![UT/2024/000087 - [2025] UKUT 00287 (TCC)](https://backend.juristeca.com/files/emisores/logo_ICfrj4g.png){kind=logo}
Discussion
Discussion
The FTT summarised the Respondents’ s455 argument at [14] and concluded at [97] – [99]:
We were told, and accept, that it is HMRC’s practice to assume that where the takings of a limited company are suppressed they have been extracted by the participants (be that the shareholders or the directors). HMRC do not undertaken any tracing activity or look to establish which participants have benefitted on the basis that it is a reasonable assumption to have made.
The Appellant contends that HMRC were not able to identify Mr Chan as the person in charge on any of the covert visits and it is therefore unreasonable to impose a section 455 charge.
That argument completely misses the objective underpinning section 455. That section taxes the participants on the basis of extracted profits. No corporation tax assessment is raised where suppression is as a consequence of theft from the company by someone other than a participant. Where there is no evidence of such theft and no alternative explanation provided there is no evidence on which to set aside HMRC’s assumption and the section 455 aspects of an assessment should stand.
This point argued in this ground of appeal was not raised before the FTT other than on the basis that Mr Chan was not the person in charge on any of the covert visits. As I set out in my refusal of permission to appeal on the papers:
9…An appeal to the UT is not an opportunity to argue a different case, i.e. to have a second bite of the cherry by pursuing arguments that ought to have been put but where not pleaded at first instance. That said on a purely legal point that the FTT ought to have considered but did not permission to appeal may be granted. In this case the issue is one of mixed fact and law. The legal point (for the avoidance of doubt it should not be inferred that I consider it correct) only arises if the factual position is ascertained to be as now asserted in the grounds of appeal. It appears that the FTT did not consider the points raised in this ground of appeal because the arguments appear to have been simply that Mr. Chan was not in charge on any of the covert visits. The Appellant was professionally represented. I note that there is no factual finding by the FTT that Mr. Chan was not a participator. Paragraph 5 of the decision simply records that he was the sole director from 1 February 2015 and that he did not own shares in it…
However, I am now just persuaded that it is arguable that the FTT may have erred in its approach to s455. I was not taken to any authorities on the particular issue raised i.e. that an individual/s must be identified. Mr Chacko relied on the FTT decision in Stirling Jewellers. This decision was appealed to the UT by both parties, but the Respondents did not appeal against the s455 aspect of the decision.
In proceeding on the basis that it is correct to assume that a participator must have extracted the profits without identifying an individual appears to be at odds with the FTT Sterling Jewellers’ decision. In the instant case no finding was made (because the point was not raised) that the under-declarations were extracted by an individual. I note that the passage relied on by Mr Chacko ought to be read in the context of the factual findings in that appeal which differ considerably from the instant case.
The FTT also appears to have proceeded on the basis that a director is a participator. Again, this point was not raised before the FTT but if as a matter of law that is incorrect it is arguable that permission to appeal should be granted. I was not provided with any substantive argument on this issue by either party but consider that it at least arguable that the FTT ought to have engage with the basis on which Mr Chan was a participator.
For the above reasons permission to appeal is granted on Ground 1.