“97 Penalties for errors (1) Schedule 24 contains provisions imposing penalties on taxpayers who – (a) make errors in certain documents sent to HMRC, or (b) unreasonably fail to report errors in assessments by HMRC.”
“1 Error in taxpayer’s document (1) A penalty is payable by a person (P) where – (a) P gives HMRC a document of a kind listed in the Table below, and (b) Conditions 1 and 2 are satisfied. (2) Condition 1 is that the document contains an inaccuracy which amounts to, or leads to – (a) an understatement of a liability to tax, (b) a false or inflated statement of a loss, or (c) a false or inflated claim to repayment of tax. (3) Condition 2 is that the inaccuracy was careless (within the meaning of paragraph 3) or deliberate on P’s part. (4) Where a document contains more than one inaccuracy, a penalty is payable for each inaccuracy.”
“1A Error in taxpayer's document attributable to another person (1) A penalty is payable by a person (T) where – (a) another person (P) gives HMRC a document of a kind listed in the Table in paragraph 1, (b) the document contains a relevant inaccuracy, and (c) the inaccuracy was attributable to T deliberately supplying false information to P (whether directly or indirectly), or to T deliberately withholding information from P, with the intention of the document containing the inaccuracy. (2) A “relevant inaccuracy” is an inaccuracy which amounts to, or leads to – (a) an understatement of a liability to tax, (b) a false or inflated statement of a loss, or (c) a false or inflated claim to repayment of tax. (3) A penalty is payable under this paragraph in respect of an inaccuracy whether or not P is liable to a penalty under paragraph 1 in respect of the same inaccuracy.”
“3 Degrees of culpability (1) For the purposes of a penalty under paragraph 1, inaccuracy in a document given by P to HMRC is – (a) “careless” if the inaccuracy is due to failure by P to take reasonable care, (b) “deliberate but not concealed” if the inaccuracy is deliberate on P’s part but P does not make arrangements to conceal it, and (c) “deliberate and concealed” if the inaccuracy is deliberate on P’s part and P makes arrangements to conceal it (for example, by submitting false evidence in support of an inaccurate figure). (2) An inaccuracy in a document given by P to HMRC, which was neither careless nor deliberate on P’s part when the document was given, is to be treated as careless if P – (a) discovered the inaccuracy at some later time, and (b) did not take reasonable steps to inform HMRC.”
“4 (1) This paragraph sets out the penalty payable under paragraph 1. (2) If the inaccuracy is in category 1, the penalty is – (a) for careless action, 30% of the potential lost revenue, (b) for deliberate but not concealed action, 70% of the potential lost revenue, and (c) for deliberate and concealed action, 100% of the potential lost revenue. … (5) Paragraph 4A explains the 3 categories of inaccuracy. 4A (1) An inaccuracy is in category 1 if – (a) it involves a domestic matter,… (6) If a single inaccuracy is in more than one category (each referred to as a “relevant category”) – (a) it is to be treated for the purposes of this Schedule as if it were separate inaccuracies, one in each relevant category according to the matters that it involves, and (b) the potential lost revenue is to be calculated separately in respect of each separate inaccuracy. … 5 (1) “The potential lost revenue” in respect of an inaccuracy in a document (including an inaccuracy attributable to a supply of false information or withholding of information) or a failure to notify an under-assessment is the additional amount due or payable in respect of tax as a result of correcting the inaccuracy or assessment. (2) The reference in sub-paragraph (1) to the additional amount due or payable includes a reference to – (a) an amount payable to HMRC having been erroneously paid by way of repayment of tax, and (b) an amount which would have been repayable by HMRC had the inaccuracy or assessment not been corrected. … 6 (1) Where P is liable to a penalty under paragraph 1 in respect of more than one inaccuracy, and the calculation of potential lost revenue under paragraph 5 in respect of each inaccuracy depends on the order in which they are corrected – (a) careless inaccuracies shall be taken to be corrected before deliberate inaccuracies, and (b) deliberate but not concealed inaccuracies shall be taken to be corrected before deliberate and concealed inaccuracies. (2) In calculating potential lost revenue where P is liable to a penalty under paragraph 1 in respect of one or more understatements in one or more documents relating to a tax period, account shall be taken of any overstatement in any document given by P which relates to the same tax period. (3) In sub-paragraph (2) – (a) “understatement” means an inaccuracy that satisfies Condition 1 of paragraph 1, and (b) “overstatement” means an inaccuracy that does not satisfy that condition. (4) For the purposes of sub-paragraph (2) overstatements shall be set against understatements in the following order – (a) understatements in respect of which P is not liable to a penalty, (b) careless understatements, (c) deliberate but not concealed understatements, and (d) deliberate and concealed understatements. (5) In calculating for the purposes of a penalty under paragraph 1 potential lost revenue in respect of a document given by or on behalf of P no account shall be taken of the fact that a potential loss of revenue from P is or may be balanced by a potential over-payment by another person (except to the extent that an enactment requires or permits a person's tax liability to be adjusted by reference to P's). …”
“9 Reductions for disclosure (A1) Paragraph 10 provides for reductions in penalties under paragraphs 1, 1A and 2 where a person discloses an inaccuracy, a supply of false information or withholding of information, or a failure to disclose an under-assessment. (1) A person discloses an inaccuracy, a supply of false information or withholding of information, or a failure to disclose an underassessment by – (a) telling HMRC about it, (b) giving HMRC reasonable help in quantifying the inaccuracy, the inaccuracy attributable to the supply of false information or withholding of information, or the under-assessment, and (c) allowing HMRC access to records for the purpose of ensuring that the inaccuracy, the inaccuracy attributable to the supply of false information or withholding of information, or the under-assessment is fully corrected. (2) Disclosure – (a) is “unprompted” if made at a time when the person making it has no reason to believe that HMRC have discovered or are about to discover the inaccuracy, the supply of false information or withholding of information, or the underassessment, and (b) otherwise, is “prompted”. (3) In relation to disclosure “quality” includes timing, nature and extent. 