Booth – Penalty appeal struck out

01 April 2020

In CF Booth Ltd v HMRC [2020] UKFTT 35 (TC), the First-tier Tribunal (FTT) struck out the taxpayer's appeal against penalties imposed for deliberate inaccuracies in its VAT returns, on the basis that the appeal amounted to an 'abuse of process'.


CF Booth Ltd (the appellant) challenged HMRC's decision, made on 4 May 2018, to notify it of a penalty assessment in the sum of £1,444,813 under Schedule 24, Finance Act 2007, for VAT periods 10/12-09/13, and 02/14 (the penalty assessment). The penalty assessment was issued on the basis that the appellant's VAT returns for those periods contained deliberate inaccuracies. 

The penalty assessment was issued against the background of the following: 

(1)  in October 2014, HMRC issued an assessment to the appellant in the sum of £160,281, under section 73, Value Added Tax Act 1994 (VATA); and 

(2)  in March 2015, HMRC denied input tax in the sum of approximately £2.6 million. 

Decision (1) denied a claim by the appellant to zero-rate eight supplies of metal to a Belgian trader, Metaux Groupe Belge. Decision (2) was on the basis that 655 purchases of various metals, on which the input tax was incurred, were connected to the fraudulent evasion of VAT and that the appellant knew, or should have known, of the fraud.

The appellant appealed these decisions and in 2017 the FTT decided that the appellant's VAT returns, in relation to the relevant transactions, contained inaccuracies (the 2017 decision). HMRC proceeded to issue of the penalty assessment which the appellant appealed.

The appellant accepted that its VAT returns contained inaccuracies for each of the relevant accounting periods in question, but argued that the inaccuracies were not deliberate. 

HMRC applied to the FTT, under Rule 8(3) of the Tribunal Rules, for part of the appellant's appeal to be struck-out, as it had no reasonable prospect of success. This was on the basis that the appeal was either an abuse of process (because the 2017 decision had already established that the returns contained deliberate inaccuracies), or on the basis that the appeal was unarguable.

FTT decision 

The application was granted. 

The FTT noted that a penalty issued under Schedule 24, VATA, is a “criminal charge” for the purposes of Article 6, European Convention on Human Rights (the Convention), with the effect that the burden of proof in relation to the penalty is on HMRC rather than on the appellant. 

Rule 8(3)(c) of the Tribunal's Rules provides that:

"The Tribunal may strike out the whole or a part of the proceedings if— [...] 

(c) the Tribunal considers there is no reasonable prospect of the appellant’s case, or part of it, succeeding".

In relation to the 2017 decision, the FTT stated that that decision established that the appellant must have had knowledge of what was happening and cannot have either acted in good faith or taken every reasonable measure not to become a participant in the VAT fraud.

The FTT went on to consider the meaning of 'deliberate' in this context  and said: 

"I disagree with the Appellant that an allegation of deliberate conduct is tantamount to an allegation of fraud and/or must inevitably involve some element of dishonesty. I disagree with the thrust of the Appellant's submissions that deliberate conduct in Schedule 24 has a higher threshold than actual knowledge of connection to fraud in a Kittel-type appeal. I simply do not see (whether as a matter of law or language) why that should be the case".

The FTT, referring to the decision of the Court of Appeal in HMRC v Tooth [2019] EWCA Civ 826 (currently on appeal to the Supreme Court), said that there need not be any degree of dishonesty on the part of the taxpayer in order for their conduct to amount to 'deliberate' behaviour. In the view of the FTT, the concept of 'deliberate', in Schedule 24, is sufficient to catch the situation where a taxpayer has been found to have actually known that the transactions were connected to fraud.

The FTT also concluded that to strike out the appellant's appeal would not violate its rights under the Convention and that Rule 8(3)(c) does extend to striking-out an appeal on the basis that the appeal is an abuse of process. In the view of the FTT, the appellant could not be permitted to argue that its conduct, in relation to the inaccuracies, was anything other than 'deliberate', as to do so would allow the appellant: 

"impermissibly and as an abuse of process, to revisit … the final and binding findings of fact already made by the FtT…The Appellant had a full opportunity to put forward its case as to the absence of connection to fraud, and its want of knowledge of such connection … [and] it would be contrary to the principle of finality of litigation to allow the FtT's determinations in 2017 to be re-visited in this appeal. There are no circumstances which could justify such a course."

The FTT also held that, even if the appellant's conduct did not amount to an abuse of process, its arguments were hopeless, as the 2017 decision comprehensively addressed the points in issue in the appeal. 


Whilst the FTT's conclusion in this case is perhaps not surprising, the FTT noted that HMRC's argument conflicted with its arguments in Microring Ltd v HMRC [2019] UKFTT 456 (TC).  This unprincipled approach is of concern. HMRC should not be adopting conflicting positions in different cases in order to advance its case in a given appeal. As we commented in an earlier blog on the decision in Jafari v HMRC [2019] UKFTT 692 (TC), where HMRC's failure to draw relevant authorities to the FTT's attention was criticised by the FTT, HMRC is under a general duty of candour and must act consistently in its dealings with both taxpayers and the FTT. 

The decision can be viewed here.

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