[2024] UKUT 00390 (TCC)

No explanation whatsoever, beyond the suggestion in the notes that the omission had

been a mistake, has been advanced for such a substantial omission from a tax return. Moving

from a declaration of no income to income of in excess of £29,000 is certainly not a minor

matter. That does not support the assertion that he was a “man of good character”.

The confirmation from VKM in the letter of 3 March 2017 (see paragraph 135 above),

that Mr Paudel had confirmed that the appellant used only the Lloyds and Halifax bank

accounts did not assist him. Not only was there the Barclays account, which both the Bottle

Stop and the appellant used, but HMRC had identified a number of other bank accounts to

which payments had been made and he has failed to produce evidence of those.

In a similar vein, his bland assertion in his witness statement at paragraph 28(6) does not

help him. He was referring to paragraph 17.4 of HMRC’s Statement of Case which stated “there

were instances on which goods were purchased using debit cards not associated with the

Appellant’s bank account”. He said that “I have discussed this with my co-Director, and we

have no knowledge of any other debit/credit cards being used for purchases” but that does not

sit well with VKM’s letter of 12 December 2017 (see paragraph 146(m) above).

Further, HMRC had given the appellant details of the numbers on the debit cards which

had been identified from the appellant’s records. VKM mention credit cards but Officer

Dyson’s evidence was that he did not know whether the appellant or the directors had credit

cards since no information had been provided.

We have also identified the differing explanations about the initial funding (see

paragraph 146(f) above) in relation to the letter of 12 December 2017 from VKM.

In Closing Submissions it was argued that there were only small differences between Mr Paudel’s oral evidence and that letter. With respect we disagree and we find that Mr Paudel’s evidence in that regard was not persuasive. Mr Jones asked him in re-examination if he had seen that letter before it was issued. Firstly, he said that he could not say but then he argued that his English was not good enough to have enabled him to understand it. That does not sit well with the choice to decline the services of an interpreter at the hearing. We find that that letter is an accurate description of the instructions given to VKM at the time.

Officer Dyson’s evidence, and he was specifically asked about it, was that at the meeting in May 2017, Mr Paudel had understood everything and that Messrs Mehta and Khadka, the Chairman and Director of VKM, had participated. VKM’s letters are very clear in their terms and explicit in stating that they have taken instructions.

In his Closing Notes, Mr Jones said that Mr Paudel had been criticised for his evidence to the effect that he had no recollection of seeing the notes of the May 2017 meeting or having discussed them with his agents. In re-examination, he had indeed repeatedly said that he could not remember when he saw the notes etc.

However, prior to that we have him noted as saying, when asked why he had not

challenged the notes, that he had never seen the notes, then he said that he had never noticed and never read them. He then said that he had read them but he had missed the paragraphs that he now contested, being theft and wastage etc.

This is a specialist Tribunal and we are well aware that some taxpayers do not read such notes. To fail to do so is not the action of a prudent taxpayer. In this instance, all five of the appellant’s agents would have been aware of the importance of those notes, the fact that Officer Dyson’s assessments, including the section 445 charges, were in large measure predicated on the information in those notes and the fact that the burden of proof when disputing the assessments lies with the taxpayer.

It was not only Officer Dyson who relied on the notes of that meeting. The Review

Conclusion letter for VAT dated 8 August 2019 had no less than 21 bullet points which narrated the facts upon which HMRC relied that were derived from that meeting. HMRC’s Statements of Case also referenced the notes of the meeting as did their Skeleton Arguments.

In his witness statement, at paragraph 15, Mr Paudel stated that, prior to the 16 May 2017 meeting, in March 2017, Officer Dyson had contacted the appellant “in regards to cash payments retained in records of TIWC”. That is simply inaccurate. The first time that Officer Dyson asked about TIWC was at that meeting and it was at the very end of the meeting. It was restricted to:

asking the directors if they had ever stocked Villa Radiosa and Mr Paudel replied in

the affirmative and denied that there had been any purchases beyond the four purchases

that had been identified from the delivery notes and invoices by HMRC, and

Officer Dyson asked him to think carefully about that, referred to the penalty fact

sheet and asked him to discuss the matter with VKM.

Mr Paudel’s witness statement referenced the HMRC Statement of Case and disputed 11 paragraphs. One paragraph that was not disputed was paragraph 20 which narrated 21 facts that it was stated had been confirmed by the directors at the meeting.

Mr Paudel, and therefore the appellant, has been professionally advised throughout, so whether he read the notes or not, he was certainly on notice as to the contents. We do not find his explanation that he did not know the detail of the notes to be credible.

Mr Paudel told the Tribunal that “everything is recorded” and when taken to the spreadsheet with Potential Additional Sales he initially said that he did not accept that there were poor records or errors. Ultimately, he said that he accepted that there were errors in the records. When asked if that meant that there would be errors in the accounts, his response was that he did not have a clue about such things.

In his witness statement he had argued at paragraph 25 that the stock flow exercise had not taken account of stock that was damaged, lost, stolen, out of date or seized by HMRC (being what was challenged in relation to the records of the meeting). He confirmed that HMRC had seized 14 or 15 pallets in 2015 because duty had not been paid. In fact, the spreadsheet for the Potential Additional Sales had a column headed “Seized Stock” and the calculations added that back in so Officer Dyson certainly had taken that into account.

In summary, whilst we accept that there has been a considerable elapse of time, in his oral evidence there were numerous questions to which his answer was that he could not remember. However, he stated that he recalled what was said at the May 2017 meeting about theft and similar matters. He did remember that they shopped for stock every day and paid in cash most of the time because it was cheaper due to bank charges. When the appellant paid by cheque then they deposited money in the bank in order to cover the payment. In re-examination Mr Paudel said that records of all payments by debit cards should be placed in the “purchase file” and when asked if he was confident that all records would be there he said that there “could be mistakes” but he was not sure.

We were not persuaded that Mr Paudel was a credible witness.