Tax adviser’s alleged dishonest conduct

HMRC issued the taxpayer a conduct notice under FA 2012, Sch 38 para 4 on the basis he had been engaged in dishonest conduct. He appealed.

The taxpayer did not attend the first tribunal hearing because his wife was ill. However, the tribunal proceeded without him and dismissed his appeal. But, the tribunal later considered the taxpayer had not had a reasonable opportunity to participate in the hearing and set the decision aside.

Arrangements were made for the taxpayer to attend by phone but he subsequently wrote to say he would be unable to do this because his wife needed constant attention.

The tribunal decided to go ahead given that  the taxpayer did not request a postponement. It stated it had ‘carefully considered’ and ‘taken into account all the written evidence and submissions’ provided by the taxpayer.

In essence, HMRC asserted the taxpayer had acted dishonestly in assisting his client. According to HMRC’s notes of a meeting, the taxpayer said he had tried to help the client reduce his VAT liability by creating false supplier invoices.

The officer referred the taxpayer to HMRC’s agents compliance team. During a meeting with officers of that team and the taxpayer, it was confirmed that any penalties would be civil ones and, as long as full disclosure was made, there would be no criminal prosecution. The team issued a dishonest conduct notice against which the taxpayer appealed. He claimed had not engaged in dishonest conduct and that HMRC had assured him no further action would be taken if he co-operated – which he had.

The First-tier Tribunal said it was ‘unclear how exactly’ the taxpayer could argue the creation of false invoices was not dishonest. Such conduct was dishonest by the standards of ‘ordinary decent people’. The tribunal concluded HMRC was entitled to determine he had acted dishonestly.

As to the taxpayer’s expectation that he would not be prosecuted, the tribunal confirmed that the conduct notice was a civil procedure.

The taxpayer’s appeal was dismissed.

The first hearing of this case was the subject of an article ‘In the interests of justice’ by Robert Maas, Taxation, 8 November 2018, page 8). In this, he lamented the fact that the hearing had gone ahead without an effort being made to allow the taxpayer to attend by phone. It seems the tribunal heeded Robert’s call by setting aside the decision and giving the taxpayer the chance to call in, although in the end he was unable to do so.

Robert Maas said: ‘It is depressing that at the end of the day Mr Rodgers was not even willing to make himself available on the telephone. I find it hard to believe, even with his wife needing constant care, that  he could not have phoned into the tribunal sitting beside her bed. The tribunal seems to have leant over backwards to have given him the opportunity to make his case and it appears that he did not even take the opportunity to put forward his case in his letter to the tribunal. It was always hard to see how he was going to show that he had not been dishonest, so the result is unsurprising.’

Issue: 4718 / Categories: Tax cases