The FTT allowed the VAT appeal in a case where the director’s conduct was not held to be dishonest (Universal Flooring (Contractors) Ltd & Anor v HMRC  UKFTT 282 (TC)).
The FTT concluded that the director had not behaved dishonestly and that HMRC had failed to prove the contrary. The reasons for reaching this conclusion were as follows:
- “We found the director to be a truthful witness.”
- “Although unusual and indeed reprehensible, we also find it plausible on the facts that we have found, that the director paid little attention to the figures in the accounts.”
- “The somewhat chaotic nature of the VAT returns and payments prior to the issue of the central assessments demonstrates that the company and the director, were dealing with VAT on an unsatisfactory basis.”
- “Whilst we wholly accept that the VAT liability is a massive 50% larger than the amounts centrally assessed, and this effectively reflects a 50% understatement of turnover which would have been readily apparent had the director analysed the sales invoices, we find that he simply did not do so. He had neither the time, nor we suspect the expertise.”
- “The director’s lack of grasp of the ongoing VAT position of the company is demonstrated by the overpayment to HMRC, at some stage prior to the period in question, of £36,000.70.”
- “This case is very different from the position in Walker where the court found that the appellants [had behaved dishonestly].”
- “In these appeals, the director’s behaviour was careless and reckless, but was not dishonest. We have found that he did not actually know that the central assessments understated the true amount of VAT; there was no deliberate strategy to underpay HMRC in order to pay other creditors and to maintain the company’s working capital position; there was no deliberate unquestioning of the central assessments in the fear that they might disclose an underpayment which would result in the additional liabilities having to be paid on an ongoing basis.”
Related content from Claritax Books
Value Added Tax, written by Ciaran McGee MA (Oxon), FCA, CTA, is an extensive volume (over 1,000 pages), written primarily for non-VAT specialist accountants and tax advisers.