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FTT finds ignoring VAT error was deliberate act

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The first-tier tribunal (FTT) finds the director’s actions were deliberate when he decided not to check the company’s final VAT return which omitted significant amounts of output VAT.

27th Jul 2021
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The case

Chohan was incorporated on 20 May 2014 and registered for VAT with effect from 1 June 2014. Its sole income arose from a property that was purchased including VAT. That property was opted to tax and let to Chohan’s associated company: Fazteck Limited.

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Replies (11)

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By vatmind
28th Jul 2021 11:44

Thanks for this interesting summary. It would be useful to have a link to the case or at least the case reference number so it can be found online.

Thanks (1)
Replying to vatmind:
rebecca cave
By Rebecca Cave
28th Jul 2021 13:58

I've now added in the link to the case report.

Thanks (1)
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By hfiddes
28th Jul 2021 12:56

Fascinating and I love it when judges get a good analogy in ;)

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By AndyC555
28th Jul 2021 13:09

"For completeness, I would mention that Ms Drummond in her witness statement says
that Mr Bashir, together with one of his brothers, appeared in the Dundee Sheriff Court in
connection with a suspicious fire at Chohan's property and an alleged insurance fraud in
October 2020".

This presumably being the fire in which all of Bashir's VAT records (although apparently nothing else) were destroyed.

Thanks (2)
Replying to AndyC555:
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By AnnAccountant
28th Jul 2021 14:24

When I worked in tax investigations for a firm, pretty much every client accused of having their hand in the till had had a fire or (more usually) isolated flood that destroyed important records.

Thanks (1)
Replying to AnnAccountant:
paddle steamer
By DJKL
28th Jul 2021 17:18

I had one for a nightclub where an irrate former manager had " thrown them in the Firth of Forth"

Thanks (0)
Replying to AnnAccountant:
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By Paul Crowley
30th Jul 2021 21:30

Floods are just a tiny bit more credible as having happened
But floods still leave the paper in the building

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By Springfield
28th Jul 2021 14:59

Nothing about the inefficient workings of HMRC ever surprises me so I'll just pose these questions:

Why, if the VAT return was submitted in March 2016 did it take until April 2018 for HMRC to visit a then a non-VAT registered company.

Does HMRC's VAT system enable it to see what the net VAT paid/reclaimed is for any business across its VATable lifetime? If so, it should have been on this as soon as the final return was sent in.

Why did it take another year to make the assessment in March 2019?

Given the reasonably large sum involved, is there any kind of prioritisation of cases within HMRC, or were the officers prioritising chasing up £100 late filing penalties?

The only surprising thing in this lamentable tale is that the company hadn't already been dissolved by the time our doughty inspectors turned up. Whether it had the resources to pay the money due is another question.

Absolutely hopeless.

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Replying to Springfield:
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By VATs-enough
28th Jul 2021 22:44

Springfield wrote:

Nothing about the inefficient workings of HMRC ever surprises me so I'll just pose these questions:

Why, if the VAT return was submitted in March 2016 did it take until April 2018 for HMRC to visit a then a non-VAT registered company.

No idea. Could be the fella legged it and it took time to find him? Could just be inefficient HMRC systems? Who knows...

Does HMRC's VAT system enable it to see what the net VAT paid/reclaimed is for any business across its VATable lifetime? If so, it should have been on this as soon as the final return was sent in.

Ha, ha, ha...you're kidding right? The VAT office would love that kind of automatic joined up system but alas... this was likely picked up by one of the few Eagle eyed people they have, and there aren't many granted. This fella was just s*** out of luck...

Why did it take another year to make the assessment in March 2019?

Here lies the endless merry go round of paperwork and authorisations, and giving 'customers' the right to take their sweet time in responding....or maybe the fella just legged it again?....

Given the reasonably large sum involved, is there any kind of prioritisation of cases within HMRC, or were the officers prioritising chasing up £100 late filing penalties?

You might think so, but you'd be wrong. You'll never get a VAT officer going anywhere near self assessment stuff. They break out in a sweat or hives,or something worse, then get signed off for 6 months....

The only surprising thing in this lamentable tale is that the company hadn't already been dissolved by the time our doughty inspectors turned up. Whether it had the resources to pay the money due is another question.

Can't offer a witty answer to this. Other than maybe he fella legged it so quick he forgot to shut the door behind him....

Absolutely hopeless.

Agreed

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Jason Croke
By Jason Croke
28th Jul 2021 15:10

Nice case summary Rickie.

As you read the case you can sense the panic from the taxpayer as they've realised they've dropped a clanger, but rather than accept a genuine oversight has occurred, instead an elaborate tale is built involving burning buildings, hand writing analysis and blaming someone else....all of which the Tribunal then chipped away at.

The takeaway for me was the comment about turning a blind eye was tantamount to a deliberate act. If the taxpayer had responded promptly to HMRC's requests and engaged with HMRC I wonder if the outcome would have been different (ie, VAT would still have been due but without the hefty penalty).

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