Taxman claim for €759,000 in unpaid VAT from bankrupt PriceClub fails

A judge has upheld an objection by a former director of bankrupt supermarket PriceClub to a €759,000 VAT bill on the grounds that it was addressed in a way that meant he was not able to legally challenge it.

Back in 2005, the VAT department had sent Chistopher Gauci, a director of PriceClub, a letter requesting payment of Lm326,154 in tax arrears, holding him personally liable for the debt and giving him 30 days to settle the outstanding amounts.

Gauci had never been notified of any estimates before he received the letter and had asked for more information from the company liquidator.

He sent letters to the Commissioner for VAT, calling upon him to retract his claim, but did not receive a response.

In the absence of any other way forward, Gauci had sued the VAT department, asking the court to declare the decision to hold him personally responsible for the amounts due from PriceClub Operators Limited and carry out a judicial review of the VAT department’s actions.

The VAT department had justified its singling out the plaintiff by saying that Gauci had been a director at the time and therefore was responsible for the company’s obligations at law. The obligations pre-dated the dissolution of the company by a long way, it said, alleging that PriceClub had sent estimates to the Board of Appeal which contained “false figures and blatant irregularities.”

The VAT due had also remained unpaid, it pointed out, saying the demand notice and subsequent judicial letter were issued in accordance with the law.

In a judgment handed down in the First Hall of the Civil Court on Tuesday, Judge Silvio Meli noted that the VAT Department had asked the court to hold Gauci personally responsible for the amount owed by the company, including tax, administrative fines and interest.

The judge also observed that through these proceedings, the plaintiff was asking the court to declare the defendant’s department’s decision to hold him responsible for the amount due to it as null.

It was clear that when the tax fell due, the plaintiff had been director of the company and its representative and responsible for the obligations, said the court, agreeing that it appeared that the obligations preceded the liquidation of the company.

But it emerged that the estimate of tax requested by the Commissioner for VAT had not been sent to the plaintiff and addressed to him in his own name, but in the name of PriceClub Operators Limited.

This meant that the plaintiff was not in a position to exercise his right to contest the estimate before the Board of Appeal of VAT once the company went into liquidation, said the court.

Therefore, the demand notice eventually issued by the Commissioner for VAT was also invalid, ruled the judge, dismissing the VAT appeals board’s arguments and upholding the plaintiff’s request.