10 (1) If a person who would otherwise be liable to a penalty of a percentage shown in column 1 of the Table (a “standard percentage”) has made a disclosure, HMRC must reduce the standard percentage to one that reflects the quality of the disclosure. (2) But the standard percentage may not be reduced to a percentage that is below the minimum shown for it – (a) in the case of a prompted disclosure, in column 2 of the Table, and (b) in the case of an unprompted disclosure, in column 3 of the Table. STANDARD % MINIMUM % FOR PROMPTED DISCLOSURE MINIMUM % FOR UNPROMPTED DISCLOSURE 30 15 0 45 22.5 0 60 30 0 70 35 20 105 52.5 30 140 70 40 100 50 30 150 75 45 200 100 60 11 Special reduction (1) If they think it right because of special circumstances, HMRC may reduce a penalty under paragraph 1, 1A or 2. (2) In sub-paragraph (1) “special circumstances” does not include – (a) ability to pay, or (b) the fact that a potential loss of revenue from one taxpayer is balanced by a potential over-payment by another. (3) In sub-paragraph (1) the reference to reducing a penalty includes a reference to – (a) staying a penalty, and (b) agreeing a compromise in relation to proceedings for a penalty. … 13 Procedure – assessment (1) Where a person becomes liable for a penalty under paragraph 1, 1A or 2 HMRC shall – (a) assess the penalty, (b) notify the person, and (c) state in the notice a tax period in respect of which the penalty is assessed… … (1A) A penalty under paragraph 1, 1A or 2 must be paid before the end of the period of 30 days beginning with the day on which notification of the penalty is issued. (2) An assessment – (a) shall be treated for procedural purposes in the same way as an assessment to tax (except in respect of a matter expressly provided for by this Act), (b) may be enforced as if it were an assessment to tax, and (c) may be combined with an assessment to tax. (3) An assessment of a penalty under paragraph 1 or 1A must be made before the end of the period of 12 months beginning with – (a) the end of the appeal period for the decision correcting the inaccuracy, or (b) if there is no assessment to the tax concerned within paragraph (a), the date on which the inaccuracy is corrected. (4) An assessment of a penalty under paragraph 2 must be made before the end of the period of 12 months beginning with (a) the end of the appeal period for the assessment of tax which corrected the understatement, or (b) if there is no assessment within paragraph (a), the date on which the understatement is corrected. (5) For the purpose of sub-paragraphs (3) and (4) a reference to an appeal period is a reference to the period during which – (a) an appeal could be brought, or (b) an appeal that has been brought has not been determined or withdrawn. (6) Subject to sub-paragraphs (3) and (4), a supplementary assessment may be made in respect of a penalty if an earlier assessment operated by reference to an underestimate of potential lost revenue. (7) In this Part of this Schedule references to an assessment to tax, in relation to inheritance tax and stamp duty reserve tax, are to a determination. … 15 Procedure – appeal (1) A person may appeal against a decision of HMRC that a penalty is payable by the person. (2) A person may appeal against a decision of HMRC as to the amount of a penalty payable by the person. ... 16 (1) An appeal under this Part of this Schedule shall be treated in the same way as an appeal against an assessment to the tax concerned (including by the application of any provision about bringing the appeal by notice to HMRC, about HMRC review of the decision or about determination of the appeal by the First-tier Tribunal or Upper Tribunal). (2) Sub-paragraph (1) does not apply – (a) so as to require P to pay a penalty before an appeal against the assessment of the penalty is determined, or (b) in respect of any other matter expressly provided for by this Act. 17 (1) On an appeal under paragraph 15(1) the tribunal may affirm or cancel HMRC's decision. (2) On an appeal under paragraph 15(2) the tribunal may – (a) affirm HMRC's decision, or (b) substitute for HMRC's decision another decision that HMRC had power to make. (3) If the tribunal substitutes its decision for HMRC's, the tribunal may rely on paragraph 11 – (a) to the same extent as HMRC (which may mean applying the same percentage reduction as HMRC to a different starting point), or (b) to a different extent, but only if the tribunal thinks that HMRC's decision in respect of the application of paragraph 11 was flawed. … (5A) In this paragraph “tribunal” means the First-tier Tribunal or Upper Tribunal (as appropriate by virtue of paragraph 16(1)). (6) In sub-paragraphs (3)(b)… “flawed” means flawed when considered in the light of the principles applicable in proceedings for judicial review. …”
“19 Companies: officers' liability (1) Where a penalty under paragraph 1 is payable by a company for a deliberate inaccuracy which was attributable to an officer of the company, the officer is liable to pay such portion of the penalty (which may be 100%) as HMRC may specify by written notice to the officer. (2) Sub-paragraph (1) does not allow HMRC to recover more than 100% of a penalty. (3) In the application of sub-paragraph (1) to a body corporate other than a limited liability partnership “officer” means – (a) a director (including a shadow director within the meaning ofsection 251 of the Companies Act 2006 (c. 46)), (aa) a manager, and (b) a secretary. (3A) In the application of sub-paragraph (1) to a limited liability partnership, “officer” means a member. (4) In the application of sub-paragraph (1) in any other case “officer” means – (a) a director, (b) a manager, (c) a secretary, and (d) any other person managing or purporting to manage any of the company's affairs. (5) Where HMRC have specified a portion of a penalty in a notice given to an officer under sub-paragraph (1) – (a) paragraph 11 applies to the specified portion as to a penalty, (b) the officer must pay the specified portion before the end of the period of 30 days beginning with the day on which the notice is given, (c) paragraph 13(2), (3) and (5) apply as if the notice were an assessment of a penalty, (d) a further notice may be given in respect of a portion of any additional amount assessed in a supplementary assessment in respect of the penalty under paragraph 13(6), (e) paragraphs 15(1) and (2), 16 and 17(1) to (3) and (6) apply as if HMRC had decided that a penalty of the amount of the specified portion is payable by the officer, and (f) paragraph 21 applies as if the officer were liable to a penalty. (6) In this paragraph “company” means any body corporate or unincorporated association, but does not include a partnership, a local authority or a local authority association. …”
“80 Determination of unpaid tax and appeal against determination (1) This regulation applies if it appears to [HMRC] that there may be tax payable for a tax year under 67G, as adjusted by regulation 67H(2) where appropriate, or regulation 68 by an employer which has neither been – (a) paid to the Inland Revenue, nor (b) certified by the Inland Revenue under regulation 75A, 76, 77, 78 or 79. (1A) In paragraph (1), the reference to tax payable for a tax year under regulation 67G includes references to – (a) any amount the employer was liable to deduct from employees during the tax year, and (b) any amount the employer must account for under regulation 62(5) (notional payments) in respect of notional payments made by the employer during the tax year, whether or not those amounts were included in any return under regulation 67B (real time returns of information about relevant payments) or 67D (exceptions to regulation 67B). (2) [HMRC] may determine the amount of that tax to the best of their judgment, and serve notice of their determination on the employer. (3) A determination under this regulation must not include tax in respect of which a direction under regulation 72(5) has been made; and directions under that regulation do not apply to tax determined under this regulation. (3A) A determination under this regulation must not include tax in respect of which a direction under regulation 72F has been made. (4) A determination under this regulation may– (a) cover ... any one or more tax periods in a tax year, and (b) extend to the whole of [the amount of tax determined by HMRC under paragraph (2)], or to such part of it as is payable in respect of – (i) a class or classes of employees specified in the notice of determination (without naming the individual employees), or (ii) one or more named employees specified in the notice. (5) A determination under this regulation is subject to Parts 4, 5, 5A ... and 6 of TMA (assessment, appeals, collection and recovery) as if – (a) the determination were an assessment, and (b) the amount of tax determined were income tax charged on the employer, and those Parts of that Act apply accordingly with any necessary modifications. ...”
