“(1) whether Zamco’s VAT returns in the relevant period contained inaccuracies amounting or leading to understatement of liability to VAT (the “‘inaccuracy’ issue”); the issue was essentially whether all of Zamco’s supplies in the relevant period were in the UK for VAT purposes - if so, its VAT returns contained such inaccuracies; if not, they did not; (2) if Zamco’s VAT returns did contain such inaccuracies, whether the inaccuracies were deliberate on Zamco’s part (the “‘deliberate’ issue”); and (3) if they were, whether the inaccuracies were attributable to Mr Zaman. 11. The Tribunal considered whether a fourth issue was also before it, namely whether the amount of the penalty (and so of the PLN) was correct.”
“Mr Zaman’s position was: (1) Zamco was trading bond to bond abroad (2) Zamco did not charge VAT to its customers; nor did its suppliers charge VAT to it (3) Since there was no VAT involved, there should be no assessments (4) Mr Zaman did nothing deliberately wrong (5) HMRC have failed to show that Zamco was trading in the UK; all they have showed is that cash was deposited with Zamco at bank branches in the UK (6) Officer Begg could not say where in any detail Zamco was trading in the UK.”
“(1) Mr Zaman’s evidence that the goods were in warehouses in France and Germany at the point of sale; (2) the documentation, which broadly supports the conclusion that the goods were in warehouses in France and Germany at the point of sale; (3) the fact that Zamco did not appeal the assessment, which was raised on the basis that the place of supply was the UK; (4) the fact that payment for Zamco’s sales was made by deposit of Sterling cash at bank branches in the UK; (5) the fact that one of the warehouses, and two of Zamco’s counterparties, had UK connections e.g. a director resident in the UK (see [25(3)], [26(6)] and [27(1)(d)] above); (6) text messages from Mr Ahmed’s phone that HMRC alleged (before the magistrates court) were indicative of his involvement in the illicit alcohol market.”
“We would be wary of putting significant weight on Mr Zaman’s evidence about the place of supply (or indeed other matters) unless (i) corroborated by evidence we consider credible or (ii) clearly in line with “common sense” and what we consider inherently likely…Our impression was that we were being given “minimum” information; questions were not being answered fully… we did not have confidence that Mr Zaman was always telling the “whole” truth to the best of his recollection.”
“We thus find that it has not been proven, on the balance of probabilities, that the alcoholic goods in question were removed to the UK by Zamco or under its directions; and so, for the same reason, it is not proved that the place of supply of all of Zamco’s supplies in the relevant period was the UK, such that its VAT returns in that period contained inaccuracies. Given the burden of proof on HMRC, this means that we have to allow the appeal - and, strictly speaking, need not consider the other issues in this appeal.”
“The critical point was that the legal burden of proof and the evidentiary burden of proof were distinct… Two principles emerge from Ingenious and Brady: (1) The burden of showing an assessment is incorrect remains on the taxpayer throughout the appeal. This is so even if the circumstances of the case are such that there either must, or may, have been some fraudulent conduct on the part of the taxpayer which is relevant to the tax liability…”
“Brady was a case about direct taxation, not VAT, but I can see no reason why the same principles should not apply to a "best of judgment" assessment to VAT made under section 73 of VATA 1994. The guidance given by Carnwath LJ in the Khan case may have been technically obiter on this point, but he regarded the position on an appeal against such an assessment as "well-established" and cited Brady with apparent approval. In my respectful view, he was clearly right to do so.”
“The facts that (i) payment was made by delivery of cash to the UK, and (ii) a few counterparties had UK connections, are in themselves insufficient to persuade us, on the balance of probabilities, that the goods made their way from French and German warehouses to the UK at, or before, Zamco on-sold them - they are not facts relating to the location of the goods. Similarly, our finding, by inference from the circumstances, that there was illicit activity somewhere in the supply chains, is not specific enough to persuade us of the likelihood that the illicit activity was smuggling into the UK at or before the point of Zamco’s sale. Rather, given the insubstantial role of Zamco in the supply chain, we find it more likely that “nothing at all” happened to the goods during the very short period of Zamco’s ownership: and so, given that Zamco acquired them in French and German warehouses, the likelihood is that they remained there up to and at the point of Zamco’s onward sale. As found at [91] above, we think it likely that Zamco’s role in the supply chain was one of “covering up” or obscuring illicit activity, rather than itself doing something more active such as organising smuggling into the UK.”
“Prior tribunals have decided that, on an appeal against a PLN, arguments can be brought against the underlying penalty, where that penalty has not been appealed by the company: (1) In Bell v HMRC, the Tribunal agreed with Judge Kempster’s analysis in Jason Andrew v HMRC[2016] UKFTT 295 (TC) “and the conclusion that it cannot have been the intention behind the legislation to leave an unchallengeable company penalty” (at [160]). (2) The Tribunal in Hussain v HMRC also agreed with this approach (at [12]), as did the Tribunal in Jarvis v HMRC[2020] UKFTT 54 (TC) at [24].”
“As this is a penalty appeal, HMRC bear the burden of proof to show that the PLN was validly issued. The standard of proof is the ordinary civil standard, being the balance of probabilities.”