Dhalomal Kishore v The Commissioners for Her Majesty's Revenue & Customs, TC 06892
| Jurisdiction | UK Non-devolved |
| Judge | Barbara MOSEDALE |
| Judgment Date | 20 December 2018 |
| Neutral Citation | [2018] UKFTT 0759 (TC) |
| Respondent | The Commissioners for Her Majesty's Revenue & Customs |
| Appellant | Dhalomal Kishore |
| Reference | TC 06892 |
| Court | First-tier Tribunal (Tax Chamber) |
[2018] UKFTT 0759 (TC)
TC06892
Appeal number:TC/2017/6848
MISDECLARATION PENALTY – penalty of approx. £2.5m imposed after
Kittel appeal struck out and shortly before HMRC agreed to pay repayment
supplement for earlier periods – preliminary issue whether assessment
formally valid - yes – preliminary issue whether Tribunal has jurisdiction to
award hardship –no - Guernsey Leasing not followed – whether all
grounds of appeal to be struck out – all struck out except case that penalty
disproportionate
FIRST-TIER TRIBUNAL
TAX CHAMBER
DHALOMAL KISHORE
Appellant
- and -
THE COMMISSIONERS FOR HER MAJESTY’S
Respondents
REVENUE & CUSTOMS
TRIBUNAL:
JUDGE BARBARA MOSEDALE
Sitting in public at Taylor House, Rosebery Avenue, London on 4 and 5 June
and 31 July 2018
Mr B McGurk, counsel, for the Appellant
Mr C Foulkes, Counsel, instructed by the General Counsel and Solicitor to HM
Revenue and Customs, for the Respondents
© CROWN COPYRIGHT 2018
DECISION
1. Mr Kishore was VAT registered and made quarterly VAT returns. He claimed
repayments of input tax in his VAT returns. HMRC delayed repayment of the input
tax claimed in his VAT returns of 12/05, 03/06 and 06/06. The input tax (some
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£22,892,998.42) claimed in his 12/05 return was repaid in tranches in early 2006; the
input tax claimed in the 03/06 and 06/06 returns (in total, £22,392,775.10) was never
repaid. By decisions dated 13 July 2007 (in respect of 03/06) and 28 March 2008 (in
respect of 06/06) HMRC refused repayment on the grounds that Mr Kishore knew or
ought to have known that his transactions in those periods were connected with the
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fraudulent evasion of VAT.
2. The appellant appealed both of those decisions. The appeal proceedings were
protracted. The appeals were ultimately struck out on 9 September 2015 for failure
by the appellant to comply with an unless order dated 6 August 2015. The appellant
later applied for the appeals to be reinstated; this was refused by the Tribunal by
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decision dated 2 November 2016. The Upper Tribunal refused leave to appeal that
decision on 2 November 2017. Therefore, the appellant exhausted his appeal rights
against the two decisions and cannot recover the input tax he claimed in respect of
periods 03/06 and 06/06.
3. On 3 August 2017, HMRC issued the appellant with misdeclaration penalty
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assessments on the basis that his 03/06 and 06/06 returns contained inaccuracies. The
penalties imposed were £1,707,846.00 in respect of period 03/06 and £811,340.00 in
respect of period 06/06. The total in penalties was £2,519,186.
4. The appellant appealed these assessments on 13 September 2017. This hearing is
concerned with those penalties: on 7 December 2017, HMRC applied to strike out the
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appeal against the penalties.
5. The appellant’s position was that the delayed repayment of his 12/05 return is
relevant to his appeal against the misdeclaration penalties. On 6 March 2006, on late
receipt of the repayment, Mr Kishore had requested HMRC pay him a repayment
supplement of £1,144,649.92. HMRC refused the claim on 18 April 2006 and on 13
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July 2006 that refusal was appealed to this Tribunal.
6. Like the ‘MTIC’ appeal, the repayment supplement appeal was protracted.
Ultimately, on 7 August 2017, HMRC conceded the appeal. The appellant has not,
however, yet been paid his repayment supplement. HMRC informed him that the
repayment supplement due to him would be set off against his liabilities to HMRC.
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HMRC had imposed the misdeclaration penalties four days earlier.
The matters in issue
7. The hearing was originally called to determine three matters:
(a) As Mr Kishore’s appeal against the misdeclaration penalties
was filed late, whether his application for the Tribunal’s leave
to allow him to lodge his appeal late should be allowed;
(b) The appellant’s application for a preliminary hearing of his
application for relief from payment of the penalties pending
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determination of his appeal on the ground of hardship; this was
also phrased as an application for the Tribunal to determine
whether HMRC was entitled to set-off the repayment
supplement against the assessed penalties. While they were
logically different applications, they were both aimed at the
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same end: to have immediate repayment of the repayment
supplement to which HMRC have accepted the appellant is
entitled.
(c) HMRC’s application to strike out the appeal if admitted;
8. In reality, the appellant’s case developed and changed before and during the
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course of the hearing. There were two significant changes. Firstly, although no prior
mention was made of this, in his skeleton argument Mr McGurk asked for the appeal
to be summarily allowed or for a preliminary issue on the basis there were no valid or
timely assessments to the penalties. Secondly, he introduced during the hearing a new
and significant ground of appeal, which was that the penalties were a breach of Mr
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Kishore’s human rights as imposed so long after the (alleged) misdeclaration. This
was in part responsible for the adjournment of the hearing for some weeks. He also
asked for disclosure.
9. So while I deal with the issues and arguments in what I consider to be the logical
order, which was not quite the order in which the arguments were made to me.
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Late appeal
10. Mr Kishore’s appeal was lodged with the Tribunal about ten days late. HMRC
raised no objection to this and the appellant gave a good explanation (he was out of
the country on extended leave at the time of receipt). I therefore admit the appeal out
of time.
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Application to allow the appeal
11. As I have said, the application for summary judgment in favour of the appellant
was not foreshadowed before service of the appellant’s skeleton argument.
Nevertheless, HMRC did not suggest that the appellant was unable to argue the
matter.
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12. Having said that, the hearing proceeded on the footing that it was a preliminary
hearing of these issues (indeed, the appellant had requested a preliminary hearing).
That meant I was asked to make a ruling on the four points of law the appellant raised
to justify the application and not merely to decide whether the points were so strong I
should award the appellant summary judgment.
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