“8 Decisions by officers of Board (1) Subject to the provisions of this Part, it shall be for an officer of the Board – … (c) to decide whether a person is or was liable to pay contributions of any particular class and, if so, the amount that he is or was liable to pay, …”
“73 Annual return of relevant payments liable to deduction of tax (Forms P35 and P14) (1) Before 20th May following the end of a tax year, an employer must deliver to the Inland Revenue a return containing the following information. (2) The information is – (a) the tax year to which the return relates, (b) the total amount of the relevant payments made by the employer during the tax year to all employees in respect of whom the employer was required at any time during that year to prepare or maintain deductions working sheets, and (c) the total net tax deducted in relation to those payments. (3) The return must be supported by the following information in respect of each of the employees mentioned in paragraph (2)(b). (4) The supporting information is – (a) the employee's name, (b) the employee's address, if known, (c) either – (i) the employee's national insurance number, or (ii) if that number is not known, the employee's date of birth, if known, and sex, (d) the employee's code, (e) the tax year to which the return relates, (f) the total amount of the relevant payments made by the employer to the employee during that tax year, and (g) the total net tax deducted in relation to those payments. (5) Paragraphs (2)(c) and (4)(g) are subject to regulation 64(7) (trade disputes). (6) If an employee was taken into employment after the beginning of the tax year, the employer must also provide the total amounts of – (a) any amounts required by regulation 43(9), 52(11), 53(3) or 61(3) to be treated as relevant payments made by the employer to the employee during the tax year, (b) any amounts treated as tax deducted by the employer by any of those regulations, (c) the sum of the figures given under sub-paragraph (a) of this paragraph and paragraph (4)(f), (d) the sum of the figures given under sub-paragraph (b) of this paragraph and paragraph (4)(g). (7) The return must include – (a) a statement and declaration containing a list of all deductions working sheets which the employer was required to prepare or maintain at any time during that tax year; and (b) a certificate showing – (i) the total net tax deducted or the total net tax repaid in the case of each employee, and (ii) the total net tax deducted or repaid in respect of all the employees, during that tax year. (8) The statement and declaration and the certificate must be – (a) signed by the employer, or (b) if the employer is a body corporate, signed either by the secretary or by a director.”
“229 Mileage allowance payments (1) No liability to income tax arises in respect of approved mileage allowance payments for a vehicle to which this Chapter applies (see section 235). (2) Mileage allowance payments are amounts, other than passenger payments (see section 233), paid to an employee for expenses related to the employee's use of such a vehicle for business travel (see section 236(1)). (3) Mileage allowance payments are approved if, or to the extent that, for a tax year, the total amount of all such payments made to the employee for the kind of vehicle in question does not exceed the approved amount for such payments applicable to that kind of vehicle (see section 230). (4) Subsection (1) does not apply if – (a) the employee is a passenger in the vehicle, or (b) the vehicle is a company vehicle (see section 236(2)). 230 The approved amount for mileage allowance payments (1) The approved amount for mileage allowance payments that is applicable to a kind of vehicle is – M × R Where – M is the number of miles of business travel by the employee (other than as a passenger) using that kind of vehicle in the tax year in question; R is the rate applicable to that kind of vehicle. (2) The rates applicable are as follows – Kind of vehicle Rate per mile Car or van 45p for the first 10,000 miles 25p after that Motor cycle 24p Cycle 20p (3) The reference in subsection (2) to “the first 10,000 miles” is to the total number of miles of business travel in relation to the employment, or any associated employment, by car or van in the tax year in question. ... 231 Mileage allowance relief (1) An employee is entitled to mileage allowance relief for a tax year – (a) if the employee uses a vehicle to which this Chapter applies for business travel, and (b) the total amount of all mileage allowance payments, if any, made to the employee for the kind of vehicle in question for the tax year is less than the approved amount for such payments applicable to that kind of vehicle. (2) The amount of mileage allowance relief to which an employee is entitled for a tax year is the difference between – (a) the total amount of all mileage allowance payments, if any, made to the employee for the kind of vehicle in question, and (b) the approved amount for such payments applicable to that kind of vehicle. (3) Subsection (1) does not apply if – (a) the employee is a passenger in the vehicle, or (b) the vehicle is a company vehicle. … 233 Passenger payments (1) No liability to income tax arises in respect of approved passenger payments made to an employee for the use of a car or van (whether or not it is a company vehicle) if – (a) the employee receives mileage allowance payments for the use of the car or van, and (b) the cash equivalent of the benefit of the car or van is treated as earnings from the employment by virtue of section 120 or 154 (cars and vans as benefits). This is subject to subsection (2). (2) The condition in subsection (1)(b) needs to be met only if the car or van is made available to the employee by reason of the employment. (3) Passenger payments are amounts paid to an employee because, while using a car or van for business travel, the employee carries in it one or more passengers who are also employees for whom the travel is business travel. (4) Passenger payments are approved if, or to the extent that, for a tax year, the total amount of all such payments made to the employee does not exceed the approved amount for such payments (see section 234). (5) Section 117 (when cars and vans are made available by reason of employment) applies for the purposes of subsection (2). 234 The approved amount for passenger payments (1) The approved amount for passenger payments is – M × R Where – M is the number of miles of business travel by the employee by car or van – (a) for which the employee carries in the tax year in question one or more passengers who are also employees for whom the travel is business travel, and (b) in respect of which passenger payments are made; R is a rate of 5p per mile. … 235 Vehicles to which this Chapter applies (1) This Chapter applies to cars, vans, motor cycles and cycles. (2) “Car” means a mechanically propelled road vehicle which is not – (a) a goods vehicle, (b) a motor cycle, or (c) a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used. (3) “Van” means a mechanically propelled road vehicle which – (a) is a goods vehicle, and (b) has a design weight not exceeding 3,500 kilograms, and which is not a motor cycle. (4) “Motor cycle” has the meaning given bysection 185(1) of the Road Traffic Act 1988 (c. 52). (5) “Cycle” has the meaning given by section 192(1) of that Act. (6) In this section – “design weight” means the weight which a vehicle is designed or adapted not to exceed when in normal use and travelling on a road laden; “goods vehicle” means a vehicle of a construction primarily suited for the conveyance of goods or burden of any description. 236 Interpretation of this Chapter (1) In this Chapter – “business travel” means travelling the expenses of which, if incurred and paid by the employee in question, would (if this Chapter did not apply) be deductible under sections 337 to 342; “mileage allowance payments” has the meaning given by section 229(2); “passenger payments” has the meaning given by section 233(3). (2) For the purposes of this Chapter a vehicle is a “company vehicle” in a tax year if in that year – (a) the vehicle is made available to the employee by reason of the employment and is not available for the employee's private use, or (b) the cash equivalent of the benefit of the vehicle is to be treated as the employee's earnings for the tax year by virtue of – (i) section 120 (benefit of car treated as earnings), (ii) section 154 (benefit of van treated as earnings), or (iii) section 203 (residual liability to charge: benefit treated as earnings), or (c) in the case of a car or van, the cash equivalent of the benefit of the car or van would be required to be so treated if sections 167 and 168 (exceptions for pooled cars and vans) [and section 248A (emergency vehicles) ]1 did not apply, or (d) in the case of a cycle, the cash equivalent of the benefit of the cycle would be required to be treated as the employee's earnings for the tax year under Chapter 10 of Part 3 (taxable benefits: residual liability to charge) if section 244(1) (exception for cycles made available) did not apply. (3) Sections 117 and 118 (when cars and vans are made available by reason of employment and are made available for private use) apply for the purposes of subsection (2).”
