Mauheed Johngir & Anor v The Commissioners for HMRC
[2024] UKFTT 274 (TC)
Ancient & Modern Jewellers Limited & Anor v The Commissioners For HMRC
20 August 2024
[2024] UKFTT 774 (TC)
First-tier Tribunal
A jewelry company wrongly used a tax scheme to pay less VAT. The tax authorities investigated, found the company deliberately made mistakes, and issued a large tax bill and penalties. The court ruled against the company, saying the tax authorities acted fairly and the company's actions were intentional.
Key Facts
- •Ancient & Modern Jewellers Ltd (A&M) and its director, Zachary Coles (ZC), appealed HMRC's VAT assessments (£5,004,595), penalties (£2,802,573.20), and a personal liability notice (PLN) for ZC.
- •The assessments were based on A&M's incorrect use of the second-hand margin scheme for VAT.
- •A&M argued the assessments were not made to HMRC's best judgment and were excessive.
- •A&M also argued the penalties were not justified as the errors were not deliberate.
- •ZC argued the PLN should be set aside as the errors were not attributable to him.
- •HMRC's investigation involved several visits and SCAC requests to other EU member states' tax authorities.
- •Extensive documentary and witness evidence was presented (over 15,000 pages of documents).
Legal Principles
Best judgment assessments under s73 VATA.
Van Boeckel v CEC [1981] STC 290, Rahman t/a Khayam Restaurant v CEC [1998] STC 826, Pegasus Birds Ltd v CEC [2004] EWCA Civ 1015
Operation of the second-hand margin scheme under Articles 311-315 of the Principal VAT Directive (PVD) and s50A VATA.
Articles 311-315 Principal VAT Directive (PVD), section 50A VATA, Notice 718
Penalties for deliberate or careless inaccuracies in VAT returns under s97 and Sch 24 FA 07.
Section 97 and Schedule 24 Finance Act 2007
Personal liability notices (PLN) under paragraph 19 Sch 24 FA07.
Paragraph 19 Schedule 24 Finance Act 2007
Liability for VAT fraudulently lost in supply chains.
UAB Litdana v Valstybinė mokesčių inspekcija (C-624/15)
Deliberate conduct includes 'blind eye knowledge' as per CPR Commercials Ltd v HMRC [2023] UKUT 61
CPR Commercials Ltd v HMRC [2023] UKUT 61
Outcomes
Appeal dismissed.
Assessments were made to HMRC's best judgment; A&M failed to demonstrate assessments were excessive; A&M deliberately rendered inaccurate VAT returns; penalties and PLN were justified.
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