Background
The First-tier Tribunal dismissed Mr Hanlon’s appeal against HMRC’s decision to make him, as a director of Cardiff Cash & Carry Ltd, liable for the company’s £242,243 VAT penalty. The company had been penalised under section 60 of the Value Added Taxes Act 1994 for failing to file VAT returns while knowing it was liable to pay VAT. The FTT found that Mr Hanlon had acted dishonestly, that the company’s penalty was attributable to his dishonest conduct, and that he should bear all of it.
The FTT released its decision on 27 February 2024. Mr Hanlon did not seek permission to appeal from the FTT until January 2025, and the FTT refused to admit that application out of time. He then made a timely application to the Upper Tribunal, which was initially refused on the papers. Judge Zaman reconsidered that decision after an oral hearing.
The Court’s Holding
The Upper Tribunal admitted Mr Hanlon’s otherwise late application in the interests of justice. Although the delay, reliance on an adviser, and possible prejudice to HMRC weighed against admission, those factors were outweighed by the nine-month delay in issuing the FTT decision, the seriousness and significance of the findings against Mr Hanlon, and the existence of arguable legal errors.
Permission to appeal was granted on two grounds: whether the FTT failed to determine, or made insufficient findings about, the VAT evaded or sought to be evaded by the company; and whether it failed to make sufficient findings about the company’s or Mr Hanlon’s conduct and subjective knowledge to support dishonesty and attribution of the company penalty to him. Permission was refused on all other grounds. The Upper Tribunal did not decide the merits of those grounds; it held only that they were arguably material errors of law and should proceed to an appeal hearing.
Key Takeaways
- A late permission application may be admitted where the interests of justice outweigh delay and prejudice.
- A finding that a director is personally liable for a company VAT penalty requires adequate findings on the underlying VAT conduct, dishonesty, and attribution.
- The Upper Tribunal will not ordinarily revisit factual disputes or re-hear evidence merely because a party challenges the FTT’s factual conclusions.
Why It Matters
The decision underscores that, in VAT penalty cases founded on dishonesty, the FTT must explain sufficiently what VAT wrongdoing occurred and why the relevant dishonest conduct is attributable to an individual director. Serious financial consequences can make deficiencies in those findings particularly important when considering whether a late appeal should be allowed to proceed.
It is a permission decision, not a final ruling on Mr Hanlon’s liability. The substantive appeal will determine whether the identified shortcomings in the FTT’s reasoning amount to material errors of law.