“336 Deductions for expenses: the general rule (1) The general rule is that a deduction from earnings is allowed for an amount if – (a) the employee is obliged to incur and pay it as holder of the employment, and (b) the amount is incurred wholly, exclusively and necessarily in the performance of the duties of the employment. (2) The following provisions of this Chapter contain additional rules allowing deductions for particular kinds of expenses and rules preventing particular kinds of deductions. (3) No deduction is allowed under this section for an amount that is deductible under sections 337 to 342 (travel expenses).”
“(1) In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. Judgment shall be pronounced publicly but the press and public may be excluded from all or part of the trial in the interest of morals, public order or national security in a democratic society, where the interests of juveniles or the protection of the private life of the parties so require, or the extent strictly necessary in the opinion of the court in special circumstances where publicity would prejudice the interests of justice. (2) Everyone charged with a criminal offence shall be presumed innocent until proved guilty according to law. (3) Everyone charged with a criminal offence has the following minimum rights: (a) to be informed promptly, in a language which he understands and in detail, of the nature and cause of the accusation against him; (b) to have adequate time and facilities for the preparation of his defence; (c) to defend himself in person or through legal assistance of his own choosing or, if he has not sufficient means to pay for legal assistance, to be given it free when the interests of justice so require; (d) to examine or have examined witnesses against him and to obtain the attendance and examination of witnesses on his behalf under the same conditions as witnesses against him; (e) to have the free assistance of an interpreter if he cannot understand or speak the language used in court.”
“33. The principle of abuse of process is based on the underlying public interest that there should be finality in litigation, and efficiency and economy in the conduct of litigation. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to an abuse of process if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in earlier proceedings if it was to be raised at all. That principle was explained by Lord Bingham in Johnson v Gore Wood & Co (a firm)[2002] 2 AC 1 , at p 31, where he went on to say: “It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not. Thus while I would accept that lack of funds would not ordinarily excuse a failure to raise in earlier proceedings an issue which could and should have been raised then, I would not regard it as necessarily irrelevant, particularly if it appears that the lack of funds has been caused by the party against whom it is sought to claim. While the result may often be the same, it is in my view preferable to ask whether in all the circumstances a party's conduct is an abuse than to ask whether the conduct is an abuse and then, if it is, to ask whether the abuse is excused or justified by special circumstances. Properly applied, and whatever the legitimacy of its descent, the rule has in my view a valuable part to play in protecting the interests of justice.””
“[ ] In relation to the penalty and personal liability notice, the Respondents bear the burden of proving that: (1) EE139’s P35 returns and P14 forms and RTI returns were inaccurate and that such inaccuracies amounted to, or led to, an understatement of liability to tax; (2) That such inaccuracies were deliberate and concealed; (3) That the deliberate and concealed inaccuracies were attributable to the Appellant as an officer of the company; and (4) That the penalty amounts as attributable to the Appellant are correct.”
“28. If the Respondents are wrong about this, and Ms Suttle and Mr Jaekel are permitted to litigate the underlying Regulation 80 determinations, and Section 8 decisions, the burden rests, in the ordinary way, on them to show that they were wrongly imposed. That is irrespective of the fact that they form part of the penalty appeal (see The Commissioners for His Majesty’s Revenue and Customs -v- Zaman[2022] UKUT 252 (TCC) at [34] – [35].”
“5(1) Subject to the provisions of the 2007 Act [ie theTribunals, Courts and Enforcement Act 2007 ] and any other enactment, the Tribunal may regulate its own procedure. (2) The Tribunal may give a direction in relation to the conduct or disposal of proceedings at any time, including a direction amending, suspending or setting aside an earlier direction.
