Albany Fish Bar Ltd and Another
| Jurisdiction | UK Non-devolved |
| Judgment Date | 05 January 2021 |
| Neutral Citation | [2021] UKFTT 221 (TC) |
| Court | First-tier Tribunal (Tax Chamber) |
[2021] UKFTT 221 (TC)
Judge Anne Redston, Ms Patricia Gordon
Vale added tax – Whether deliberate and concealed understatement of VAT liabilities – Held – Yes – Assessments for earlier years made outside the statutory time limit – Appeal against those assessments allowed – Remaining assessments upheld with minor reductions – Penalty issued to company and personal liability notice issued to director – Whether penalty to be reduced because assessments for earlier periods set aside – Held – No – Penalty and personal liability notice upheld with minor reductions.
[1] Albany Fish Bar Limited (“the Company”) runs a fish and chip shop in Cardiff. Mr Waseem Akhtar is the Company's director and shareholder.
[2] On 9 August 2017, HM Revenue & Customs (“HMRC”) issued “best judgement” assessments under Value Added Taxes Act 1994 (“VATA”), s 73(1), charging the Company VAT of £109,670.00 for VAT quarters 08/10 to 04/17, because in HMRC's view the Company had been systematically excluding lunchtime sales from its VAT returns.
[3] On 14 November 2017, HMRC issued the Company with a penalty of £87,736 under Finance Act 2007, Schedule 24 (“Sch 24”) on the basis that the behaviour had been deliberate and concealed. On 11 January 2018, HMRC issued a personal liability notice (“PLN”) under Sch 24, para 19 making Mr Akhtar liable for 100% of the penalty on the basis that the inaccuracies were attributable to him.
[4] The Company appealed the assessments and the penalty, and Mr Akhtar appealed the PLN. The appeals were joined by the Tribunal on 18 March 2018.
[5] We decided that the Company had been deliberately suppressing its lunchtime sales for VAT periods 08/10 to 04/17; that this behaviour was deliberate and concealed, and that the inaccuracies were attributable to Mr Akhtar. However, there were two other issues: whether some of the assessments were out of time, and if so, whether the penalties should also be reduced.
[6] Assessments under VATA s 73(1)“shall not be made later than” the time limits set out in VATA s 73(6), namely:
- 2 years after the end of the prescribed accounting period; or
- one year after evidence of facts, sufficient in the opinion of the Commissioners to justify the making of the assessment, comes to their knowledge.
[7] In relation to VAT periods 10/15 to 04/17, the assessments were within the time limit in s 73(1)(a) above. However, the assessments for periods 08/10 through to 07/15 were made more than one year after evidence of facts, sufficient in HMRC's opinion to justify the making of that assessment, had come to their knowledge. As a result, those assessments were out of time.
[8] We therefore allowed the appeal against the assessments for periods 08/10 through to 07/15. We reduced the assessments for periods 10/15 to 04/17 to take into account zero rated sales, and inflation. The parties have permission to revert to the Tribunal if they are unable to agree the quantum of the reduced assessments by applying those principles.
[9] Mr Brown submitted that the penalty should be reduced to reflect the fact that the assessments for earlier periods had been set aside. In deciding that issue, we considered the following points:
- A penalty is payable under Sch 24 if a person gives HMRC a VAT return which contains an inaccuracy which amounts to, or leads to … an understatement of a liability to tax. The Company was liable to a penalty under Sch 24 because it had deliberately submitted VAT returns which contained inaccuracies for all periods from 08/10 through to 04/17.
- It is well-established that liability does not depend on assessment, see Whitney v IR Commrs (1925) 10 TC 88, 110 per Lord Dunedin, so the fact that some of those correcting assessments had been set aside did not change the Company's liability to a penalty;.
- Sch 24 did not provide that a penalty could only be levied if there had been a valid corrective assessment.
- In Ali (t/a Vakas Balti) v R & C Commrs [2008] BVC 43 (Vakas Balti), the Court of Appeal considered a similar VAT case under the earlier provisions, and decided that the penalties were not dependent on HMRC having made a valid assessment for underpaid VAT.
- There is nothing to indicate that by introducing Sch 24, Parliament intended to move away from that position. There is, in particular, no reference to such a radical change in the related Notes on Clauses.
- Those Notes instead show that the amount of the penalty was to be linked to the difference between (a) what was included on the VAT returns, and (b) what should have been included on those returns.
