Tribunal Upholds VAT Assessments, Penalties, and Director's Personal Liability in Conditionaire Energy Savers Ltd Case

Citation: [2023] UKFTT 977 (TC)
Judgment on


In the First-tier Tribunal (Tax Chamber) case of Conditionaire Energy Savers Ltd & Another v The Commissioners for HMRC [2023] UKFTT 977 (TC), the tribunal dealt with key issues surrounding VAT assessments, penalties, and director’s personal liability. The case presents a detailed analysis of the principles involved in reaching a judgment on these matters. This article will dissect the legal principles applied, linking the analysis directly to the case’s findings.

Key Facts

Conditionaire Energy Savers Ltd (“the Company”) faced a ‘best judgment’ VAT assessment and a penalty assessment for failing to keep documents necessary to verify VAT returns. Peter Ernest Williams, the sole director, separately appealed a Personal Liability Notice (PLN) against him for the same penalty amount. The tribunal was tasked with determining whether the assessments made by HMRC were correct and if the director could be held personally liable. Key to the case was the transfer of the company’s documentation to Envirotech Limited pursuant to a sale agreement, which purportedly precluded the Company from making the necessary disclosures to HMRC and led to the alleged inability to verify VAT returns.

VAT Assessment and Best Judgment

The tribunal acknowledged the statutory obligation under s.73 VAT Act 1994 requiring businesses to maintain records that verify VAT returns. It stressed the taxpayer’s burden to disprove a ‘best judgment’ assessment by providing concrete evidence supporting their VAT return accuracy, citing cases such as Pegasus Birds Ltd v. CEC [2004] and Mithras (Wine Bars) Ltd v HMRC [2010].

Penalties for Deliberate and Concealed Inaccuracies

The case addressed penalties under Schedule 24 Finance Act 2007, examining the threshold for conduct to be considered ‘deliberate and concealed.’ Referencing the case law Auxilium Project Management v HMRC [2016] and the Supreme Court’s judgment in HMRC v Tooth [2021], the tribunal embraced the subjective test requiring proof that the taxpayer knowingly provided HMRC with an inaccurate document with the intention of being relied upon as accurate.

Personal Liability Notice (PLN)

For director’s personal liability, Paragraph 19, Schedule 24, Finance Act 2007 was central. The tribunal observed the requirement for HMRC to show that any inaccuracy in the VAT returns was attributable to the company’s officer. The case presents a straightforward application of this principle as Peter Ernest Williams, being the sole director, was deemed to have the inaccuracy attributable to him, thus upholding the PLN.


After considering the submitted evidence, the Tribunal dismissed the appeals, upheld the ‘best judgment’ VAT assessment, the Schedule 24 penalty assessment, and the PLN. It determined that the company did not demonstrate with evidence that their VAT returns were correct, and the existing inaccuracies fell under the umbrella of deliberate and concealed based on a subjective test. Williams was found personally liable as the sole director and officer of the company, where the inaccuracy was attributed to him.


The tribunal’s ruling in Conditionaire Energy Savers Ltd & Anor v The Commissioners for HMRC enforces the rigid expectations placed on taxpayers to maintain and provide records substantiating their VAT return claims. It also clarifies the high bar set for the designation of inaccuracies as ‘deliberate’ and ‘concealed’, demanding a discernibly intentional act by the taxpayer. Furthermore, it affirms that directors can face personal liability for inaccuracies attributed to them, reinforcing the principle that holding a company office comes with the responsibility for ensuring compliance with tax obligations.

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