“36. An application to amend will be refused if it is clear that the proposed amendment has no real prospect of success. The test to be applied is the same as that for summary judgment underCPR Part 24 . Thus the applicant has to have a case which is better than merely arguable. The court may reject an amendment seeking to raise a version of the facts of the case which is inherently implausible, self-contradictory or is not supported by contemporaneous documentation. 37. Beyond that, the relevant principles applying to very late applications to amend are well known. I have been referred to a number of authorities: Swain-Mason v Mills & Reeve[2011] 1 WLR 2735 (at paras. 69 to 72, 85 and 106); Worldwide Corporation Ltd v GPT Ltd [CA Transcript No 1835]2 December 1988 ; Hague Plant Limited v Hague[2014] EWCA Civ 1609 (at paras. 27 to 33); Dany Lions Ltd v Bristol Cars Ltd[2014] EWHC 928 (QB) (at paras. 4 to 7 and 29); Durley House Ltd v Firmdale Hotels plc[2014] EWHC 2608 (Ch) (at paras. 31 and 32); Mitchell v News Group Newspapers[2013] EWCA Civ 1537 . 37. Drawing these authorities together, the relevant principles can be stated simply as follows: a) whether to allow an amendment is a matter for the discretion of the court. In exercising that discretion, the overriding objective is of the greatest importance. Applications always involve the court striking a balance between injustice to the applicant if the amendment is refused, and injustice to the opposing party and other litigants in general, if the amendment is permitted; b) where a very late application to amend is made the correct approach is not that the amendments ought, in general, to be allowed so that the real dispute between the parties can be adjudicated upon. Rather, a heavy burden lies on a party seeking a very late amendment to show the strength of the new case and why justice to him, his opponent and other court users requires him to be able to pursue it. The risk to a trial date may mean that the lateness of the application to amend will of itself cause the balance to be loaded heavily against the grant of permission; c) a very late amendment is one made when the trial date has been fixed and where permitting the amendments would cause the trial date to be lost. Parties and the court have a legitimate expectation that trial fixtures will be kept; d) lateness is not an absolute, but a relative concept. It depends on a review of the nature of the proposed amendment, the quality of the explanation for its timing, and a fair appreciation of the consequences in terms of work wasted and consequential work to be done; e) gone are the days when it was sufficient for the amending party to argue that no prejudice had been suffered, save as to costs. In the modern era it is more readily recognised that the payment of costs may not be adequate compensation; f) it is incumbent on a party seeking the indulgence of the court to be allowed to raise a late claim to provide a good explanation for the delay; g) a much stricter view is taken nowadays of non-compliance with the Civil Procedure Rules and directions of the Court. The achievement of justice means something different now. Parties can no longer expect indulgence if they fail to comply with their procedural obligations because those obligations not only serve the purpose of ensuring that they conduct the litigation proportionately in order to ensure their own costs are kept within proportionate bounds but also the wider public interest of ensuring that other litigants can obtain justice efficiently and proportionately, and that the courts enable them to do so.”
“36. In Tower MCashback LLP 1 and anor v HMRC[2011] UKSC 19 the Supreme Court considered, inter alia, the question of whether HMRC could pursue arguments supporting a conclusion in a closure notice which had not been advanced in the notice itself. Lord Walker at [15] quoted with approval the words of Henderson J in the High Court: "There is a venerable principle of tax law to the general effect that there is a public interest in taxpayers paying the correct amount of tax, and it is one of the duties of the commissioners [the predecessors of the FTT] in exercise of their statutory functions to have regard to that public interest. [The judge then considered changes in the tax system and continued] For present purposes, however, it is enough to say that the principle still has at least some residual vitality in the context of section 50, and if the commissioners [that is to say now the FTT] are to fulfil their statutory duty under that section they must in my judgment be free in principle to entertain legal arguments which played no part in reaching the conclusions set out in the closure notice. Subject always to the requirements of fairness and proper case management, such fresh arguments may be advanced by either side, or may be introduced by the commissioners on their own initiative." 37. These sources make clear that in determining what arguments the tribunal may permit to affect its decision the guiding principle must be fairness in the circumstances of the case. Fairness does not require formality, and Rule 2(2)(b) expressly requires formality to be avoided. Fairness does not require, for example, that to advance an argument not present in its statement of case or the notice of appeal a party must always formally apply to amend its earlier pleading. On the other hand it does require that the other party is given adequate opportunity in the circumstances to meet the point, whether by argument or with evidence. 38. If a new argument is a pure point of law it might be addressed, as the case may be, after: a few minutes' thought; an evening's consideration; or one or more days' research. Provided that the other party has an appropriate opportunity to meet the point, it would generally not be unfair for the tribunal to take that argument into account. 39. When the argument gives rise to the possibility that it may be rebutted by further evidence, the other party must have a fair opportunity to bring that evidence to the tribunal. Depending on the circumstances that may mean no more than asking a few extra questions of a witness who is at the hearing in any event; or it may mean arranging for documents to be provided, or further evidence called, the next day; or seeking a longer adjournment. We do not wish to be thought to be laying down any particular rules, as what fairness requires will depend on all the circumstances of the case, and cases in the FTT vary enormously from informal appeals that take a very short time to elaborately argued cases that last for many days. 40. On the other hand, there will be circumstances where it is simply too late for a point to be raised. Where it is not reasonably possible in the circumstances of the case – having regard in particular to the resources of the parties and the need to avoid delay – for the other party to have a fair opportunity to rebut a new point, that is likely to mean that it would be unfair for a new point to be taken. 41. These requirements of fairness seem to us to arise however a new point emerges, that is whether the argument is one raised expressly or implicitly by: the appellant – for example by a non-represented appellant who has provided only a rudimentary notice of appeal; by HMRC – for example an argument which arises as a result of the questioning of a witness; or by the tribunal itself. 42. In the same way that a statement of case should set out HMRC's arguments clearly and unequivocally with sufficient detail, a new argument should only be taken into consideration if, among other things, it has been made clear to all parties what it is, and that it is being made. 43. In HMRC's case the FTT's Rules require the statement of case to set out their position in relation to the appeal, but flexibility, fairness and the tribunal's duty to seek that taxpayers pay "the correct amount of tax" require that they should not be so constrained by the arguments there set forth that no other argument may be raised. Whether or not that is permissible will depend upon whether the taxpayer can be given a fair opportunity to meet it. It would be contrary to the objectives of avoiding unnecessary formality and seeking flexibility if a greater hurdle for raising a new argument were placed in front of HMRC simply because it had set out its view at a particular time in the proceedings. That would risk Statements of Case becoming burdened by boilerplate and generalities rather than plainly indicating HMRC's real concerns.”
