In Jeneruhl Trading Limited and Vivek Nayar v HMRC [2024] TC09260, a company director was unsuccessful in an attempt to debar HMRC for pursuing him for his company's debts using a company officer liability notice. His company was partly successful on the case management issue of disclosure of HMRC information related to the timing of HMRC's assessments.
The company traded in scrap metal, plastic goods, and second-hand clothing. Following an investigation, HMRC considered there was fraudulent evasion of VAT and the company knew or should have known this.
- Assessments for £1,164,739 for the VAT periods from July 2019 to January 2020 and a Penalty notice for £349,421 notified in December 2021 were issued to deny claims for input tax under the Kittel principle.
- In March 2022 HMRC notified Mr Nayar he was personally liable to pay the Company's penalty as the actions of the company were attributable to him as a director and the Company office liability notice (CLN) was issued.
The director made a debarring application to the First Tier Tribunal (FTT) requesting that it strike out/bar HMRC from taking further part in all or part of the proceedings against him on the basis, it was argued, HMRC had no reasonable prospect of its case succeeding.
- Mr Nayar argued HMRC had found him liable by virtue of 'mere directorship'.
- HMRC said the letter notifying Mr Nayar of the decision to issue the CLN made it clear he was liable because the actions of the company were caused by him as a company officer. It was not his appointment as a director but rather his key role within the company's business that was the point.
- The FTT agreed with HMRC: they did have a realistic prospect of success on this point which required testing at trial.
The company also made a case management application:
- It queried the timings of the assessments and penalty notice, wanting to determine when the last piece of evidence of facts was communicated to HMRC that caused the assessments to be raised.
- The appellant had asked for very detailed information about the time limits issue but his application for further and better particulars had already been rejected.
- The FTT was not prepared to allow the application wholesale and commented that the cost to HMRC would be disproportionate to the relevance of the application.
- They did agree that HMRC's progress logs concerning the decision to assess, and specific responses between parties in the VAT team were pertinent to a comparison with the dates on the assessments.
The debarring application and the application for further and better particulars were rejected, and the application for specific disclosure was allowed to a limited extent, with further directions to be made on that point following the release of the current decision.
Useful guides on this topic
Personal Liability Notices (PLNs)
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 all or part of the liability to pay the debt to one of its officers.
VAT fraud: What is the Kittel principle?
What is the VAT Kittel principle? What happens when the Kittel principle applies? What tests do HMRC and the tribunals apply? How can I protect my business?
Appeals: VAT
How do I appeal a VAT penalty? How can I request a Statutory Review? How do I appeal an HMRC decision?
Assessments: Best judgment & time limits
What is a 'best judgment' assessment for VAT? When can HMRC raise one? What are your rights of appeal? How do you displace a best judgment assessment? What are the time limits for a VAT assessment?
Penalties (VAT)
When do penalties apply for VAT? What penalties are charged and how can they be mitigated?
External link
Jeneruhl Trading Limited and Vivek Nayar v HMRC [2024] TC09260
