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Woodspeen Ltd v. Commissioners of Customs and Excise

[1990] LON 1913Y

(Judgment by: Sir Barry Shaw (Tribunal Chairman))

Between: Woodspeen Ltd (LON/90/1913Y) - Appellant
Commissioners of Customs and Excise - Respondents

Value Added Tax Tribunals, London Tribunal Centre

Sir Barry Shaw (Tribunal Chairman)

Judgment date: 24 June 1991

Sitting in public at Oxford combined Court Centre

Judgment by:
Sir Barry Shaw (Tribunal Chairman)


This is an appeal by Woodspeen Ltd against an assessment of £43,186.87 for value added tax, which assessment was made by the Respondent Commissioners on 4 October 1989 in respect of the period 13 August 1987 to 31 July 1989.

The grounds upon which the assessment was made appear from the Respondents' Statement of Case dated 8 November 1990 as follows:

'1. WOODSPEEN LTD (hereinafter called "the Appellant") carries on business as a Contractor from premises at Swan Yard Market Place, Cirencester, Gloucs.

2. The Appellant is registered for value added tax with effect from 13 August 1987 under registration number 466 8471 05.

3. Officers of Customs and Excise visited the Appellant's premises on 3 and 14 May 1989 and inspected the Appellant's records and accounts. From information obtained at the time of the visit, it appeared to the Commissioners that the return(s) made by the Appellant for the purposes of value added tax were incorrect in that :-

4. The Appellant failed to account for output tax on supplies of building work in respect of a development at Manor Farm Estate, Elmstone, made to Breakfree Ltd.

5. The appellant contends that no supplies have been made to Breakfree Ltd. It also contends that any monies paid by it to Breakfree Ltd were not paid in respect of supplies made by it to Breakfree Ltd and that development is eligible for zero rating under listed building regulations so that the supplies made can be zero rated approved alterations.

6. The Commissioners contend that there is no joint venture or partnership between the Appellant and Breakfree Ltd and no evidence of such has been provided to the Commissioners. They also contend that no evidence has been adduced by the Appellant to support its contention that the development concerned is a listed building and that the works carried out are approved works.

7. On 4th day of October 1989 the Commissioners of Customs and Excise assessed the amount of value added tax due from the Appellant to the best of their judgment in respect of the period 13.8.87 to 31.7.89 in the sum of £43186.87 and duly notified the Appellant of the said assessment.'

The Appellant's Notice of Appeal in respect of other disputed decision of 4 October 1989 gave as the reason for appealing -

'Assessment incorrectly issued as no supply made'.

Upon the appeal being called on for hearing the Appellant did not appear and was not represented. Mr R G Topping, of the Solicitor's office of HM Customs and Excise, appeared on behalf of the Respondents.

There was before the Tribunal a letter dated 10 January 1991 addressed to the London Tribunal Centre by Messrs Solomon Hare Chartered Accountants, 21 Market Place, Cirencester, who, on behalf of the Appellant, had previously been in communication with HM Customs and Excise concerning the appeal of Woodspeen Ltd, in which they wrote:-

'We apologise for the delay in replying to your outstanding correspondence regarding the above case. However, the effects of the appointment of the Law of Property Act receiver has meant that the company now has no liquid funds and as such is totally unable to fund its defence in respect of a Tribunal hearing. Also as the Law of Property Act receiver has control over all the effective assets of the company it would appear that the company will be insolvent once the receiver has finished his administration would either go into liquidation or be struck off.

We suggest that the case cannot proceed any further.'

Mr Topping applied to the Tribunal to amend paragraph 3 of the Respondents' Statement of Case by substituting for 14 May 1989 the date 17 May 1989. This amendment was allowed.

Mr Topping then handed in to the Tribunal a folder (marked 'A') containing copy documents paged 1-43, to which the Respondents wished to refer. He submitted that the Tribunal could, and properly should, proceed to consider the appeal in the absence of the Appellant in accordance with the provisions of rule 26(2) of the Value Added Tax Tribunals Rules 1986.

In the light of the letter dated 10 January 1991, written by Messrs Solomon Hare, as already referred to, (a copy of which is contained in Exhibit 'A' at page 16) the nature of the case and the circumstances appearing from the documents before the Tribunal, and subject to the service of any decision reached or direction made by the Tribunal upon any receiver appointed in respect of the assets and affairs of the Appellant, the Tribunal acceded to the Respondents' submission and request and proceeded to hear the appeal.

Mr T Hillier, a senior officer of HM Customs and Excise, gave evidence on behalf of the Respondents. From his evidence the Tribunal was satisfied as to the following matters.