“10. The issues likely to be decided by the FTT on the VAT PLN appeals are, in summary: i) Were SLL, SLRL and SLRCL’s VAT returns inaccurate and did such inaccuracies amount to, or lead to, a false or inflated claim to repayment of tax? ii) Were such inaccuracies deliberate and concealed? iii) Were the deliberate and concealed inaccuracies attributable to Mr Ellis as a director of the companies? iv) Were the penalty amounts as attributed to Mr Ellis correct? 11. The burden of proof will be on HMRC in the VAT PLN appeals to establish that there was an inaccuracy leading to a potential loss of revenue, that this was brought about by the deliberate and concealed action of the three companies, and that the deliberate action was attributable to Mr Ellis as a director of them.” (3) The approach set out in Ellis is how we would, but for Zaman (or the authorities referred to therein, considered further below) being drawn to our attention, have approached the issues in these appeals. HMRC continue to accept that they bear the burden of proving “deliberate and concealed”
“[74] This view is reinforced by a number of considerations: (i) it is the appellant who knows, or ought to know, the true facts; (ii) s 60(7) makes express provision placing the burden on Customs in relation to specified matters. This suggests that the draftsman saw it as an exception to the ordinary rule, and seems inconsistent with an implied burden on Customs in respect of other matters; (iii) the distinction is also readily defensible as a matter of principle. Mr Young relied on 'the presumption of innocence' underart 6 of the Convention , but he was unable to refer us to any directly relevant authority. The presumption clearly justifies placing the burden of proof on Customs in respect of tax evasion and dishonesty; but once that burden has been satisfied, a different approach may properly be applied (compare R v Benjafield[2002] UKHL 2 , R v Rezvi[2002] UKHL 1 (on appeal from R v Benjafield, R v Leal, R v Rezvi, R v Milford)[2003] 1 AC 1099 ,[2002] 1 All ER 815 , in relation to confiscation orders in criminal proceedings); (iv) in relation to the calculation of tax due the subject-matter of the assessment and penalty appeals is identical. This link is given specific recognition by s 76(5) (allowing combination in one assessment). It would be surprising if the Act required different rules to be applied in each case; (v) s 73(9) provides that the assessed amount, subject to any appeal, is 'deemed to be an amount of VAT due …'. In a case where either there was no appeal against the assessment, or the penalty proceedings followed the conclusion of any such appeal, this provision would appear to preclude any attempt to reopen the assessment for the purpose of assessing the penalty. The subsection does not apply directly where, as here, the penalty appeal is combined with an appeal against the assessment, and the assessment has not therefore become final, but it indicates another link between the two procedures. (I do not see the provision as necessarily confined to enforcement, as Mr Young argues. Nor in the present context do I need to spend time on his argument that this interpretation could cause unfairness in proceedings against a third party under s 61, although I note that under that provision there appears to be a general power to mitigate the penalty.); (vi) to reverse the burden of proof would make the penalty regime unworkable in many cases. In a case such as the present, a 'best of judgment' assessment is needed precisely because the potential taxpayer has failed to keep proper records, so that positive proof in the sense required in the ordinary civil courts is not possible. The assessment may be no more than an exercise in informed guesswork. Indeed to put the burden on Customs would tend to favour those who have kept no records at all, as against those who have kept records, which are merely inadequate, but may be enough to give rise to an inference on the balance of probabilities. [75] We were referred in this connection to Hindle (t/a DJ Baker Bar) v Customs and Excise Comrs[2003] EWHC 1665 (Ch) ,[2004] STC 412 , a decision of Neuberger J given shortly after the tribunal decision in this case. That case also concerned a small trader who had failed to make VAT returns, and was subject to compulsory registration, followed by a 'best of judgment' assessment and an assessment to a civil penalty, all of which were upheld on appeal to the tribunal. The appeal to the High Court failed on the facts (see[2004] STC 412 at [34]). However, Neuberger J had earlier made some observations on the statutory criteria. It had been argued on behalf of the trader that different approaches were required in considering, on the one hand whether the statutory threshold for registration was exceeded, and, on the other, whether the 'best of judgment' assessment should be upheld. The judge agreed (see[2004] STC 412 at [29]–[32]): '[29] … As a matter of ordinary language, it seems clear to me that s 73(1) involves two issues where they are both being fought, as here. The first is to determine whether the person concerned has failed to make any returns required under this Act, which in this case involves the tribunal satisfying itself on the evidence before it whether or not the trader's turnover would or was reasonably expected to exceed£55,000 . If so satisfied, the tribunal would then go on to consider the assessment by reference to determining whether the commissioners had indeed made the assessment to the best of their judgment. [30] The point is reinforced when one considers a case where the commissioners have simply registered a trader for VAT and he appeals against that decision, without there being any assessments against which he has appealed. In those circumstances, Miss Shaw, I think realistically, concedes that the tribunal would make its own assessment, based on the evidence before it and the balance of probabilities, as to whether or not there has been a failure to make returns “as required under this Act”, ie in a case such as this, whether, on the evidence before it, the tribunal considers that the trader's turnover exceeds or is reasonably likely to exceed£55,000 . It would be very odd if the proper approach to determining whether or not there has been a failure to make returns required under this Act depended on whether or not there happened to be a challenged assessment at the same time. [31] Miss Shaw makes the point that, in a case such as this, if the argument which I favour is correct, then there is a slightly odd double requirement of the tribunal: first, to decide on the evidence before it and the balance of probabilities whether, in this case, the turnover of the appellant exceeded or is likely to exceed£55,000 ; secondly, on a more familiar reviewing Wednesbury type approach (see Associated Provincial Picture Houses Ltd v Wednesbury Corp[1948] 1 KB 223 ), whether the Commissioners' assessment was to the best of their judgment. [32] I think there is something in that point, but I do not find it particularly powerful. In each case the tribunal is being asked to look at different things. The first is whether the turnover exceeds, or is likely to exceed, a particular figure on the evidence before it. The second is whether, on the evidence before them, the actual figure for turnover which resulted in the VAT assessment of the commissioners was one arrived at to the best of their judgment. If slightly different questions involve slightly different approaches to the burden of proof or other matters, it is not that surprising. Certainly there is nothing so surprising in the result that it justifies what seems to be to be a re-wording of s 73(1), which is what the commissioners' argument involves.' [76] I make two comments on that passage. First, it was concerned with a different issue from the present: that is, the basis of calculation for the appeal against compulsory registration. No argument appears to have been addressed to the question of calculation for the purposes of the penalty assessment. Secondly, I think the judge was presented with a false dichotomy. As has now, I hope, been made clear by this court in Pegasus Birds, a 'Wednesbury type approach' (see Associated Provincial Picture Houses Ltd v Wednesbury Corpn[1948] 1 KB 223 ,[1947] 2 All ER 680 ) to a VAT assessment is the exception not the norm. In an ordinary case there is no reason for different approaches to the two forms of appeal. Whenever an appeal raises an issue of the correct calculation of turnover for the purposes of VAT, the primary task of the tribunal is, as we said in Pegasus Birds, 'to find the correct amount of tax, so far as possible on the material properly available to it', and, in the absence of any provision to the contrary, the burden of proof lies on the appellant. (In fairness to Miss Shaw, I note as already mentioned that she had summarised the position accurately in her skeleton argument before the tribunal in the present case, a few months before Hindle.) The present case [77] If this is the correct approach, I agree with the judge that the tribunal's decision is unimpeachable. There was ample material to support a prima facie case that there had been evasion of tax, and that this had been intentional and dishonest. In the absence of evidence from Mr Khan to the contrary, the tribunal was clearly entitled to reach its conclusion. As to the precise amount of tax evaded, I do not see how it was possible in the absence of better records for Customs to do more than they did. Whether or not this would have been sufficient if the burden of proof had truly been on them, on the view I take of the law it was enough to support the tribunal's conclusion. For these reasons I would dismiss this ground of appeal.”
