Tribunal Rejects Late Appeal in VAT Assessment Case, Upholds Personal Liability Notice

Citation: [2024] UKFTT 52 (TC)
Judgment on

Introduction

The First-Tier Tribunal (Tax Chamber) decision in Laurence Onwufuju v The Commissioners for HMRC [2024] UKFTT 52 (TC) addresses several key topics in UK tax law, particularly relating to VAT assessments, penalties, and the obligations of company officers. This case represents an appeal against the imposition of a Personal Liability Notice (PLN) for assessed VAT. The Tribunal had to decide on two main issues: the appellant’s late appeal against the PLN and the prospects of success of the substantive appeal against the PLN if the late appeal was permitted.

Key Facts

The appellant, Mr. Laurence Onwufuju, served as a director of Webstar Dixon Limited, which was assessed by HMRC for VAT underpayments and subsequently issued a company penalty based on deliberate behavior. A PLN was then issued to Mr. Onwufuju personally, making him liable for the company’s penalty. The crux of the matter involved the timing of the appeal against the PLN and the actual prospects of success of the appeal.

The appellant contended receiving the PLN late, which accounted for his delayed appeal. He argued that had he received it on the issued date, as an experienced individual in dealing with tax appeals, he would have appealed timely. The HMRC challenged his claim of late receipt, adherence to deadlines, cooperation, and credibility.

The legal principles invoked in this case included:

  1. Service of Documents: The application of Section 7 of the Interpretation Act 1978, concerning the service of documents, hinges on presumed service if it has been properly addressed, pre-paid, and posted. The Tribunal inferred that HMRC followed adequate processes and thus the document was deemed served unless proven otherwise by the appellant.

  2. Judicial Discretion for Late Appeal: The principles set out in Martland v HMRC [2018], detailed a three-stage process for considering applications for permission to appeal out of time. This involved an evaluation of the seriousness of the delay, reasons for the delay, and conducting a balancing exercise considering the overall circumstances and prejudice caused by the grant or refusal of permission.

  3. Strike-Out: The Tribunal’s power under Rule 8 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 allows striking out of proceedings if there is no reasonable prospect of an appellant’s case succeeding.

  4. Penalties: The case also invoked Schedule 24 to the Finance Act 2007, addressing penalties levied on companies and officers for deliberate inaccuracies regarding VAT submissions.

  5. VAT Law: The case discussed sections of the Value Added Tax Act 1994 and relevant regulations, focusing on input tax, output tax, and the reclaiming of bad debts.

References made to prior case law like Fairford Group plc [2014] and HMRC v Tooth [2021] provided guidance on how the Tribunal should approach the striking out of cases.

Outcomes

The Tribunal adjudicated against the appellant on the following points:

  1. Late Appeal: The appellant’s late appeal was rejected on the basis of lacking credibility in his claim of late service, supplemented by insufficient evidence to prove it. The Tribunal found that the PLN was properly issued and served, thereby upholding the presumption of service under the Interpretation Act.

  2. Strike-Out: Even if the late appeal was allowed, the Tribunal determined that the appellant’s substantive appeal would have been struck out, as it had no realistic prospect of success. This conclusion was reinforced by the appellant’s failure to provide evidence of correct VAT accounting or dispute the deliberate inaccuracy of VAT returns.

  3. PLN: The Tribunal upheld the PLN based on deliberate behavior by the company and, by extension, the appellant.

Conclusion

In Laurence Onwufuju v The Commissioners for HMRC, the First-Tier Tribunal diligently applied the existing legal framework to the facts at hand. This detailed examination underscored the importance of following procedural rules, including timely appeals and evidence submission. The decision reinforces the consequences of deliberate noncompliance with VAT regulations and the personal liability that company officers can face. As such, it serves as a stark reminder to tax professionals regarding compliance and the stringent approach of the Tribunal to procedural adherence and duty of care in tax matters.