Umaad Butt v The Commissioners for HM Revenue and Customs
| Jurisdiction | UK Non-devolved |
| Judge | Mr Justice Newey,Judge Sinfield |
| Neutral Citation | [2017] UKUT 0325 (TCC),[2017] UKUT 0325 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Subject Matter | Tax,8 August 2017 |
| Date | 08 August 2017 |
| Published date | 09 August 2017 |
[2017] UKUT 0325 (TCC)
Appeal number: UT/2016/0036
VALUE ADDED TAX – PENALTY – Missing Trader Intra-Community Fraud –
liability of director of company to penalty for dishonest conduct in relation to
evasion of VAT - Axel Kittel v Belgian State and Mobilx v HMRC considered -
whether FTT’s approach to evidence flawed – whether judge who refused
application for HMRC to be barred under rule 8(3) FTT Rules should have recused
herself from hearing substantive appeal - appeal dismissed
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
UMAAD BUTT Appellant
- and –
THE COMMISSIONERS FOR
HER MAJESTY’S REVENUE AND CUSTOMS Respondents
Tribunal:
The Hon Mr Justice Newey
Judge Greg Sinfield
Sitting in public in London on 6 and 7 April 2017
Rory Mullan, Harriet Brown and Etienne Wong, counsel, acting pro bono under
licence from the Bar Pro Bono Unit, for the Appellant
Jeremy Benson QC and Karen Robinson, counsel, instructed by the General
Counsel and Solicitor to HM Revenue and Customs, for the Respondents
© CROWN COPYRIGHT 2017
2
DECISION
Introduction
1. The Appellant, Mr Umaad Butt, was one of two directors of and owned 50% of
the shares in Waterfire Limited (‘Waterfire’). The Respondents (‘HMRC’) refused a
claim by Waterfire for input tax of £6,792,184 incurred in the period 04/06 on the
ground that the company, through its directors, knew or should have known that its
transactions were connected with fraud, namely a missing trader intra-Community (or
“MTIC”) fraud. HMRC considered that Waterfire had dishonestly sought to evade
VAT and that the company was liable to a penalty of £6,792,184 under section 60 Value
Added Tax Act 1994 (“VATA94”).
2. Section 60(1) VATA94 provides that a person who has dishonestly done something
or omitted to do something for the purpose of evading VAT shall be liable to a penalty
equal to the amount of VAT evaded or sought to be evaded. For these purposes,
evading VAT includes obtaining a VAT credit in circumstances where a person is not
entitled to that amount. Section 60(7) provides that the burden of proof as to the matters
specified in section 60(1) is on HMRC. Where the person liable to a penalty under
section 60 is a company and the conduct giving rise to that penalty is, in whole or in
part, attributable to the dishonesty of a director or other officer, section 61 VATA94
provides that HMRC may recover the penalty or a proportion of it from the director or
other officer. HMRC considered that Waterfire’s conduct was attributable to the
dishonesty of its directors and imposed a penalty under section 61 VATA94 on Mr Butt
of £3,137,483.03, being 50% of the input tax claimed less a reduction of 10%.
3. Mr Butt appealed to the First-tier Tribunal (Tax Chamber) (‘the FTT’) in August
2010. In December 2013, Mr Butt applied to the FTT for a direction under rule 8(3) of
the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (‘the FTT
Rules’) that HMRC be barred from taking further part in the proceedings and the FTT
issue a summary decision that Mr Butt’s appeal was allowed. The application was
heard by the FTT (Judge Jennifer Blewitt) on 14 May 2014. Judge Blewitt released her
decision, [2014] UKFTT 490 (TC), refusing the application on 20 May (‘the Summary
Decision’). Judge Blewitt refused the application on the basis that she was not satisfied
that HMRC’s case, or part of it, had no reasonable prospect of success such that HMRC
should be barred from taking further part in the proceedings. Mr Butt had also applied
for the hearing of the appeal, listed June 2014, to be postponed. That application had
been refused by email on 23 April and that decision was confirmed orally at the hearing
on 14 May.
4. Mr Butt applied to the FTT for permission to appeal against the Summary
Decision and the refusal to vacate the hearing. In a decision notice issued on 28 May
2014, Judge Blewitt refused to grant Mr Butt permission to appeal on either matter. Mr
Butt then applied to the Upper Tribunal for permission to appeal. The Upper Tribunal
refused permission to appeal on the papers and after a reconsideration at an oral hearing.
5. The substantive appeal was heard by the FTT (Judge Blewitt and Mr Wilson) over
seven days in June 2014 with closing submissions in September. At the start of the
hearing, counsel for Mr Butt made an application that Judge Blewitt recuse herself from
hearing the substantive appeal on the ground that a fair minded and informed observer
would conclude that there was a real possibility that she had pre-judged a major part of
the issues by virtue of the fact that she had refused Mr Butt’s application in the
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