Delay in imposing misdeclaration penalty was unreasonable

The taxpayer appealed against a misdeclaration penalty HMRC imposed under VATA 1994 s 63 for inaccurate input tax claims. It refused to repay the tax on the basis the taxpayer knew or should have known the transactions were connected with the fraudulent evasion of VAT. The taxpayer appealed but HMRC applied to have the appeal struck out. The First-tier Tribunal found against the taxpayer and struck out the appeal. The matter progressed to the Upper Tribunal.

The judges in the Upper Tribunal dismissed the taxpayer’s first three grounds of appeal. In essence they agreed with the First-tier Tribunal that a liability could accrue under s 63(1) irrespective of whether the taxpayer had put forward a reasonable excuse. The judges said there was no conflict here with art 6 of the European Convention on Human Rights for the burden of proof to be imposed on the taxpayer.

On the fourth ground of...