Introduction

The case Andrew v. Revenue and Customs (VAT - PENALTIES : Misdeclaration) ([2016] UKFTT 295 (TC)) presents significant insights into the application and scope of Personal Liability Notices (PLNs) under the Finance Act 2007. Mr. Jason Andrew, the sole director and shareholder of Staunton Communications Ltd, appealed against a PLN issued by HM Revenue & Customs (HMRC) following the issuance of a Company Penalty for VAT misdeclarations. This commentary explores the background, key issues, judicial reasoning, and the broader implications of this judgment.

Summary of the Judgment

Mr. Andrew, acting as the director of Staunton Communications Ltd, filed VAT returns that contained significant inaccuracies, leading HMRC to issue a Company Penalty of £281,805 for deliberate inaccuracies. After the company's dissolution, HMRC issued a PLN to Mr. Andrew, holding him personally liable for the full penalty. Mr. Andrew appealed the PLN, arguing that the tribunal lacked jurisdiction to apportion the Company Penalty to him personally, especially since the company had not appealed the initial penalty and was dissolved. The First-tier Tribunal upheld HMRC's position, confirming that Mr. Andrew was personally liable and that the tribunal had jurisdiction to consider aspects of the Company Penalty in the PLN appeal.

Analysis

Precedents Cited

The judgment references Derry v Peek [1886-90] All ER Rep 1 to elucidate the standards for proving fraud, emphasizing that recklessness suffices to establish deliberate inaccuracy. Additionally, the Tribunal considers the case Nazif & anor v CCE (1995) (LON/92/70P), aligning its reasoning with established interpretations of appeal rights under predecessor legislation, thereby reinforcing the extensiveness of appeal rights for named officers.

Legal Reasoning

The core legal issue revolves around whether the tribunal has jurisdiction to apportion the Company Penalty to Mr. Andrew after the company's dissolution and failure to appeal the original penalty. The Tribunal analyzed Schedule 24 of the Finance Act 2007, specifically paragraph 19, which governs the liability of company officers. It concluded that:

• The Tribunal possesses the authority to consider elements of the Company Penalty when assessing a PLN.
• The dissolution of the company does not preclude HMRC from holding directors personally liable for VAT misdeclarations.
• Mr. Andrew's actions demonstrated recklessness, fulfilling the criteria for deliberate inaccuracy under the Act.

The Tribunal further distinguished between the company's obligations and the officer's personal liabilities, asserting that the absence of a company's appeal does not negate the officer's responsibility.

Impact

This judgment reinforces HMRC's ability to hold company officers personally liable for VAT penalties, even if the company itself is dissolved or does not contest the penalties. It underscores the importance for directors to ensure accurate VAT reporting and provides clarity on the scope of tribunal jurisdiction in PLN appeals. Future cases will reference this decision to understand the boundaries of personal liability and the procedural aspects of appealing against PLNs.

Complex Concepts Simplified

Personal Liability Notice (PLN)

A PLN is a legal notice issued by HMRC to company officers, making them personally liable for VAT penalties originally imposed on the company. This mechanism ensures that responsible individuals cannot evade penalties through corporate structures.

Schedule 24 of the Finance Act 2007

Schedule 24 outlines the provisions for civil penalties related to incorrect tax returns, including VAT. It details the conditions under which penalties are applied, degrees of culpability, penalty calculations, and the rights of appeal.

Deliberate Inaccuracy

This refers to inaccuracies in tax documents that are intentionally or recklessly made, leading to incorrect tax assessments. Proving deliberate inaccuracy involves showing that the individual either knowingly provided false information or acted without due care.

Conclusion

The judgment in Andrew v. Revenue and Customs solidifies the principle that company directors can be held personally accountable for VAT penalties through PLNs, even in the absence of company oversight or contestation. It delineates the tribunal's jurisdiction to assess personal liability notices comprehensively, ensuring that individuals cannot circumvent penalties via corporate dissolution. This decision serves as a crucial reminder for company officers to maintain diligent and accurate tax practices.