Coonley Trading Limited & Anor v The Commissioners for HMRC
[2023] UKFTT 452 (TC)
Aizio Associated Limited & Ors v The Commissioners for HMRC
29 June 2023
[2023] UKFTT 576 (TC)
First-tier Tribunal
A company and its directors were fined for mistakes on their tax returns. Some fines were cancelled because important documents were lost, not because of deliberate wrongdoing. Other fines remained because of mistakes they made on purpose, even though they didn't try to hide them. The directors still had to pay some of the fines.
Key Facts
- •Aizio Associates Limited appealed against a £21,457.55 VAT penalty.
- •Timothy Campbell and David Billard appealed against Personal Liability Notices (PLNs).
- •HMRC issued the penalty due to inaccuracies in Aizio's VAT returns.
- •Aizio's records were lost due to a stolen laptop.
- •The Tribunal considered whether the returns were inaccurate when filed or became inaccurate due to the loss of evidence.
- •The Tribunal also considered whether the directors' behavior was deliberate or careless and the appropriate penalty reduction.
Legal Principles
Penalties for VAT inaccuracies are governed by Schedule 24 of the Finance Act 2007.
Finance Act 2007, Schedule 24
A 'deliberate inaccuracy' requires intention to mislead HMRC.
HMRC v Tooth [2021] 1 WLR 2811
The right to deduct input tax is subject to providing evidence of payment.
Value Added Tax Act 1994, sections 24-26; Value Added Tax Regulations 1995, Regulation 29
HMRC can assess VAT due to best judgment if returns are incomplete or incorrect.
Value Added Tax Act 1994, section 73
On appeal against a PLN, HMRC must show it was validly issued; the appellant must show the underlying assessment was wrong.
Zaman v HMRC [2022] UKUT 252 (TCC)
Outcomes
Aizio's appeals for periods 11/18, 05/19, 12/19, 02/20, and 03/20 were allowed.
The Tribunal found that the returns were accurate when filed; the subsequent loss of evidence did not make them retrospectively inaccurate.
Aizio's appeals for periods 08/19, 11/19, and 01/20 were dismissed.
The Tribunal found deliberate but not concealed inaccuracies in these returns due to undeclared output tax.
The PLNs against Campbell and Billard were confirmed, reduced to reflect only the upheld penalties.
The directors' actions were found to be responsible for the inaccuracies.