R & C Commissioners v Zaman
| Jurisdiction | UK Non-devolved |
| Judgment Date | 20 September 2022 |
| Neutral Citation | [2022] UKUT 252 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2022] UKUT 252 (TCC)
Judge Andrew Scott, Judge Jennifer Dean
Upper Tribunal (Tax and Chancery Chamber)
VAT – Public liability notice (PLN) – Sole director – FA 2007, Sch. 24, para 19 – VAT assessment on company challenged – Place of supply of goods – Whether burden of proof on HMRC – No – Whether FTT erred in its approach – Yes – Decision set aside – Case remitted back to FTT – Appeal allowed.
In R & C Commrs v Zaman [2022] BVC 508, the Upper Tribunal set aside the decision of the First-tier Tribunal (FTT) in Zaman [2021] TC 08177 finding it had erred in law by failing to recognise the evidential burden lay with the appellant in that case and not with HMRC. The case was remitted back to the FTT for reconsideration.
The appellant was the sole director of Zamco, a company that had been the subject of a VAT assessment for underdeclared VAT and a penalty for inaccuracy. Neither the assessment nor penalty were challenged by Zamco. A public liability notice (PLN) subsequently issued to the appellant was, however, the subject of an appeal to the FTT on the basis the underlying assessment and penalty were incorrectly issued. HMRC had asserted supplies of alcoholic goods were made in the UK, but the appellant maintained there were no VATable supplies since all the relevant supplies took place in warehouses in Germany or France.
The FTT found it was likely there was illicit activity in the supply chains, and Zamco’s involvement was to obscure that illicit activity, but concluded HMRC had failed to prove, on the balance of probabilities, the place of supply in the relevant period was the UK. The FTT therefore allowed the appeal.
HMRC accepted they bore the burden of proof in relation to the PLN, and that the appellant could appeal the PLN on the basis the underlying assessment and penalty were wrongfully issued, but submitted the appellant then assumed the evidential burden of displacing the assessment. The FTT had erred in treating the appeal as a penalty appeal in which the legal and evidential burden remained solely with HMRC.
The UT agreed. If the challenge to the PLN was brought on the basis that the assessment was wrong, the legal rules relating to the way in which the assessment could have been challenged still applied and it was well-established law that it was for the taxpayer to prove, by evidence, that an assessment to VAT issued by HMRC was incorrect.
The FTT had made a material error in law by misdirecting itself and failing to recognise the evidential burden was with the appellant.
The decision of the FTT was set aside and the case remitted back to the same panel of the FTT for reconsideration. Appeal allowed.
The Court of Appeal judgment in Awards Drinks Ltd (in liquidation) v R & C Commrs [2021] BVC 17 is clear authority that credible evidence must be provided by a taxpayer to discharge their burden of proof in relation to properly issued assessments. The UT had not heard or considered any of the substantial evidence submitted to the FTT and therefore could not decide whether the appellant had discharged that burden which was why the case was remitted back to the FTT for reconsideration.
Comment by Angela Bedi, Senior Tax Writer at Croner-i.
Mr R. MacLeod, Advocate for the Office of the Advocate General appeared for the appellant
Mr M. Zaman represented himself appeared for the respondents
[1] This is an appeal by HM Revenue and Customs (“the appellants”) against a decision of the First-tier Tribunal (Tax Chamber) (the “FTT”) released on 24 June 2021 (the “Decision”).
[2] By the Decision, the FTT allowed Mr Zaman's appeal against a Personal Liability Notice (“PLN”) issued to him by HMRC on 26 October 2018 following an assessment to VAT (“the assessment”) against Zamco Limited (“Zamco”) of which Mr Zaman was the sole director.
[3] The assessment for £1,929,592 to Zamco was issued on 30 May 2018 in respect of under-declared VAT in the periods 02/16 to 08/17 on the basis that Zamco's supplies of alcoholic goods in the relevant period took place in the UK and were therefore subject to VAT. Zamco did not appeal against the assessment.
[4] On 23 October 2018 HMRC charged a penalty to Zamco, in the sum of £1,736,632.80, under paragraph 1 of Schedule 24 to the Finance Act 2007, for the inaccuracies in its VAT returns in the relevant period. The penalty was not appealed.
[5] The appellants appeal with the permission of the FTT. References to numbers in square brackets are to paragraphs of the Decision unless otherwise specified.
[6] The FTT (at [10]) recorded the agreed issues before the Tribunal as:
- whether Zamco's VAT returns in the relevant period contained inaccuracies amounting or leading to understatement of liability to VAT (the inaccuracy issue); the issue was essentially whether all of Zamco's supplies in the relevant period were in the UK for VAT purposes – if so, its VAT returns contained such inaccuracies; if not, they did not;
- if Zamco's VAT returns did contain such inaccuracies, whether the inaccuracies were deliberate on Zamco's part (the deliberate issue); and
- if they were, whether the inaccuracies were attributable to Mr Zaman.
[11] The Tribunal considered whether a fourth issue was also before it, namely whether the amount of the penalty (and so of the PLN) was...
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