In Mohammad Ameen Mirza v HMRC [2022] UKUT 00291, it was held that whilst a claim for reasonable excuse must examine the attributes of the specific taxpayer, in this case, there was no evidence of the appellant's attributes or state of mind which meant the claim could not be allowed. 

  • Mr Mirza was a greengrocer, registered for VAT.
  • His business entered the default surcharge regime in 2010 and Mr Mirza had not paid any VAT since 2012.
  • Mr Mirza made a number of repayment claims for Input VAT, dating back to 2012, and was under the belief that HMRC owed him about £190,000.
  • In 2015, HMRC and the police raided Mr Mirza's business premises and seized over $500,000 in cash.
  • In 2018, HMRC wrote to Mr Mirza explaining that his outstanding tax debts were 'far in excess of the seized cash and that he should contact the Debt Management department.
  • Mr Mirza submitted a VAT return for February 2019 which contained a VAT liability but no tax was paid by the due date. HMRC applied a default surcharge.
  • Mr Mirza Appealed the surcharge to the First Tier Tribunal (FTT) on the basis that the VAT had effectively been paid due to set-off against either:
    •  The cash seized in the raid that was due back to him.
    • The amounts claimed for repayment.
  • The FTT held that there could be no set-off against either amount. Mr Mirza's debts were clearly more than the cash held by HMRC (as per the letter) and the repayment claims were not only not agreed upon but had also been in dispute for a number of years.

The Upper Tribunal (UT) granted Mr Mirza the right to appeal on the following basis:

  • Ground 1; the FTT erred by proceeding with the hearing without hearing oral evidence from Mr Mirza.
  • Ground 2; the FTT could not conclude whether Mr Mirza had a Reasonable Excuse for non-payment without considering Mr Mirza's specific attributes in relation to the excuse. Mr Mirza's excuse was that he had relied on Professional advice which had been wrong.

The requirements of reasonable excuse were set out as being, as per Perrin v HMRC [2018] UKUT 156;

  • A genuine excuse, requiring evidence as to the appellant's attributes and state of mind.
  • An objectively reasonable excuse when taking the attributes and circumstances of the appellant into account.

The UT found that:

  • Ground 1; despite there being criticism of how the FTT handled the procedures required in the case, Mr Mirza had been given the opportunity to provide an oral witness statement on a number of occasions and did not. Whilst the FTT failed to issue directions on case management, including witness statements, Mr Mirza was professionally represented and not actually prevented from giving evidence due to any procedural irregularity.
  • Ground 2; again there was a suggestion that the FTT had erred in its approach to the original appeal. It appeared as though the FTT were following the position that reliance on incorrect professional advice can never constitute a reasonable excuse. The UT confirmed that this is not the case. The UT held, however, that such an error would not have changed the outcome of the appeal as no evidence was produced to support the claim of reasonable excuse. 
    • No mention of reasonable excuse was made by Mr Mirza's representation (Mr Nawaz) in their skeleton argument, nor in the details of Mr Mirza's appeal.
    • The only case for reasonable excuse presented was from unsupported statements made by Mr Nawaz. No further evidence was submitted.
    • The FTT judge did ask Mr Mirza at the end of the hearing if he was happy that everything had been mentioned that should have been, to which he replied, he was.

The appeal was dismissed.

Useful guides on this topic

Input VAT: What constitutes a valid claim (& VAT invoice)?
What is Input VAT? Who can claim it? What is needed for a valid claim? What needs to be included on a VAT invoice and can you make a claim without one? 

Grounds for Appeal: Reasonable excuse
What is considered to be a 'reasonable excuse' when a taxpayer makes an appeal against a tax compliance failure?

Grounds for Appeal: Reliance on an adviser or third party
When can a taxpayer appeal a penalty for late filing, late payment or for error or mistake? What are the grounds on which they can appeal?

External links

Mohammad Ameen Mirza v HMRC [2022] UKUT 00291

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