Director did not act dishonestly

The company failed to submit returns for six years between periods February 2010 and November 2016 instead paying central assessments issued by HMRC in the absence of the returns. The director Mr Mackley paid these assessments but they understated the true liability on the returns by £371 739 over the period. When the returns were finally submitted HMRC issued civil evasion penalties to both the company and director equal to 30% of the tax underpaid less default surcharges issued for some periods.

The legislation gives HMRC the power to issue a penalty against both a company and its director if tax has been deliberately underpaid ie fraud and evasion has taken place VATA 1994 s 60 and s 61. The burden of proof is on HMRC to prove evasion based on the civil standard of probabilities. It is not enough to...