[10] We decided that the penalty was 80% of the VAT which the Company should have paid to HMRC for all the VAT periods from 08/10 to 04/17, namely 80% of the amounts originally assessed by HMRC but with those figures reduced for zero-rated sales and inflation. The parties have permission to revert to the Tribunal if they are unable to agree the quantum of the reduced penalty.
[11] We found that Mr Akhtar was responsible for the related inaccuracies and that 100% of the penalty so calculated was payable by him.
[12] The Tribunal had both documents and oral evidence.
[13] HMRC supplied a main bundle of documents and a supplementary bundle, which included the following:
- correspondence between the parties, and between the parties and the Tribunal;
- notes of the meetings between HMRC, Mr Akhtar and Hodge Bakshi, the firm of Chartered Accountants which acted for the Company;
- copies of the Company's till rolls, on which HMRC had relied in making the assessments.
- various calculation schedules prepared by HMRC in relation to the assessments;
- a copy of HMRC's handwritten notes in relation to a meeting on 2 December 2015; and
- a schedule setting out dates on which Mr Akhtar said he had been overseas (Mr Akhtar's schedule of dates).
[14] The day before the hearing, the Tribunal was provided with:
- copies of pages from Mr Akhtar's passport and pages containing entry and exit stamps, mostly for the UAE and Pakistan;
- the Company's current menu; and
- a copy of revised calculations provided by Mr Passey of Hodge Bakshi.
[15] Neither party objected to the late submission of this evidence and we admitted it.
[16] The following individuals gave witness evidence:
- Mr David Morgan, a Higher Officer of HMRC who has worked in the Cross Tax Evasion Team based in Cardiff for twelve years. He has undertaken specific training in the interrogation and analysis of cash registers and was authorised for that purpose by HMRC. He provided a witness statement, gave oral evidence-in-chief led by Mrs Spence and was cross-examined by Mr Brown. We found him to be an entirely credible and honest witness.
- Ms Marianne Rogers, an officer of HMRC who worked in the same team as Mr Morgan at the relevant time. She has also undergone specialist training to allow her to interrogate different types of cash tills and run related reports. Ms Rogers provided a witness statement, gave oral evidence-in-chief led by Mrs Spence, and was cross-examined by Mr Brown. She too was entirely honest and credible.
- Mr Akhtar provided a witness statement, gave evidence in chief led by Mr Brown, and was cross-examined by Mrs Spence. We found him to be an unreliable witness. In particular:for the reasons given at paragraph 71–86 it was not credible that he was unaware that part of the Company's turnover was being suppressed for VAT purposes;HMRC's meeting minutes in terms record that the business was controlled by Mr Akhtar, and he accepted that those minutes were accurate. However, he twice changed his evidence after that meeting:HMRC's meeting minutes in terms record that the business was controlled by Mr Akhtar, and he accepted that those minutes were accurate. However, he twice changed his evidence after that meeting:the day before the hearing he filed a supplementary Statement in which he said that his involvement in the business was very limited' for the majority of 2014 and 2015.As explained in the main body of this decision, we reject this later evidence as inconsistent with that given previously;Mr Akhtar's schedule of dates set out when he said he said he was overseas; he added he was also away from the business on additional dates. However, the non-UK dates on that schedule totalled 244 days in 2014. If Mr Akhtar had spent over two-thirds of that year in the UAE and Pakistan, it is not credible that he would:have failed to mention this when he met with HMRC in 2016; instead he said only that he had he had taken time away from the business for holidays etc; andhave omitted any reference to these prolonged and frequent alleged absences in his own witness statement.
- Mr Passey, a senior VAT and tax manager at Hodge Bakshi, who provided a witness statement about the methodology used by HMRC in calculating the assessments, gave oral evidence led by Mr Brown, and was cross examined by Mrs Spence. We found him to be an entirely honest and credible witness, although for the reasons explained at paragraph 102, we did not agree with all of his challenges to HMRC's figures.
[17] In addition to the above, the Appellants also filed and served witness statements for three other individuals: Mr Akhtar's sister, Ms Tasneem Akhtar; Mr Tariq Siddique, one of the Company's employees; and Mr Trevor Laidlaw, an employee of a firm called BCR Cash Registers Ltd.
[18] As the hearing was to take place by video, both parties had been directed by Judge Kempster on 24 August 2020 to provide the name, role, telephone number and email addresses of each person participating in the hearing on behalf of that party, and confirmation that they each possessed the IT equipment necessary to participate. However, the Appellants did not supply the Tribunal with...
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