Igen Distribution Ltd ((in Liquidation)) and Another
| Jurisdiction | UK Non-devolved |
| Judgment Date | 13 August 2020 |
| Neutral Citation | [2020] UKFTT 328 (TC) |
| Date | 13 August 2020 |
| Court | First-tier Tribunal (Tax Chamber) |
[2020] UKFTT 328 (TC)
Judge Christopher McNall
Procedure – Appellant's application for further and better particulars – Rule 5 – Observations on the role of HMRC's Statement of Case – Application refused – HMRC's application to strike out the Appeal – Rule 8(3) – Observations on the role of a witness statement – Application refused.
[1] These are case management decisions following a telephone hearing on 8 July 2020. That hearing came before me by virtue of directions given by Judge Robin Vos released on 12 May 2020.
[2] The First Appellant, Igen Distribution Ltd (“Igen”), dealt (amongst other things) in “SanDisk” memory cards. The Second Appellant, Mr Qureshi, was Igen's sole director and shareholder. In December 2017, HMRC denied Igen its claim for repayment of input tax for several accounting periods in 2015 and 2016, amounting to £124,106, on the basis that Igen knew or should have known that its transactions were connected with the fraudulent evasion of VAT.
[3] There are 15 transactions in issue, all involving memory cards, which are said to trace back to three defaulting traders: Eco Voice Ltd (Deal 1); BJWP Ltd (Deals 2–5); and UHA Wholesale Ltd (Deals 6–15):
- In relation to Deal 1, there is an intermediate trader (Global ATM Solutions) between the Appellant and the defaulter;
- In relation to Deals 2–5 the Appellant purchased directly from the defaulter; and
- In relation to Deals 6–15, there is an intermediate trader (Positive Connect) between the Appellant and the defaulter.
[4] On 29 June 2017, Igen was deregistered for VAT, on the basis that Igen had used its VAT Registration Number solely or principally for fraudulent purposes. The deregistration letter set out the reasons: all the transactions relating to SanDisk memory cards led to fraudulent tax loss, and other elements of the transactions were said to lack commerciality such as to throw doubt on their legitimacy. As far as I am aware, the deregistration decision was not challenged; and is not subject to this appeal.
[5] On 22 December 2017, HMRC issued a decision letter denying Igen its input tax.
[6] On 21 June 2018, HMRC issued a penalty assessment against Igen pursuant to Schedule 24 of the Finance Act 2007 in the sum of £71,670 (which was adjusted at departmental review on 5 October 2018 to £65,153). This was on the footing that the behaviour of Igen was deliberate but not concealed.
[7] On that same day, HMRC issued a Personal Liability Notice against Mr Qureshi for 100% of Igen's liability. The sum of that notice was also adjusted to £65,153 (by way of increasing some of the Reductions for Disclosure: from 0% to 5% for “telling”, and from 10% to 20% for “helping”).
[8] The Appellants filed a single Notice of Appeal dated 24 October 2018, and the Tribunal created one appeal for each Appellant, and then directed that the appeals be joined. The Grounds of Appeal, in summary, and insofar as relevant for present purposes, say:
- When Mr Qureshi was told that he should not deal with a particular supplier, he has stopped;
- Mr Qureshi was not told to stop dealing with any of the suppliers in issue here;
- There is no evidence of culpability and HMRC need to define fraudulent activity, and how HMRC say that Mr Qureshi knew or ought to have known of such fraudulent activity.
[9] On 14 February 2019, HMRC presented a petition in the High Court to wind-up Igen Distribution Ltd (“Igen”). A winding up order was made on 5 June 2019. The Official Receiver, as Igen's liquidator, became the Appellant. On 2 June 2020, HMRC made the Official Receiver aware of Igen's appeal. On 29 June 2020, the Deputy Officer Receiver wrote to withdraw Igen's appeal, pursuant to Rule 17 of the Tribunal's Rules, and that withdrawal was communicated to the Tribunal on 1 July 2020. At the time of writing, HMRC have not objected to the withdrawal.
[10] HMRC had applied for Igen's appeal to be struck-out, but, given the withdrawal, I need say little further about the substance of Igen's appeal. Igen was not represented at the hearing before me.
[11] On 12 November 2019 HMRC applied to strike-out the appeals of both Appellants pursuant to rule 8(3)(c) of the Tribunal's Rules. Insofar as the application affects Igen, it now falls away, in the circumstances already described.
