Universal Flooring (Contractors) Limited & Anor. v The Commissioners for HMRC
[2023] UKFTT 282 (TC)
Thomas Hanlon v The Commissioners for HMRC
27 February 2024
[2024] UKFTT 175 (TC)
First-tier Tribunal
A company director was hit with a big tax bill because his company didn't pay VAT. He said he didn't know, but the judge didn't believe him. The judge said the director was dishonest because he didn't look into what was happening and avoided the tax office. He had to pay the whole amount.
Key Facts
- •Thomas Hanlon appealed a £242,243 VAT penalty levied on him under s.61 VATA for Cardiff Cash & Carry Ltd's (the Company) failure to file VAT returns.
- •The Company, now in liquidation, did not appeal the penalty.
- •Hanlon was the sole director of the Company.
- •Hanlon delegated tax responsibilities to M&O Trading, claiming ignorance of the VAT evasion.
- •HMRC argued Hanlon was dishonest and entirely responsible for the evasion.
- •Hanlon avoided multiple HMRC meetings and lacked documentation supporting his claims.
- •HMRC presented evidence suggesting Hanlon understood VAT obligations and deliberately avoided compliance.
Legal Principles
Section 61 VATA allows recovery of a penalty from a corporate officer if attributable to their dishonesty.
Value Added Tax Act 1994 (VATA), sections 60 and 61
The test for dishonesty is objective, based on 'ordinary standards' or 'normally acceptable standards of honest conduct,' considering the individual's knowledge and attributes.
Byers v Revenue and Customs Commissioners [2019] UKFTT 310 (TC); Ivey v Genting; Royal Brunei v Tan; Barlow Clowes
Dishonesty includes both acts and omissions; an honest person does not deliberately ignore potential wrongdoing.
Royal Brunei Airlines
Outcomes
The appeal was dismissed.
The Tribunal found Hanlon's conduct dishonest, either by knowing of the evasion or deliberately ignoring it. His lack of evidence, inconsistent statements, and avoidance of HMRC interaction supported this conclusion.
The full penalty was attributed to Hanlon.
Hanlon was the sole director, and no evidence supported the involvement of others as managing officers under s.61(6) VATA.