Kangs Solicitors is regularly instructed by businesses seeking to challenge VAT Assessments and VAT Penalty Notices issued by HMRC.

In certain instances, a complicating and aggravating feature is the additional issuance of a Personal Liability Notice by HMRC against a company officer, usually the company director.

Hamraj Kang of Kangs Solicitors outlines some of the issues surrounding VAT Assessments and Personal Liability Notices and, in particular, the recourse available to companies and company officers to challenge such matters.

The team at Kangs Solicitors is highly accredited for advising corporate and individual clients in relation to every aspect of HMRC civil tax and VAT investigations.

The team is led by Hamraj Kang who is ranked as a ‘star individual’ for financial crime investigations by the leading legal directory Chambers & Partners.

For an initial no obligation discussion, please call our VAT Team at any of our offices detailed below:

Appealing Vat Assessments | Kangs Solicitors

On receipt of a VAT Assessment and VAT Penalty Notice from HMRC it is important to seek professional legal advice with regard to the appeal procedures available to the taxpayer.

In the first instance, the taxpayer is entitled to an Informal Review of the decision by HMRC. This takes the form of written representations and this Informal Review is usually conducted by the HMRC officer with conduct of the tax enquiry.

If the Informal Review is unsuccessful, the taxpayer has the right to request a Formal Internal Review which will be conducted by an ‘independent’ HMRC officer who has had no involvement in the original tax enquiry.

If the Formal Internal Review upholds the original decision of HMRC, the taxpayer has the option of lodging a formal appeal with the First-tier Tax Tribunal.

Appealing VAT Penalty Notices

In addition to serving the taxpayer with a Notice of VAT Assessment, HMRC will simultaneously assess the level of penalty to be imposed and serve a VAT Penalty Notice.

The procedure for appeal available to the taxpayer is the same as that for appealing against the VAT Assessment Notice outlined above.

Appealing Personal Liability Notices

Where a corporate body has received a Notice of VAT Assessment and a VAT Penalty Notice, in certain circumstances HMRC may issue a Personal Liability Notice against a ‘company officer’.

‘Company officer’ is defined widely and includes not only a director but any person managing or purporting to manage the company’s affairs.

A Personal Liability Notice may be served at a later date than the original VAT Assessment and VAT Penalty Notice but the appeal procedure remains the same as detailed above.

When Can A Personal Liability Notice Be Issued? | Kangs Solicitors

This can follow service by HMRC of a VAT Penalty Notice under section 69C VAT Act 1994 in circumstances where HMRC suspects that transactions connected with VAT fraud have taken place.

If the transactions are connected to fraud and HMRC forms the view that the taxpayer either knew or should have known that the transactions were connected to the fraudulent evasion of VAT and that this was ‘the only reasonable explanation for the transaction’, a Personal Liability Notice can be issued against the company officer.

The above test is known as the Kittel Principle and can often apply to any ‘innocent trader(s)’ caught up in dishonest and fraudulent trading chains. The innocent trader may be fully VAT compliant in relation to its own tax invoices but is deemed in these circumstances to be an ‘accomplice’ as it aids the perpetrators of the fraud who are the defaulting traders.

A Personal Liability Notice is issued pursuant to section 69D VAT Act 1994 which provides that a company officer may be considered liable for the company penalty when:

  • the company for which the officer was working for is liable to a penalty because it knew or should have known that its transactions were connected with VAT fraud pursuant to section 69C VAT Act 1994; and
  • the actions of the company which give rise to that liability were attributable to the company officer.

If the company only has one director/shareholder it will be relatively straightforward for HMRC to establish that this person was the controlling mind of the company with sole responsibility for company operations. Personal liability can be more difficult to attribute in cases where there are multiple company officers.

Where a Personal Liability Notice is served, the actions of the company can be attributed to the company officer personally who can be liable for up to one hundred per cent of the VAT Penalty imposed on the company.

How Can We Help? | Kangs VAT Expert Solicitors

We have considerable experience in representing businesses in VAT disputes and negotiations with HMRC.

We can assist with the following:

Who Can I Contact? | Kangs HMRC & VAT Fraud Investigation Solicitors

We welcome new enquiries by telephone or email.

Our team of lawyers is available to meet at our offices in London, Birmingham or Manchester or, alternatively, we are happy to arrange an initial no obligation meeting via telephone or video conferencing.

Who Can I Contact? | Kangs HMRC & VAT Fraud Investigation Solicitors

We welcome new enquiries by telephone or email.

Our team of lawyers is available to meet at our offices in London, Birmingham or Manchester or, alternatively, we are happy to arrange an initial no obligation meeting via telephone or video conferencing.

For initial enquires please contact:

Hamraj Kang
hkang@kangssolicitors.co.uk
07976 258171 | 020 7936 6396 | 0121 449 9888

Tim Thompson
tthompson@kangssolicitors.co.uk
020 7936 6396 0121 449 9888

John Veale
jveale@kangssolicitors.co.uk
0161 817 5020  | 020 7936 6396 07989 521 210