCA Civ 255	Tribunal’s jurisdiction in goods restoration appeals allows considering facts found at hearing date, even if differing from original decision-maker’s facts.	The Tribunal distinguished this jurisdiction as not applicable to security notice appeals, which derive from a different statute.
HMRC v Behzad Fuels (UK) Ltd [2019] EWCA Civ 319	Confirms Gora jurisdiction in certain appeals regarding seized goods.	The Tribunal noted this but reaffirmed it was not bound by this reasoning in the context of VAT security notices.
Southend United Football Club Limited v HMRC [2013] UKFTT 715	Where a decision is flawed but inevitably would have been the same, the appeal should be dismissed.	The Tribunal applied this principle to uphold the decision despite potential flaws, as the outcome would have been the same.

Court's Reasoning and Analysis

The Tribunal first established that its jurisdiction was to assess whether the Respondents' decision to require security was reasonable and not to substitute its own discretion. It emphasized that only facts known at the time of the original decision (31 October 2018) or the review decision (8 April 2019) could be considered, rejecting arguments that facts arising later should affect the decision.

The Tribunal found the Appellant’s history of late and unpaid VAT returns, substantial arrears, and previous insolvencies of related companies were relevant factors in assessing risk to the revenue. The Appellant’s misunderstanding of the Time to Pay arrangement’s scope did not render the Respondents’ decision unreasonable, as the arrangement covered only PAYE arrears, not VAT arrears.

Although the reviewing officer erred in basing the review decision solely on facts as of the original decision date rather than the review date, this error was immaterial because the Appellant’s position had worsened, making it inevitable that security would still be required.

The Tribunal also considered the Appellant’s argument that the predecessor companies’ history should not have been considered. It concluded the links between the companies justified taking their history into account. Even if this factor was improperly considered, the reviewing officer’s reliance on the Appellant’s non-compliance alone meant the decision would stand under established legal principles.

Arguments regarding the Appellant’s inability to take larger contracts due to the security requirement were noted but deemed irrelevant to the reasonableness of the Respondents’ decision.

Holding and Implications

The Tribunal DISMISSED the Appellant’s appeal.

The decision confirms that the Tribunal’s role in appeals against VAT security notices is limited to reviewing the reasonableness of the Respondents’ decision based on facts known at the relevant decision dates, without substituting its own discretion. The Appellant’s prior companies’ insolvency history and the Appellant’s VAT compliance record are relevant considerations in assessing risk to the revenue. The existence of a Time to Pay arrangement covering PAYE arrears does not negate the reasonableness of requiring security for VAT arrears. No new precedent was established; the ruling directly affects the parties by upholding the requirement for security.