TC09555 - [2025] UKFTT 00748 (TC)

Fecha: 09-May-2025

Introduction

Introduction

This appeal concerns the following decisions (Decisions)made by HM Revenue & Customs (HMRC):

(1)

VAT assessments issued to 3KH Limited (3KH)on 12 June 2018 pursuant to section 73 Value Added Taxes Act 1994 (VATA) for VAT periods 10/13 – 01/18 in the total sum of £1,234,237 (VAT Assessments). Such assessments having been subsequently amended on 16 July 2020 such that the total sums now assessed are £1,118,691.

(2)

Decisions notified to 3KH on 25 June 2018 pursuant to section 8 Social Security Contributions (Transfer of Functions, Etc) Act 1999 on 25 June 2018 in respect of National Insurance Contributions not accounted for in tax years ended 5 April 2014 – 2017 totalling £14,601 (NICs Decisions).

(3)

Penalties issued to 3KH on 25 June 2018 pursuant to regulation 81 Social Security Contributions Regulations 2001 in the total sum of £14,601 (NICs Penalties).

(4)

Corporation tax discovery assessments issued on 11 July 2018 pursuant to paragraph 41(1) Schedule 18 to the Finance Act 1998 (Sch 18 FA98) for accounting periods ended 31 July 2014, 31 July 2015, and 31 July 2016. The total sums assessed were £659,276.12.

(5)

Corporation tax discovery assessment issued on 18 July 2018 pursuant to paragraph 41(1) Sch 18 FA98 for accounting period ended 30 July 2014 in the sum of £305,441.70.

(6)

Further VAT assessments to VAT issued to 3KH under section 73 VATA on 23 May 2019 in respect of periods 04/17 – 07/18 in the additional sum of £559,550 (Further VAT Assessments). These assessments were also reduced on 16 July 2020 and the sum we are invited to uphold is £522,060.

(7)

Corporation tax discovery assessment issued on 30 May 2019 pursuant to paragraph 41(1) Sch 18 FA98 for accounting period ended 31 July 2017 in the sum of £894,668.55.

(8)

Further corporation tax discovery assessment issued to 3KH on 4 June 2019 for accounting period ended 31 July 2016 in the sum of £247,618.50 (together with the assessments referred to at paragraphs (4), (5) and (7) (Discovery Assessments). Following the amendment of the VAT Assessments and Further VAT Assessments HMRC invite us to amend the Discovery Assessments in accordance with sections 50(6) and (7) Taxes Management Act 1970 such that the total sum we are invited to determine as due is £2,124,250.76

(9)

Penalties issued under Schedule 24 Finance Act 2007 (Sch 24 FA07)on 8 July 2019 in respect of the assessments identified at paragraph (1) above and on 13 August 2019 in respect of the assessments identified at paragraph (6). Penalties total £1,096,526.26. Following the amendment to the VAT and Further VAT Assessments HMRC invite us to determine the total penalties in the varied sum of £993,666.71.

(10)

Penalties issued under Sch 24 FA07 on 12 July 2019 associated with the corporation tax assessments identified in paragraphs (4) and (5) above. And on 26 July 2019 in respect of the assessment identified at paragraph (7) above. Total of all such penalties being £1,291,003.20. The amended sum in which we are invited to uphold the penalties arising from the corporation tax inaccuracies is £1,301,103.56 (together with the penalties referred to at paragraph (9) above Penalties)

(11)

Personal liability notices issued under paragraph 19(1) Sch 24 FA07 allocating to Mr Mauheed Johngir (MJ) 42.5% and Mr Muhammed Waqas Baber (MB) 50% of the penalties identified in paragraphs (9) and (10) above in so far as they related to periods commencing after 14 April 2015 when MJ and MB were appointed as directors. The penalties sums for which MJ and MB were each made liable are £1,042,509 (PLNs). (Footnote: ¹)

The Decisions arise from an investigation undertaken by HMRC pursuant to which they consider that they identified significant suppression of cash sales leading to an under declaration of VAT and insufficiency in assessment to corporation tax in the periods covered by the Decisions. HMRC contend that the suppressed sales were extracted by MJ and MB.

We set out below the issues agreed to be determined in this appeal (we have reordered and slightly reframed them from the that presented to us as we consider the order and reframing has facilitated a more logical flow):

(1)

Were sales at Tipu Sultan Moseley (TSM) under declared for VAT purposes? (TSM Suppression Issue)

(2)

Did 3KH operate Tipu Sultan Leicester (TSL)? (TSL Issue)

(3)

Were the VAT Assessments made to HMRC’s best judgment? (Best Judgement Issue)

(4)

Do the VAT Assessments overstate the output tax due on any suppressed sales by 3KH? (VAT Quantum Issue)

(5)

Did 3KH overclaim input VAT? (Input Tax Issue)

(6)

Did HMRC discover a loss of corporation tax? (Discovery Issue)

(7)

Were such sales identified as having been suppressed advanced to MJ and MB, thereby justifying a charge to corporation tax under section 455 Corporation Tax Act 2010 (CTA)and justifying the NICs Assessments/Penalties? (Participation Issue)

(8)

Were any errors in the VAT and/or corporation tax returns deliberate? (Deliberate Issue)

(9)

Were any deliberate errors attributable to MJ and MB? (PLN Issue)

(10)

Was the reduction given to the penalty percentage adequate? (Mitigation Issue)