![UT/2022/000157 - [2024] UKUT 00346 (TCC)](https://backend.juristeca.com/files/emisores/logo_ICfrj4g.png){kind=logo}
The parties’ submissions in outline
The parties’ submissions in outline
HMRC disputes this reasoning; the respondents support it. In summary, the parties’ submissions are as follows.
For HMRC, Mr Hayhurst submits that there is a strand of authorities which supports the proposition that in all tax cases (including appeals against penalty assessments) the burden is on the taxpayer except where: (i) the statute expressly or impliedly places the burden of proof on HMRC or (ii) where the liability for which HMRC contends requires proof of particular knowledge or state of mind on the part of the taxpayer. The clearest example of the latter exception is the requirement on HMRC to show that the taxpayer knew or should have known of a connection with fraud in relation to cases within the Kittel principle.
Mr Hayhurst says that, in addition to Khan, this strand of authorities includes the cases of Brady, Ingenious Games LLP v HMRC [2015] UKUT 0105 (TCC) (“Ingenious”), and Awards Drinks Limited v HMRC [2021] EWCA Civ 1235 (“Awards”).
For the respondents, Mr Webster KC submits:
In relation to tax assessments, the burden of proof is on the taxpayer to show that the relevant assessment is wrong and to establish the correct amount of tax that is due.
There is an exception to that general principle where dishonesty or fraud is expressly alleged by HMRC against a taxpayer. In such cases, HMRC must plead, particularize and prove dishonesty or fraud in the same way that it would have to do so in civil proceedings (E Buyer UK Ltd v HMRC [2017] EWCA Civ 1416 (“E Buyer”) per Sir Geoffrey Vos C, as he then was, at [98]).
Where a penalty is imposed upon a taxpayer, HMRC bears the burden of proving liability to that penalty, unless an exception to Article 6 ECHR can be justified (Euro Wines v HMRC [2018] EWCA Civ 46 (“Euro Wines”)).
Although it is possible to justify an exception to the application of Article 6 ECHR in some cases, given the nature of the appeals in this case, it would not be appropriate to make an exception. The FTT was correct to impose the burden of proof on HMRC.
- Heading
- Introduction
- Background
- VAT
- Excise duties
- The FTT Decision
- The Grounds of Appeal
- Ground 1: the burden of proof
- Background
- The FTT Decision
- The parties’ submissions in outline
- The relevant case law principles
- The burden of proof in tax appeals
- The burden of proof in penalty appeals
- DLN
- Penalties under Schedule 24 FA 2007 and Schedule 41 FA 2008
- Ground 2: approach to the issues and evidence
- Background
- The FTT Decision
- Discussion
- Conclusion
- Ground 3: conclusions inconsistent with the underlying evidence
- Background
- The FTT decision
- The parties’ submissions in outline
- Discussion
- Application to the facts of this case
- Conclusion
- Ground 4: breach of “best judgment” requirement
- Background
- Relevant case law principles
- There are two distinct questions which arise where an assessment purports to be made under section 73(1) VATA: first, whether the assessment has been made under the power conferred by that section; an
- The test as to whether an assessment is made to the best of HMRC’s judgment is classically set out in the judgment of Woolf J in Van Boeckel , at page 292e-293a, where he said this
- As to whether an alleged error in an assessment is to be taken as evidence that the assessment was not made to the best of HMRC’s judgment, the relevant question is whether the mistake is consistent w
- There are, however, dangers in an over-rigid adherence to a two-stage approach (i.e. first, validity; second, quantum) to a challenge to a best judgment assessment. The important issue for the tribuna
- The FTT Decision
- The parties’ submissions in outline
- The only relevant test of whether the assessment met the best judgment requirement was whether the mistakes in the assessment were “consistent with an honest and genuine attempt to make a reasonable a
- Application to the facts of this case
- Ground 4
- Ground 5
- Conclusion
- Background
- In relation to Ground 3
- In relation to Ground 4
- In relation to Ground 5 Why, if there was a breach of the best judgement requirement, it rejected the Court of Appeal’s guidance in Pegasus Birds at [23-29] not to automatically set aside the whole assessment but instead to
- If the Tribunal considered Mr Foster’s failure to consider the York Wine bank statements was so “serious or fundamental” that it required the whole assessment to be set aside ( Pegasus Birds [29]), wh
- The parties’ submissions in outline
- Discussion
- Application to the facts of this case
- Conclusions