Antonio Jorge Rodrigues Cardoso Vieira v The Commissioners for HM Revenue and Customs

Hearing date: 4 April 2017

Judgment Approved

Introduction

This is an appeal by Antonio Vieira against an order of Deputy Registrar Mullen dated 21 November 2016 dismissing Mr Vieira's application to set aside a statutory demand dated 25 July 2016 ("the second statutory demand") which was served on Mr Vieira by the Commissioners for Her Majesty's Revenue and Customs ("HMRC") on 16 August 2016. The second statutory demand claimed that Mr Vieira owed HMRC a total of £180,757.90 in respect of income tax, VAT, surcharges, late payment penalties and interest for the period from 6 April 2002 to 25 July 2016. Mr Vieira disputes that he owed any more than £2,113, a sum he has subsequently paid. On 30 September 2016 Mr Vieira filed a notice of appeal seeking permission to appeal out of time against the assessments made by HMRC to the First-tier Tribunal (Tax Chamber) ("the FTT"). That appeal is presently pending before the FTT.

The central issue on the appeal is the correct interpretation and application, in circumstances such as these, of paragraph 13.3.3 of the Practice Direction – Insolvency Proceedings ("the Practice Direction"), which states:

"Where the debt claimed in the statutory demand is based on a judgment, order, liability order, costs certificate, tax assessment or decision of a tribunal, the court will not at this stage inquire into the validity of the debt nor, as a general rule, will it adjourn the application to await the result of an application to set aside the judgment, order decision [sic], costs certificate or any appeal."

Factual background

The factual background to the matter is somewhat involved. Given some of the arguments raised on the appeal, it is necessary to set it out in detail.

Mr Vieira is of Portuguese origin, and his evidence is that he does not speak, read or write English well. Mr Vieira is a mini-cab driver, and he carries on business as a sole trader. His evidence is that he has always relied on his accountants to prepare his accounts and deal with his tax affairs, and that he now considers that the firms who previously advised him failed to do so in a satisfactory manner.

In about July 2010 HMRC opened an investigation into Mr Vieira's tax affairs. At that time Mr Vieira was not registered for VAT and was resident at 3 Oldfield House, West Drive, London SW16 1RT. Susan Bush and Ken Daniels from HMRC's Local Compliance office in Croydon met Mr Vieira on 5 August 2010 and met Mr Vieira and his then accountant, Rizwan Azed, on 18 March 2011 and 10 October 2011 to discuss matters. HMRC's note of the meeting on 10 October 2011 reproduces word for word HMRC's note of the meeting on 18 March 2011. Nevertheless, it is clear that the officers were concerned that Mr Vieira had underdeclared his turnover and profits from the business. Two particular aspects of this concern related to income and expenses which had been put through Mr Vieira's personal bank account rather than his business bank account and hires which Mr Vieira had accepted, but which had been carried out by other drivers.

On 13 February 2012 Mrs Bush wrote to Mr Vieira giving him notice of compulsory registration for VAT with effect from 1 July 2010. The pro forma application for registration completed by Mrs Bush gave the address of Mr Vieira's business as 3 Oldfield House. Although the letter stated that Mr Vieira could ask for a review or appeal within 30 days, he did not do so. On 30 March 2012 Mrs Bush wrote to Mr Vieira notifying him that he was liable to a penalty and needed to provide VAT returns for the period 1 July 2010 to 31 July 2012.

On 17 May 2012 Mr Vieira rented out 3 Oldfield House and moved to 15 Finch Drive, Feltham TW14 0DL.

On 28 January 2013 Mr Azed filed Mr Vieira's tax return for the tax year ending 5 April 2012 showing his address as 15 Finch Drive together with his accounts for the year ending 31 March 2012 showing his then address of 3 Oldfield House. The accounts showed turnover of £33,287, payments to other drivers of £13,146 and profit for the year of £10,337. Mr Vieira's accounts for the preceding and following years showed similar figures.

On 20 September 2013 HMRC posted a statutory demand dated 13 August 2013 ("the first statutory demand") through the letterbox at 3 Oldfield House. The first statutory demand claimed that Mr Vieira owed HMRC a total of £33,046.44 in respect of income tax, VAT, surcharges and late payment penalties for the period from 6 April 2009 to 13 August 2013. On 1 November 2013 an order was made for substituted service of the first statutory demand by post.

