In Apollinaire Ltd and Zakir Hashmi v HMRC [2022] TC08648, the First Tier Tribunal (FTT) found that a director with a track record of phoenixing businesses and late filing tax returns had deliberately overstated his company input VAT. HMRC assessed the director to the company's VAT penalties via a Personal Liability Notice.

  • Apollinaire Registered for VAT in October 2015.
  • Apollinaire’s VAT return to 31 January 2016 sought a repayment of £98,191.21 Input VAT, Mr Hashmi was the sole director and shareholder in Apollinaire.
  • The repayment resulted (largely) from an invoice for stock totalling £573k from an entity called Snow Whyte.
  • HMRC requested further information in respect of the repayment and issued Schedule 36 Notices which confirmed:
    • Snow Whyte had been sold by Mr Hashmi to a Mr Singh and Mr Hashmi had been a director of Snow Whyte until 9 October 2015.
    • Both Snow Whyte and Apollinaire had been trading under the same name.
    • There was no break in trade between Snow Whyte and Apollinaire.
    • There had been a transfer of till and staff.
  • HMRC denied the VAT repayment as they considered there had been a Transfer of Going Concern.
  • HMRC raised Penalties for deliberate error totalling £65,801 (of which £50,203 was upheld following a Statutory Review) as it believed Mr Hashmi had generated the disputed invoices.
  • HMRC issued a Personal Liability Notice (PLN) to Mr Hashmi.
  • Mr Hashmi Appealed to the FTT.

The FTT found:

  • There was a ToGC as:
    • The FTT did not accept that Mr Hashmi had purchased Snow Whyte in October 2015 and had doubts over Mr Singh's existence.
    • Mr Hashmi was the ‘controlling mind’ of both entities at all the material times.
    • The trade in both entities was at the same premises and had the same trading name and employees.
    • The trade had been conducted seamlessly.
  • The behaviour of Mr Hashmi was deliberate as:
    • He had a history of dissolving companies while retaining the same trading name.
    • He had a history of non-submission of tax returns.
    • He failed to take the appropriate advice on the alleged sale of Snow Whyte.
    • There was an extensive conflict in the evidence provided by the taxpayer and many of the assertions he made were unsupported.
    • The taxpayer's accountant, a Mr Javid, was not a credible witness.

The appeal was dismissed and the assessments and PLNs were upheld.

Useful guides on this topic

Registering for VAT
When should a business register for and charge VAT? What are the VAT registration thresholds? What penalties might HMRC issue for late notification of registration? When do you need to file a VAT return?

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? 

Sch 36 information notices: At a glance (freeview)
What is a Schedule 36 Information Notice? When can HMRC issue one? What rights does the taxpayer have when an information notice is issued?

Schedule 36 Information Notices (subscriber)
What is a Schedule 36 Information Notice? When can HMRC issue one? What rights does the taxpayer have when an information notice is issued?

Transfer of Going Concern (TOGC)
What is a TOGC? What conditions must be met? What are the consequences of a TOGC? What case law is there? 

Personal Liability Notices
A Personal Liability Notice (PLN) may be issued by HMRC in the event of a company's or a Limited Liability Partnership's (LLP's) failure to pay its tax debts or tax penalties to HMRC. A PLN will transfer the liability to pay the debt to one of its officers.

External links

Apollinaire Ltd and Zakir Hashmi v HMRC [2022] TC08648

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