In Mohammed Abdul Malik v HMRC [2019] TC07198 the FTT upheld a personal liability notice for VAT penalties issued to a company employee; he was a manager therefore an officer of the company.

If HMRC find that a company officer has acted dishonestly or negligently, and if the company is at risk of going insolvent, they may issue a Personal Liability Notice (PLN)

  • An officer is defined as a director, shadow director, manager or secretary.

Mr Malik was an employee of a pizza franchise; he was not appointed as a company director but owned and was a director of other businesses.

  • Following an investigation, HMRC concluded that the company takings had been supressed and the company should have been registered for VAT. They imposed a penalty on the company of £138,692.40 for failure to notify HMRC of its obligation to register for VAT.
  • HMRC found an application had been made to strike the company off and issued personal liability notices to Mr Malik and the company director for 50% each of the penalty amount.
  • Mr Malik appealed saying he was merely an employee and not an officer of the company.

The FTT dismissed the appeal; Mr Malik was a manager and therefore an officer of the company, and the failure was attributable to him:

  • In meetings with HMRC the director said Mr Malik was responsible for the company’s financial matters, Mr Malik himself claimed responsibility for PAYE compliance and recording and reconciling the business’ takings and expenditure and he also provided all details about company finances and how it operated to HMRC.
  • Given his experience and seniority, it seemed much more likely that Mr Malik would have held a managerial position, rather than being an employee only responsible for making and delivering pizzas as he later suggested.
  • It followed that he bore part responsibility for registering the company for VAT. He was also part of the attempts made to conceal the failure to notify.

The judge considered whether Mr Malik’s share of the penalty of £69,346 was appropriate and concluded that it was and should not be reduced.

Links to our guides:

At a glance: VAT Penalties 
A summary of vast array of different penalties that may apply to VAT registered trader.

Penalties: Failure to Notify
A tax penalty applies when a person fails to notify HMRC that they are chargeable to tax.

External links:

Mohammed Abdul Malik v HMRC [2019] TC07198

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