John Smith v The Commissioners for HMRC

We were provided with a substantial (3540 page) bundle of documents. We were also given, electronically, a variety of other documents on which the respective parties sought to rely.

Both parties sought to rely on oral evidence. In the case of HMRC, this was evidence from officer Michael Dyce (“Officer Dyce”), officer Martin Doherty (“Officer Doherty”) and officer Marcus Wright (“Officer Wright”). All three of these officers tendered witness statements and attended the hearing in person which enabled them to be cross-examined on those statements.

A fourth HMRC officer, officer Sarah Harris (“Officer Harris”) tendered a witness statement but had retired from HMRC by the time of the hearing and was thus unable to attend. She was unable therefore to be cross-examined on the contents of that statement.

On the appellant’s side, the appellant himself provided two witness statements and gave oral evidence. He was extensively cross-examined.

Oral evidence on his behalf was also given by Dr Nigel Young (“Dr Young”). The focus of his evidence was on the results of the research undertaken by Officer Doherty. This evidence was tendered late in the proceedings by the appellant who asked for it to be admitted as expert evidence. We allowed the application, but on the basis that we would not treat Dr Young as an expert but as a witness of fact. We gave reasons for this decision at the time. Following the evidence given by Dr Young, the appellant renewed his application that he be treated as an expert. We reject that application for the reasons given in our original decision. Furthermore, given that his evidence was largely of fact rather than of opinion, in our view his status is largely irrelevant.

The relevance of these witnesses requires a brief synopsis of the chronology of this appeal. At present we make no findings of fact, and this is intended to be a very broad and neutral overview.

The appellant took over his father’s chartered accountancy practice in the late 1990’s. His position is that he then sold it on 1 March 2003. In the absence of submitting tax returns, HMRC issued determinations to the appellant for tax and followed those up with a statutory demand in October 2007. The appellant was subsequently declared bankrupt but following annulment of that bankruptcy in November 2008, HMRC opened enquiries into the appellant’s tax returns. Officer Dyce gave evidence of those enquiries.

Following the issue of third party information notices, HMRC received bank account statements, correspondence from clients, and invoices, all of which suggested to them that the appellant had carried on trading as principal in the business after 2003. Accordingly, in 2015, HMRC issued discovery assessments (income tax) and best judgment assessments (VAT) to the appellant. Officer Harris was the officer responsible for issuing those assessments.

Following further discussions and correspondence with the appellant, an ADR meeting was held in 2022. Following the ADR, the appellant provided HMRC with details of the sale of the business in 2003. Officer Wright was the HMRC officer involved in the ADR and to whom the information was provided. He then asked Officer Doherty to undertake a digital investigation into the digital footprint of the entities identified in the information provided by the appellant. He then provided HMRC’s view of the matter. Dr Young’s evidence concerned the investigation undertaken by Officer Doherty.

The appellant also intended to call two further witnesses. The first, Rosina Harris, had worked for the appellant. She provided a witness statement dated 1 September 2017. Sadly (and this had not become apparent to the appellant until shortly before the December 2025 hearing) Rosina Harris died on 11 July 2019. At our suggestion the appellant made an application under the Civil Evidence Act 1995 that her witness statement be treated as hearsay evidence and that we should accord it such weight as we thought fit.

The second of these witnesses, Mr David Nathan had also prepared a witness statement, in this case dated 20 November 2023. He too had ostensibly worked with the appellant. Mr Nathan was intending to give his evidence from a hotel in Singapore. Unfortunately for the appellant, in order to give this evidence, specific permission was required from the government of Singapore, to enable him to do so. Such permission was not forthcoming by the end of the December 2025 hearing (when the evidence closed). The appellant made an application, too, under the Civil Evidence Act 1995 that his witness statement be treated as hearsay evidence and we should accord it such weight as we thought fit.

As far as the documentary evidence was concerned, we are cognisant of the guidance provided in Adelukan v HMRC [2020] UKUT 244, and we reminded the parties, prior to beginning of the evidence, of the principle reflected in that case. We could not be expected to take into account every document in the bundle but would only take into account documents to which we were expressly referred.

