UT/2024/000022 - [2025] UKUT 00309 (TCC)

Under this ground, it is argued that the FTT erred by failing to take into account two key matters: (1) that there had (as HMRC had accepted) been no loss of tax and, moreover, “corrective action” could have been taken to regularise the VAT position by re-routing the VAT supplies so as to accord with the VAT returns; and (2) the strength of Mr Pawar’s appeal, particularly in view of the availability and effect of such corrective action. Mr Bedenham accepted that there was some overlap between the two limbs of this ground; his submission was that in the light of the first limb any inaccuracy in the returns could not be characterised as “deliberate” so as to justify a PLN.

His written and oral submissions emphasised that the FTT had erred in failing even to consider the merits of Mr Pawar’s appeal as part of the stage three balancing exercise. The appeal had obvious strength in that the burden would be on HMRC to prove that the inaccuracy in the Company’s VAT return was “deliberate”. That was front and centre of the question of the merits of Mr Pawar’s claim. The relevant legislative provision (paragraph 19(1) of schedule 24 to the Finance Act 2007) applies “Where a penalty under paragraph 1 [the inaccuracy penalty] is payable by a company for a deliberate inaccuracy which was attributable to an officer of the company …”. The legislation makes it clear that the officer’s liability only arises where the relevant inaccuracy is a deliberate inaccuracy attributable to the officer.

Mr Bedenham complains that the FTT did not even refer to these provisions, as might have been expected given their central importance to any assessment of the merits of the dispute. That the Appellant’s case was strong was revealed by the inconsistency in HMRC’s position between their acceptance that there had been no loss of tax and that corrective action could be taken, while on the other, maintaining that the inaccuracies were deliberate on Mr Pawar’s part. He also argued that the logical inference from HMRC having withdrawn from the corporation tax penalty was that HMRC could not meet the burden of proof on the balance of probabilities, and that the same reasoning should apply to the VAT penalty. HMRC submit the FTT did consider the merits appropriately and without error. It also did consider specifically the Appellant’s arguments regarding the corrective action. It rejected those arguments as a good reason for the delay (at [70] and [74] to [75] of the FTT Decision). The corrective action was dependent on the provision of further information and that information was not provided. HMRC submit that by rejecting the “corrective action” argument as a good reason for the delay the FTT was plainly also rejecting the point that the possibility of corrective action meant the Appellant’s case had strength. No deal on corrective active could have been reached when the information the deal was dependent on had not been provided.