Avocet firm's 'thoroughly contradictory' £240,000 tax appeal

EXCLUSIVE by DOUGLAS SHEPHERD

A subsidiary of the insolvent Avocet Infinite group failed to settle a £187,000 tax bill levied on a property transaction, then attempted to challenge Revenue Scotland's imposition of a £58,000 penalty for non-payment.

The appeal to the Tax Chamber First Tier Tribunal for Scotland was lodged by Martin Frost, the group's principal director on behalf of Avocet Farms Ltd., a business which traded under three different names in the space of four years.

Revenue Scotland had originally served the notice seeking Land and Buildings Transaction Tax (LBTT) on Avocet Agriculture Ltd. relating to the multi-million pound purchase of Harcarse Hill farm, Berwickshire, in 2016.

The firm became known as Avocet Farms in 2017 before a further name change to Orrdone Farms in 2019. The business is now in the hands of joint receivers with debts estimated to total at least £3.5 million. HMRC is listed as one of the creditors.

The complicated tale of Mr Frost's attempt to have the tax assessment re-calculated is set out in a  decision notice by tribunal president Anne Scott which followed a public hearing - demanded by Mr Frost - last August. He claimed Revenue Scotland had "sued the wrong party".

But Ms Scott explains the revenue had not sued anyone: they had simply responded to Mr Frost's notice of appeal. He had argued that the tribunal “… is bias (sic) in not ordering Revenue Scotland to commence again against Avocet Farms Limited”. This tribunal has no such power, Ms Scott said.

The history of the case showed that on 5 October 2018, Revenue Scotland had issued a Penalty Assessment Notice to Avocet Farms Limited. That Notice was issued following the lodgement on 30 August 2018 of a Land and Buildings Transaction Tax (“LBTT”) return which had had an effective date of 16 October 2016 so the return was very late as it should have been filed within 30 days of the effective date and the tax paid then.

"The name of the buyer was stated to be Avocet Agriculture Limited. The return was lodged by the appellant’s solicitor (“the agent”). The transaction related to the purchase of Harcase Hill Farmhouse for a total consideration which was stated at £5 million. The LBTT amounted to £187,000.15. The tax, which was due for payment by 15 November 2016, has not been paid."

Avocet Agriculture Limited had changed its name to Avocet Farms Limited on 23 June 2017; so the penalties were assessed on Avocet Farms Limited. The Penalty Assessment Notice was in the sum of £57,958 being penalties for late filing of the return, late payment of the tax and interest.

The agent for the company wrote to Revenue Scotland on 5 November 2018  and requested a review of the Penalty Assessment Notice. Revenue Scotland issued a review decision upholding the penalties but that letter was incorrectly addressed to Avocet Agriculture Limited.

Mr Frost lodged an appeal with the Tribunal in the name of Avocet Agriculture Limited referring to the penalties and the £5 million transaction.

"He makes it clear that the decision that he appeals is the review decision issued by Revenue Scotland on 20 December 2018. He enclosed a copy. The stated Ground of Appeal was that in 2018 the price had been reduced to £4 million and there should therefore be no penalties", according to the tribunal decision notice.

In April 2019 Mr Frost responded stating that the appellant in the appeal should be Avocet Farms Limited which had previously been known as Avocet Agriculture Limited. 

The company currently known as Avocet Agriculture Limited had no connection with the transaction. The consideration had been reduced by £1 million, the LBTT should be sought from Avocet Farms Limited and recalculated. But Revenue Scotland sought an Order dismissing the appeal on the basis that there had not been compliance with the Directions.

Mr Frost was directed to intimate in writing to the Tribunal whether or not he wished to continue with an appeal by Avocet Farms Limited and, if so, that would be treated as an application to substitute Avocet Farms Limited as the appellant. . In the event that that course of action was adopted then the appellant was directed to lodge with the Tribunal details of the reasons why the return was late and the tax not paid. The appellant was put on notice that if there was no compliance then the appeal would be dismissed.

The decision notice continues: "The appellant responded in a thoroughly contradictory fashion and stated: 'I formally intimate that Avocet Agriculture Limited wishes to appeal this Order for after discussing such with a retired judge and Senior Scottish counsel it is their opinion that under Scots law it is not possible to transcribe one limited company to another. … Separately, I have forwarded extended grounds for an Appeal by Avocet Farms Limited.'”

Mr Frost argued that although the transaction was in 2016, the purchase price was altered in 2018 from £5 million, the figure in the LBTT return, to £3.7 million and therefore Revenue Scotland has overstated the tax, interest and penalties.

Ms Scott states: "The first and most obvious point to make is that most recently lodged Grounds of Appeal state that the purchase price had been altered to £3.7 million. He had previously stated £4 million. In his oral submission he argued that the purchase price had initially been reduced to £4.2 million and then to £3.2 million.

"However, it also transpired that the buyer and seller were connected parties so the transaction had not been at arm’s length.  Secondly, and far more importantly, Mr Frost should be well aware that those are not adequate Grounds of Appeal. 

"He has never explained why no tax has been paid. It was only at the hearing that he offered any explanation as to the reason for the late return and that was little and too late. He is therefore in breach of the Rules.

"Even at this hearing Mr Frost has not offered any explanation for the failure to pay any tax at all.  At the hearing he made a bland and unsupported assertion that the agent had been at fault for lodging the return late. 

"However, when he was asked why the appeal had been lodged in the wrong name he also blamed the agent until it was pointed out to him that he had hand written the appeal and not only had he put the wrong name in the box for “appellant” he had also stated  that he was signing the appeal for Avocet Agriculture Ltd."

And Ms Scott concluded: "Since there is no valid Notice of Appeal the appeal, such as it is, is dismissed."