Tribunal Rules on Personal Liability Notice in UK Tax Law Case

Citation: [2024] UKFTT 51 (TC)

Judgment on Jan 3, 2024

Introduction

The case of Paul Judd v The Commissioners for HM Revenue and Customs (HMRC) [2024] UKFTT 51 (TC) illustrates key legal principles pertinent to UK tax law, including the concepts of abuse of process and personal liability for company officers under Schedule 24 of the Finance Act 2007. This case provides insight into the Tribunal’s approach in assessing an application to amend grounds of appeal and addresses issues related to the attribution of penalties for inaccuracies in VAT returns.

Key Facts

Paul Judd, the appellant, sought to amend his appeal grounds against a Personal Liability Notice (PLN) issued by HMRC under paragraph 19 of Schedule 24 of the Finance Act 2007. This notice related to penalties assessed on Award Drinks Ltd (the ‘company’), of which Judd was a director. The company had previously lost appeals against VAT assessments at the First-tier Tribunal (FTT), Upper Tribunal, and Court of Appeal according to decisions [2018] UKFTT 570 (TC), [2020] UKUT 201 (TCC), and an unreferenced Court of Appeal decision. It was contended that the original VAT returns inaccurately reported taxable supplies, underestimating VAT liability.

Judd’s primary argument was that there were no inaccuracies in the VAT returns, a position not taken in the company’s litigation. Secondary grounds included whether any inaccuracies were ‘deliberate’ and, if so, whether they were attributable to him as a company director.

Legal Principals

Several legal principles were applied in this decision:

Abuse of Process: The case hinged on whether it constituted an abuse of process for Judd to argue that the VAT returns were accurate, essentially revisiting an issue decided in earlier litigation (relying on prior cases like Shiner v HMRC and Johnson v Gore Wood & Co). The crucial question was whether, considering the public and private interests and all the facts of the case, the appellant was misusing or abusing the tribunal process.
Sufficient Identification: The concept of ‘sufficient identification’ was utilized, as derived from Gleeson v J Wippell, to determine whether Judd was effectively identified with the company’s legal stance during previous litigation, and thus could not separate his case from that of the company.
Burden of Proof: The burden of proof in penalty appeals, as noted in HMRC v Zaman, typically falls on HMRC, unless a taxpayer is positively challenging an assessment as the sole basis for declaring a PLN invalid.
Fair Hearing: The court considered whether Judd, through the company, had received a fair hearing on the inaccuracy issue during the company’s litigation, despite Judd not having been a formal party, guided by Article 6 of the European Convention on Human Rights.

Outcomes

The Tribunal Judge, Zachary Citron, decided that:

Judd’s application to amend his appeal to argue the VAT returns were accurate was refused. It was determined that, due to ‘sufficient identification’ between Judd and the company during previous litigation, allowing this claim would constitute an abuse of process, thus affirming previous decisions.
The application to amend was granted concerning the questions of whether inaccuracies were ‘deliberate’ and whether they could be attributed to Judd. It was deemed appropriate for these to be addressed in further proceedings, as they were separate matters yet to be decided.

Conclusion

The Tribunal’s decision in Paul Judd v The Commissioners for HMRC underscores the careful scrutiny the Tribunal applies to prevent the misuse of its processes and to maintain the principle of finality in litigation. The case illustrates the difficulty company directors face in challenging PLNs following adverse rulings against the company, especially where there is close involvement or identification with the company’s previous litigation stance. Importally, directors remain entitled to challenge elements of penalties and liability uniquely attributable to them, provided they meet the procedural requirements and navigational complexities of tax litigation.