Beware of the Invigilator!

Once upon a time a Customs and Excise VAT officer visited a fish and chip shop and announced that he was to undertake invigilation, that is to say, remain on the premises and record the transactions that took place during a specified period of time.
The proprietor did not want the officer present and asked him to leave. However, the officer said that as he had the power to carry out the invigilation he intended to do so and refused to leave. The proprietor called his accountant who in turn sought our advice.
Statutory powers
Now we have always understood that Schedule 11 to the Value Added Tax Act 1994 did not give Customs and Excise any powers to remain on premises without the taxable person's permission, unless the officer was undertaking one of their specified powers of entry to examine records, take samples or inspect the premises.
We therefore suggested to the officer that as he was not exercising any of those powers, our client was within his rights to close the shop and sue the Commissioners for loss of earnings. The officer left. Clearly the officer had second thoughts about his powers and so we decided to pursue the point with the Commissioners of Customs and Excise. We have now been engaged in correspondence with the Commissioners for twelve months and still have not received a definitive statement of an officer's powers of invigilation.
In the first instance the officer and then the local Collector replied to our letters and confirmed, on the basis of legal advice from Customs and Excise HQ, that the Commissioners were of the view that while there was no specific single power in the VAT Act, invigilation was lawful within the general powers conferred by the Act.
We felt that the Commissioners were not addressing the point whether they had the power to stay on the taxpayer's premises to invigilate when it was abundantly clear the taxpayer did not wish them to do so, and put forward counsel's advice that officers carrying out invigilation against the owner's wishes were committing a trespass unless there was a specific right to do so. Counsel was of the opinion that there is no right outside the statutes (at common law for example) that allows Customs and Excise officers to enter premises and carry out invigilation and, if such a right did exist, it could only be granted by statute.
The Commissioners responded that they considered that they had the power to invigilate within their general powers to gather information in order to make an assessment. Obviously an invigilation may well lead to an assessment, but then so might intercepting the business telephone or planting a camera on the premises — but no-one would suggest that the Commissioners have the right within the Act to do those things.
What is 'reasonable'?
The Commissioners' view seems to be that they have the right to do anything that is reasonable (in their view) if it leads to an assessment. However, what is reasonable? It could be argued that intercepting phones calls could be reasonable in certain circumstances. In our view if the Commissioners are to have powers to override the wishes of the business, those powers must be properly conferred on them by Parliament and be exercised in a reasonable manner.
Our correspondence started with the invigilating officer in September 1999 and is now being dealt with directly by Customs and Excise HQ. They have now written to inform us that they are seeking further legal advice and in the meantime are temporarily suspending the use of invigilation in cases where the trader has not given consent. They also acknowledged that it is unacceptable for the legal validity of their powers of invigilation to be in question and that it may be necessary to amend the legislation to redefine existing powers to enable them to continue using that method of verifying traders' records.
To us this case was not an unusual call for help from the trader. He did not know the officer's powers, but neither it appears do the Commissioners.
The Commissioners have promised to keep us informed of developments and, with the advent of the Human Rights Act, it will be interesting to see how they proceed. We hope to be able to provide an update in due course.
Dave Sweeting is a partner in Independent VAT Consultants and Wilson Braithwaite Scholey, chartered accountants based in Leeds. He is a well-known lecturer on VAT matters and can be contacted on 0113 2340080.

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