On 27 November 2013 HMRC presented a petition to the Central London County Court for a bankruptcy order against Mr Vieira based on the first statutory demand giving his address as 3 Oldfield House. On 10 December 2013 HMRC tried unsuccessfully to serve the petition on Mr Vieira at that address. On 2 January 2014 an order was made for substituted service of the petition by post and the hearing of the petition was adjourned from 14 January to 11 March 2014. On 30 January 2014 the petition was served on Mr Vieira by post to 3 Oldfield House.

In the meantime, there had been correspondence between Mr Azed and HMRC. On 12 December 2012 Mrs A. Charles of HMRC's Debt Management Enforcement and Insolvency Service in Worthing wrote to Mr Azed, in reply to a letter dated 11 December 2013 which is not in evidence, informing Mr Azed that the first statutory demand had been served on 20 September 2013 and that the petition was out for service. The letter also pointed out that Mr Vieira's VAT returns from February 2012 were outstanding. On 16 December 2013 Mr Azed replied saying that Mr Vieira did not believe that his turnover was over the VAT threshold at any time having regard to HMRC Notice 700/25 since he acted as an agent and asking for a meeting to discuss the matter. On 20 December 2013 Mr Daniels, now at HMRC's Local Compliance office in Glasgow, wrote to Mr Azed pointing out that HMRC had concluded that Mr Vieira acted as principal, that there had been no appeal against Mr Vieira's VAT registration, that the time limit had expired long ago and that he did not see any point in a meeting. On 30 December 2013 Mrs Charles wrote to Mr Azed saying that HMRC would seek a bankruptcy order unless the petition debt was paid in full. She did not, however, send Mr Azed copies of either the first statutory demand or the petition.

On 28 February 2014 Mr Vieira suffered a heart attack and was hospitalised for seven days, after which he was advised to rest at home for a period.

On 11 March 2014 DJ Lambert made a bankruptcy order in the absence of Mr Vieira.

Also on 11 March 2014 M. Symons of HMRC's Local Compliance office in Bootle sent Mr Vieira eight notices of further assessment in respect of his income tax for the years ended 5 April 2003 to 5 April 2010 inclusive claiming various additional amounts of tax totalling £97,293.50. Each notice was sent to 15 Finch Drive. Each notice stated that a copy of the relevant calculation was enclosed, but no such calculations are in evidence. Each notice stated that Mr Vieira could ask for a review or appeal within 30 days. Copies of the notices were sent to Mr Azed.

On 12 March 2014 Mr or Ms Symons sent Mr Vieira a closure notice in respect of his self-assessment tax return for the year ended 5 April 2011 claiming an additional £12,762.26. The notice does not specify how this sum was calculated, although it refers to a letter dated 5 February 2014 which is not in evidence. Again, the notice was sent to 15 Finch Drive. Again, the notice stated that Mr Vieira could ask for a review or appeal within 30 days. Again, a copy of the notice was sent to Mr Azed.

On 26 March 2014 Mr Vieira, his wife and Mr Azed met representatives of Turpin Baker Armstrong ("TBA"), a firm of licensed insolvency practitioners, to discuss the possibility of an individual voluntary arrangement. On 28 March 2014 routine enquiries by TBA revealed that a bankruptcy order had been made against Mr Vieira. On 4 April 2014 Mr Vieira visited 3 Oldfield House and found correspondence including the first statutory demand and the petition. On 5 May 2014 Mr Vieira and Mr Azed attended a meeting with the Official Receiver. On 27 June 2014 TBA sent proposals for an IVA to all Mr Vieira's known creditors. There were six other creditors in addition to HMRC. Mr Vieira's liability to HMRC was estimated at £130,340.13 out of a total due to creditors of £207,036.80.

On 18 July 2014 Mr Azed sent HMRC VAT returns for Mr Vieira for the period from 1 July 2010 to 28 February 2013. Mr Vieira's evidence is that he signed these returns on Mr Azed's advice and that he does not know where Mr Azed obtained the figures from.

On 29 July 2014 there was a meeting of Mr Vieira's creditors at which his proposals for an IVA were rejected due to the opposition of HMRC. On 22 August 2014 James Patchett of TBA was appointed as Mr Vieira's Trustee in Bankruptcy. On 11 September 2014 HMRC lodged a proof of debt with Mr Patchett in the total sum of £140,049.51, but this did not take into account the information contained in the VAT returns filed on 18 July 2014.

Sometime in September 2014 Mr Vieira instructed solicitors and appointed Fisher Phillips as his accountants in place of Mr Azed.

On 30 January 2015 Mr Vieira applied to annul the...