He visited the Appellant's books and records. He examined records of purchases by the Appellant of building goods and materials and records of building services. He was satisfied that the Appellant was a builder providing building services.

Breakfree Ltd, Mr Hillier established, was a company the business of which was that of providing and selling houses. Woodspeen was building these. The Appellant's books showed that in respect of another company, Ampney Homes Ltd, which also provided building services, the Appellant invoiced Ampney Homes Ltd and charged VAT in the normal manner but in respect of Breakfree Ltd the Appellant drew up no paper work at all. The Appellant was carrying out building work on houses which Breakfree was selling to the public. From Mr Hillier's evidence, uncontradicted as it was, it appeared to be clear that the Appellant was providing a service to Breakfree Ltd. The Appellant was registered for VAT on 13 August 1987. Breakfree was not registered for VAT. No partnership between the Appellant and Breakfree was registered for VAT purposes. Mr Hillier saw no evidence of a joint venture between the Appellant and Breakfree. No claim or suggestion of such a joint venture was made to Mr Hillier on his visit to the Appellant on 17 May 1989 but it is to be noted that he did not then see anyone other than a lady bookkeeper.

By letter dated 9 March 1990 written to the Appellant (Exhibit A, page 41) the Respondents requested, inter alia, 'a copy of the agreement between the parties relating to their joint trading venture'. Messrs Solomon Hare, in replying to this letter on 18 June 1990 (Exhibit A, pages 42 and 43) wrote, inter alia, that 'There is an agreement in writing and a copy of this will follow shortly'. In this connection it seems that it was not until 21 February 1991 that Messrs Solomon Hare, in response to a letter from the Tribunal, enclosed -

'A copy of the written agreement for a joint venture as a partnership between Woodspeen Ltd and Breakfree Ltd related to the works at Manor Farm, Elkstone'.

The enclosure was a handwritten copy of a letter dated 18 June 87 (sic), the author of which appears to be Mr Robert Seed, who is a director of Woodspeen Ltd and of Breakfree Ltd. But there was before the Tribunal no satisfactory evidence, either as to the authorship of the letter or the identity of 'Glenys', to whom it was addressed and by whom it was seemingly marked 'Agreed'. Correspondence suggests that this was Mrs Glenys Isaac, who is indicated to have been a 50 per cent owner of both Woodspeen Ltd and Breakfree Ltd. 'S Seed' appears to have been Mrs Sue Seed, also indicated by correspondence to have been a 50 per cent owner in both companies. The letter, and thus the suggested evidence of joint venture between the Appellant and Breakfree Ltd, is in the following terms:

' 18 June 87

Dear Glenys,

Units ABCE & F Elkstone

As discussed on the phone we have the opportunity of purchasing the balance of the site at Elkstone but I am having some problems with regard to raising the finance for the purchase and construction through Woodspeen owing to the large commitment of that company at the present time.

I have discussed the matter with the seller who has stated that they would be prepared to lend the whole of the purchase monies but only through a separate company holding title to that part of the land.

My own feeling is that we should take advantage of this offer and form another company with the same shareholders as we have in Woodspeen Ltd. Woodspeen would still be the operating company managing and the new company would only hold the land on which the land and construction finance would be raised.

The profits of the whole venture would still be dealt with as agreed on Woodspeen Ltd and the whole matter treated as a joint venture on Partnership basis between the two companies. In any event I am told that the Inland Revenue would treat the two companies as a single activity from a corporation tax point of view - which of course is entirely in accord with our wishes.

If you agree to this arrangement between Woodspeen and the new company then it would reduce admin. costs having Woodspeen as the managing partner and all transactions being dealt with in the one account and set of books.

Sue has already agreed that we should go along this route and has signed this letter as confirmation. If you are happy please do the same on the attached photocopy and return the same to me.

We all send our love, Confirmed S Seed.



Glenys Isaac

Breakfree Ltd, however, was not at 18 June 1987 registered as a company and had no existence at that date. No subsequent or any company resolutions were produced to the Tribunal.

The Tribunal concluded that there was no satisfactory evidence of joint venture or partnership produced to the Tribunal and no evidence of what was to be the subject of any joint venture. The Tribunal, without the benefit of assistance and evidence from the Appellant, is unable to conclude that any joint venture or partnership between the Appellant and Breakfree Ltd was ever created in law or was sufficient to comply with the requirements of the Value Added Tax 1983, section 30, or permit any group registration by virtue of the provisions of section 29.

Without the benefit of evidence for, or on behalf of, the Appellant, the Tribunal is unable to find established any basis of fact upon which this appeal can succeed.

The appeal is accordingly dismissed.


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