Prutish Gopaul v The Commissioners for HMRC

23 August 2023

[2023] UKFTT 728 (TC)

First-tier Tribunal

Mr Gopaul's company was accused of hiding its sales. The taxman won on the sales part, but lost on a technical point about hidden loans. So, Mr Gopaul still has to pay, but a lot less than the taxman first said.

Key Facts

•Mr Gopaul established Gopaul Ltd, a takeaway pizza business.
•HMRC issued Gopaul Ltd with VAT assessments and penalties for suppressed turnover.
•HMRC issued Mr Gopaul with Personal Liability Notices (PLNs) for VAT and corporation tax penalties.
•Gopaul Ltd entered liquidation.
•Mr Gopaul appealed the PLNs to the First-tier Tribunal (Tax Chamber).

Legal Principles

A person issued with a PLN can challenge the underlying company penalty and assessments.

Jason Andrew v HMRC [2016] UKFTT 0295 (TC), Bell & Hovers v HMRC [2018] UKFTT 225 (TC), Zaman v HMRC [2021] UKFTT 0228 (TC), HMRC v Zaman [2022] UKUT 252 (TCC)

In a best judgment assessment, HMRC must use their best judgment, and the tribunal considers if the amount is correct.

Fio’s Cash and Carry Ltd v HMRC [2017] UKFTT 346 (TC), Kyriakos Karoulla t/a Brockley's Rock v HMRC [2018] UKUT 0255 (TCC), Rahman (t/a Khayam Restaurant) v Customs and Excise Commissioners [2002] EWCA Civ 181, Pegasus Birds Ltd v Customs and Excise Commissioners [2004] EWCA Civ 1015, Mithras (Wine Bars) Limited v HMRC [2010] UKUT 115(TCC)

There is no statutory basis for the concept of staleness in issuing assessments; assessments can be made within time limits.

HMRC v Tooth [2021] UKSC 17

For a deliberate inaccuracy, there must be an intention to mislead the Revenue.

Tooth v HMRC [2021] UKSC 17, Auxilium Project Management v HMRC [2016] UKFTT 249 (TC)

Section 455 is an anti-avoidance section to discourage disguising distributions as loans.

RKW Ltd v HMRC [2014] UKFTT 151

Outcomes

Appeal partly allowed.

HMRC failed to prove deliberate behaviour regarding the s 455 part of the corporation tax liability.

VAT PLN upheld in full.

HMRC met the burden of proving deliberate understatement of turnover.

Corporation tax PLN reduced.

HMRC failed to prove deliberate behaviour in omitting s 455 liabilities.

Mitigation level confirmed.

HMRC's mitigation was deemed fair considering the assistance provided and lack of record-keeping by Mr Gopaul.

Prutish Gopaul v The Commissioners for HMRC

Key Facts

Legal Principles

Outcomes

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