[12] On 20 December 2019, the Appellants (strictly speaking, only Mr Qureshi) formally responded to HMRC's application. This document was signed by Mr Qureshi's representative, Mr Nawaz:
- No issue was taken with tax loss. There was a (guarded) acceptance that BJWP (from which Igen purchased directly) may have been non-compliant, but the Appellant asked How does this become the responsibility of [the Appellants]? The loss is, quite simply, a bad debt;
- The Appellant took issue with fraud or collusion with others in fraud, and Mr Nawaz says Despite a voluminous witness statement, it is not clear how exactly the transactions constitute fraud … […] HMRC are asked to provide Further and Better Particulars of such evidence of such knowledge instead of such wishy-washy verbiage that they have produced in voluminous witness statements;
- The Appellant accepts that there is a connection, as purchases have been made, but asks Does this mean the Appellants are responsible for any and all misdemeanours their suppliers might have committed? Surely this is not possible and hopefully this is not being alleged;
- The Appellant takes issue with knowledge. It is denied that ought to to have known answers to the requirement for knowledge. Criticism of HMRC is advanced that HMRC were in and out of the offices of BJWP and others and took no action to notify traders involved such as IGEN and others that they should not trade with BJWP and others if they suspected wrongdoing.
[13] On 7 January 2020, HMRC responded to that document, treating it as containing an application for Further and Better Particulars.
[14] On 7 January 2020, Mr Qureshi further articulated his position as HMRC as such:
What is required here is reference to precise documents that prove knowledge on the part of the Appellant. Instead of offloading office dustbins into witness statements, with respect, it would be far more helpful to provide direct references to documents that prove knowledge on the part of the appellant and this might require no more than a handful of documents.
[15] Mr Nawaz comments:
I have learnt that little useful purpose would be served by making a FABP applications on the basis of Statements of Case. Inevitably judges suggest that the appellant should wait for the witness statements and then approach the Tribunal for FABP which is now being done.
[16] The two applications are to some extent inter-dependent:
- HMRC apply to strike-out Mr Qureshi's appeal on the footing that there is no reasonable prospect of his case succeeding (principally, due to what HMRC says are inadequacies of his witness statement);
- Mr Qureshi says that he cannot properly deal with HMRC's case until Further and Better Particulars are given.
[17] I have decided to dismiss both applications, for the reasons set out in more detail below.
[18] Although I have dismissed HMRC's application, I am nonetheless giving directions in relation to evidence, and I record that unless those directions (under separate cover) are complied with, Mr Qureshi's appeal will stand as automatically struck-out, without further order.
[19] These are the relevant features:
- On 12 February 2019, HMRC served a Statement of Case. It accepts (Paragraph 16) that HMRC bears the burden of proving:That the VAT returns were inaccurate, and that such inaccuracies amounted to, or led to, a false or inflated claim to repayment of tax;That such inaccuracies were deliberate but not concealed;That the deliberate but not concealed inaccuracies were attributable to Mr Qureshi;That the penalty amounts are correct.
- On 14 June 2019, Mr Nawaz wrote that the Statement of Case is so pathetic that it is not even worth bothering with. He aimed particular criticism at HMRC's defining of the so-called dishonesty/crime in the vaguest possible terms. The appellant is left guessing as to what precisely it is that he is being accused of … there is no attempt at all at dealing with the issues being raised;
- On 15 July 2019, HMRC filed its witness statements (six) and over 300 related exhibits of material, including deal packs in relation to each of the 15 deals;
- Mr Qureshi's witness statement was filed on 4 November 2019.
[20] Although Mr Qureshi's application is made second in time, it seems to me logical to deal with it first.
[21] I decline to order that HMRC provide further and better particulars.
[22] It seems to me any such order would be one requiring HMRC to amend its Statement of Case, or to require HMRC to provide information: rules 5(3)(c) and (d). In either event, these are discretionary powers should only be exercised when in accordance with the overriding objective: rule 2.
[23] The starting point must be to examine HMRC's Statement of Case. In short, I do not accept Mr Nawaz's criticism of HMRC's Statement of Case. I consider that the Statement of Case complies with rule 25, in that it sets out the Respondents' position in relation to the case: Rule 25(2)(b).
[24] In my view, the Statement of Case gives the Appellant sufficient information to know the case which he has to meet. This is not a case of challenging complexity – whether factual, or legal. It traverses familiar legal ground, and the facts and circumstances which led HMRC to make its decision as against these taxpayers is set out clearly and intelligibly.
[25] I reject criticism made as to the length of the Statement of Case. rule 25(2)(a) provides that a Statement of Case...
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