“If the Tribunal is satisfied that there is a prima facie case that Ms Suttle and Mr Jaekel either knew they were submitting misleading information to the Respondents, or turned a blind eye to it, then the Tribunal can, if no proper reason has been given for the absence of key witnesses, draw the inference (per Jones v Dunkel) that Ms Suttle and Mr Jaekel fear to call witnesses who could have provided useful evidence about the end users, whether they disagreed with the evidence adduced by the Respondents (i.e. if it is to be said that Mr McConnell is lying or made an error) and this fear is evidence that if they were brought to give evidence they would have exposed facts unfavourable to Ms Suttle and Mr Jaekel. The same applies to their failure to call evidence from further employees at EE139.”
“141. The consideration which a court should give to the fact that a potentially relevant witness has not been called is well established. I can take the principles from the judgment of Brooke LJ in Wisniewski v Central Manchester Health Authority [1998] PIQR P324 at P340 where, having reviewed the authorities, he said: "From this line of authority I derive the following principles in the context of the present case: (1) In certain circumstances a court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action. (2) If a court is willing to draw such inferences, they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call the witness. (3) There must, however, have been some evidence, however weak, adduced by the former on the matter in question before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue. (4) If the reason for the witness's absence or silence satisfies the court, then no such adverse inference may be drawn. If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effect of his/her absence or silence may be reduced or nullified." 142. This statement of principle is in accordance with the earlier decisions of the House of Lords in R v IRC ex p. T C Coombs & Co[1991] 2 AC 283 and Murray v DPP[1994] 1 WLR 1 and the comments of Lord Sumption in the Supreme Court in Prest v Prest[2013] 2 AC 415 at [44]. 143. These principles mean that before I draw an inference and made a finding of fact adverse to a witness who was not called, I need to ask myself: (1) is there some evidence, however weak, to support the suggested inference or finding on the matter in issue? (2) has the Defendant given a reason for the witness's absence from the hearing? (3) if a reason for the absence is given but it is not wholly satisfactory, is that reason "some credible explanation" so that the potentially detrimental effect of the absence of the witness is reduced or nullified? (4) am I willing to draw an adverse inference in relation to the absent witness? (5) what inference should I draw?”
“If we should have a VAT enquiry it was advised that on no account should we give them access to anything other than the accounts. If they ask to view anything such as contracts/timesheets then we must say that we are unable to locate them and could they put the request in writing and we will forward on. If the Taxman should make an enquiry on one of our workers then we should advise that they only allow them access to their contract and expense forms.”
“Going forward the company should only allow genuine expenses incurred while the employee is travelling in the performance of their duties or travelling to or from a place they have to attend in the performance of their duties – as long as the journey is not ordinary commuting or private travel.”
“(viii) Most employees would not qualify for home to work travel in any event as the employment contracts were not “overarching”
“38. In Tooth the Supreme Court considered the test of "deliberate inaccuracy" insection 118 Taxes Management Act 1970 , which was required in order to enable HMRC to serve a "discovery assessment" within a 20 year window. It held that the natural meaning of the phrase "deliberate inaccuracy" meant a statement which, when it was made, was deliberately inaccurate, rather than a deliberate statement that was in fact inaccurate. "Deliberate" attached a requirement of intentionality to the whole of that which it described, namely "inaccuracy". The required intentionality therefore attached both to the making of the statement and to its inaccuracy (§43). […] 40. As the Court of Appeal held in E Buyer, it is not necessary for HMRC to plead or prove dishonesty in order to establish Kittel knowledge (i.e. that the taxpayer "knew or should have known" that the transactions were connected to fraud). Mr McDonnell argued that a finding of dishonesty was, however, an essential element of deliberate inaccuracy for the purposes of the penalty assessment, such that the findings in the 2017 Decision could not suffice to establish deliberate inaccuracy. 41. We disagree. There is in our judgment no requirement for HMRC to plead or prove dishonesty when seeking to impose a penalty for deliberate inaccuracy under Schedule 24 FA 2007. As the FTT held in Auxilium, deliberate inaccuracy occurs when a taxpayer knowingly provides HMRC with a document that contains an error with the intention that HMRC should rely upon it as an accurate document. We do not consider that anything said by the Supreme Court in Tooth calls that test into question.”
“63. In our view, a deliberate inaccuracy occurs when a taxpayer knowingly provides HMRC with a document that contains an error with the intention that HMRC should rely upon it as an accurate document. This is a subjective test. The question is not whether a reasonable taxpayer might have made the same error or even whether this taxpayer failed to take all reasonable steps to ensure that the return was accurate. It is a question of the knowledge and intention of the particular taxpayer at the time. 64. The test of deliberate inaccuracy should be contrasted with that of careless inaccuracy. A careless inaccuracy occurs due to the failure by the taxpayer to take reasonable care (see paragraph 3(1)(a) of Schedule 24Finance Act 2007 and Harding v HMRC[2013] UKUT 575 (TCC) at [37]).”
