VAT & Personal Liability

The First-tier Tribunal has released its decision in Parwinder Singh Gill v HMRC, upholding a Personal Liability Notice of around £1.7m against the director of a construction labour supply company. The question was whether he had acted deliberately, and the Tribunal found that he had.

The company supplied around 300 workers, almost all of them to a single main contractor. HMRC spotted the under-declaration while reviewing that contractor's records as part of a wider enquiry. Across more than four years, the VAT under-declared ran to roughly £3.5m.

What made the position hard to explain was the shape of the surviving records. After the company went into liquidation, HMRC compared the invoices held by the contractor (the customer) with those recovered from the accountant's office.

The volume of individual invoices held by the contractor was almost double to that held by the accountant, whose copies reconciled almost exactly to the sales declared on the returns. It was clear some invoices had been used to prepare the returns, and the rest had not.

The director's case was that he had passed every invoice to his accountant, that some may have been lost, and that his health was relevant. The Tribunal rejected this. He checked the bank statements daily, so he saw both the money coming in from the contractor and the VAT going out to HMRC.

Lost paperwork might explain the odd error, but not systematic suppression sustained for years. His ill health, on his own evidence, began only after the company had failed.

The accountant was never called as a witness. The Tribunal had warned that an adverse inference was likely if he did not give evidence.

The lesson from this case is a familiar one on its own facts. Reliance on an adviser was no shield here because the director had the means to see the position and the arithmetic was visible in his own bank account.

On these particular facts, HMRC was able to establish its case by comparing the main contractor's invoice records against the company's declared sales, and by cross-checking the VAT against the company's net CIS position.