“42. […] It is sufficient to say (not least because it was a dictum about the contextual meaning of wilful rather than deliberate) that it offers no assistance on the true construction in this very different context of the phrase "deliberate inaccuracy" in section 118(7). The question is whether it means (i) a deliberate statement which is (in fact) inaccurate or (ii) a statement which, when made, was deliberately inaccurate. If (ii) is correct, it would need to be shown that the maker of the statement knew it to be inaccurate or (perhaps) that he was reckless rather than merely careless or mistaken as to its accuracy. 43. We have no hesitation in concluding that the second of those interpretations is to be preferred, for the following reasons. First, it is the natural meaning of the phrase "deliberate inaccuracy". Deliberate is an adjective which attaches a requirement of intentionality to the whole of that which it describes, namely "inaccuracy". An inaccuracy in a document is a statement which is inaccurate. Thus the required intentionality is attached both to the making of the statement and to its being inaccurate. 44. Secondly, "deliberate inaccuracy" is the gateway to the taxpayer's exposure to a 20-year period for the making of a discovery assessment, because of the importation of that phrase from section 118(7) into section 29(4). If the first interpretation were to be preferred the taxpayer could incur that exposure by making an honest but in fact inaccurate statement, even after taking reasonable care as to its truth or falsehood. The taxpayer would not even need to be careless, and yet would incur a much longer exposure than if he had been. 45. Thirdly, the penalty scheme in Schedule 24 to theFinance Act 2007 had, shortly before the relevant amendments were made to section 29 (including section 118(7)), used the same concept of deliberate inaccuracy for the purpose of triggering penalties more serious than those arising from carelessness, at altogether higher levels of blameworthy conduct (even though subdivided by reference to the presence or absence of concealment). It seems inconceivable that Parliament would have chosen the same language to serve as the gateway to the longest available period of exposure to a discovery assessment, if the phrase was to be interpreted as meaning only that the statement was intentionally made. 46. Fourthly, as already noted, the phrase was introduced at the same time as a substantial shortening of the exposure period for carelessness, which leads to the clear inference that Parliament must have regarded "deliberate inaccuracy" as conduct substantially more blameworthy. It is to be noted that, as Ms McCarthy submitted, there are other triggers for a 20-year time limit for an assessment which do not necessarily lie on a scale of blameworthiness between carelessness and fraud, but their existence does not displace the powerful inference as to Parliament's intention already described. 47. It may be convenient to encapsulate this conclusion by stating that, for there to be a deliberate inaccuracy in a document within the meaning of section 118(7) there will have to be demonstrated an intention to mislead the Revenue on the part of the taxpayer as to the truth of the relevant statement or, perhaps, (although it need not be decided on this appeal) recklessness as to whether it would do so.”
"112. …”Blind-eye" knowledge approximates to knowledge. Nelson at the battle of Copenhagen made a deliberate decision to place the telescope to his blind eye in order to avoid seeing what he knew he would see if he placed it to his good eye. It is, I think, common ground - and if it is not, it should be - that an imputation of blind-eye knowledge requires an amalgam of suspicion that certain facts may exist and a decision to refrain from taking any step to confirm their existence. Lord Blackburn in Jones v. Gordon(1877) 2 App Cas 616 , 629 distinguished a person who was "honestly blundering and careless" from a person who "refrained from asking questions, not because he was an honest blunderer or a stupid man, but because he thought in his own secret mind - I suspect there is something wrong, and if I ask questions and make farther inquiry, it will no longer be my suspecting it, but my knowing it, and then I shall not be able to recover"
“41. It is interesting to note that the basic law of dishonesty does not seem to be in dispute. It has recently been restated in this context in Group Seven. As was explained there at [58]-[61], in the light of Ivey v. Genting, it was settled law that the touchstone of accessory liability for breach of trust or fiduciary duty is indeed dishonesty, as Lord Nicholls so clearly explained in Royal Brunei. The defendant’s actual state of knowledge and belief as to relevant facts forms a crucial part of the first stage of the test of dishonesty. Once the relevant facts have been ascertained, including the defendant’s state of knowledge or belief as to the facts, the standard of appraisal which must then be applied to those facts is a purely objective one: namely whether the defendant’s conduct was honest or dishonest according to the standards of ordinary decent people. Moreover, the imputation of blind-eye knowledge requires two conditions to be satisfied: (i) the existence of a suspicion that certain facts may exist, and (ii) a conscious decision to refrain from taking any step to confirm their existence (see Lord Scott at [112] in Manifest Shipping). The suspicion in question must be firmly grounded and targeted on specific facts, and the deliberate decision not to ask questions must be a decision to avoid obtaining confirmation of facts in whose existence the individual has good reason to believe. Blind-eye knowledge cannot be constituted by a decision not to enquire into an untargeted or speculative suspicion (Manifest Shipping at [116]). Suspicions falling short of blind eye knowledge are relevant in that suspicions of all types and degrees of probability may form part of a person’s state of mind, and therefore part of the overall picture to which the objective standard of dishonesty is to be applied. We were told that the UK Supreme Court refused the LLP defendant permission to appeal in Group Seven on the grounds that the applications did not raise an arguable point of law in the light of the recent case law in the UKSC. … 46. Secondly, the reality of SIB’s pleading, looked at as a whole, is that it is alleging gross neglect on a grand scale. This is a case that falls squarely within Lord Scott’s strictures in Manifest Shipping. If a plea of dishonesty were to be permitted in these circumstances, it would be to allow blind eye knowledge to be constituted by a decision not to enquire into an untargeted or speculative suspicion rather than a targeted and specific one. It would be to allow gross negligence to be the basis for a finding of dishonesty, which can never be the case.”
“24. Although the concepts of blind-eye knowledge and recklessness as to the truth or falsity of a statement may intersect, they are clearly not identical. As we have already stated, HMRC did not ask us to consider whether an inaccuracy is deliberate where a taxpayer is reckless as to whether the document contains any errors. In the absence of any argument on the point from HMRC, and because it is not necessary for the purposes of this decision, we do not consider whether recklessness is a sufficient basis for determining that an inaccuracy is deliberate further in this decision, and make no comment either way.”
“[] The company’s clients and employees have provided documents to HMRC and identified systems which show that the company would have or should have known the actual hours worked by the employees. The company ignored these. [] The company accepted mileage claims with little or no detail. Evidence from third parties has confirmed that the vast majority of workers did not perform their duties in their own vehicles. [] The company selected an arbitrary 6 hours a day which when multiplied by the minimum hourly wage resulted in excessively low wages. Large false expense claims were then added to this sum to give a total figure which equated to the charge out rate. This was indicative of contrivance to re-categorise wages as payments for supposed expenses. In the circumstances the company must have known that its [Returns] were significantly wrong.”
“3 Degrees of culpability (1) For the purposes of a penalty under paragraph 1, inaccuracy in a document given by P to HMRC is – … (b) “deliberate but not concealed” if the inaccuracy is deliberate on P’s part but P does not make arrangements to conceal it, and (c) “deliberate and concealed” if the inaccuracy is deliberate on P’s part and P makes arrangements to conceal it (for example, by submitting false evidence in support of an inaccurate figure).”
“(a) telling HMRC about it, (b) giving HMRC reasonable help in quantifying the inaccuracy, the inaccuracy attributable to the supply of false information or withholding of information, or the under-assessment, and (c) allowing HMRC access to records for the purpose of ensuring that the inaccuracy, the inaccuracy attributable to the supply of false information or withholding of information, or the under-assessment is fully corrected.”
“54. We will address the legal test first. The UT’s decision in Edwards made clear there was no reason to add any gloss to the phrase “special circumstances”
“…The only restriction is that the circumstances must be “special”