As far as the oral evidence was concerned, we have borne in mind the well-known guidance given by Leggatt J in Gestmin SGPS SA v Credit Suisse (UK) Ltd & Anor. [2013] EWHC 3560 (Comm) about the fallibility of human recollection and evidence based thereon at [15]-[22] and the relative importance of contemporary documentation in commercial cases.

The comments of Leggatt J in Gestmin are not, however, to be taken as meaning that witness evidence should simply be disregarded, even if it relates to events occurring several years ago. This was made plain by the Court of Appeal in Kogan v Martin [2019] EWCA Civ 1645 at [88-89] where Floyd LJ said:

The point was reiterated by Peter Jackson LJ in Re B-M (children: findings of fact) [2021] EWCA Civ 1371 when he said:

We have also been guided by the following methodology set out in the recent Court of Appeal decision in Singh v Bains [2026] EWCA Civ 408 (“Singh”):

We have borne these principles in mind when evaluating the evidence in this case.

In particular, we have applied them to our analysis of the reliability of the appellant’s oral evidence, bearing in mind that his evidence was sworn testimony, and that we should give reasons why we have any misgivings about that reliability.

We do have misgivings based on a number of particular examples of where we considered that the evidence given by the appellant, when compared to with the documentary position, was inherently implausible.

The first of these relates to the witness statement of Rosina Harris. That witness statement is dated 1 September 2017. The appellant’s evidence is that he did not draft this statement for her but had asked her to write it which she had done. She then sent it to the appellant (his evidence was that he assumed it was sent by email) who printed it off and then asked her to sign it. In that statement she says that “I am very clear in what was said, my memory of this is very good, and I wrote a note about it”. This was in relation to a meeting attended by HMRC officers in 2011. An email dated 18 October 2017 from the appellant to Ms Harris does not refer to her statement. It is headed HMRC visit and says that “I know we have discussed this numerous times but now that you have decided to retire from the firm, I think it is best for me to have something in writing about this. Can you therefore, before you leave, send me details of exactly what occurred on the day that HMRC visited….”.

In response Rosina Harris, on the same date, in an email, says “as you know, the visit was a few years ago and my memory isn’t what it was but I will set out what my understanding of what occurred was”.

We find it very strange that, given that the witness statement was ostensibly compiled a little over a month before this exchange of emails, no mention is made either of that statement, nor of the information provided in it about that meeting. Furthermore, what Rosina Harris says in her email “my memory isn’t what it was”, contradicts what she said in a statement; “I am very clear in what was said, my memory of this is very good, and I wrote a note about it…”

We think it is inconceivable that if Rosina Harris had made a note about it, she would have said in her email that her memory isn’t what it was.

Furthermore, Mr Nathan in his witness statement said that “I have only recently given Rosina[s] statement to Bradley, he wasn’t even aware it existed…”. Mr Nathan’s statement was dated 20 November 2023. When this was put to the appellant, his evidence was that he knew it existed but he had lost it as a result of a computer failure.

These inconsistencies call into question the reliability of the appellant’s testimony.

Secondly, on many occasions, the appellant answered questions with the expression “I would have done…”, Or “I am sure that I…” One example of this related to the HMRC forms relating to non-domicile and residence which, the documentary record shows, were sent to him for completion in, for example, 2008. In response to a challenge from HMRC that he had never provided these completed forms, his answer was that he didn’t know when he had submitted them but remembered filling them out and sending them to HMRC.

We think it is inherently unlikely that he did so and prefer the documentary record.

Thirdly, in relation to the VAT position, HMRC had written to the appellant on 11 March 2015 identifying inconsistencies in the invoices which they had obtained by use of their information notices. In an email dated 8 April 2015, the appellant responded saying “I will draw up my response…” It was put to him that this did not address the VAT issue, but the appellant’s evidence was initially that he was very sure that he had spoken to John Dunne with whom he had a discussion about the VAT numbers and who told him that all the VAT numbers were correct.

The appellant had said that this conversation took place before he sent his April email but subsequently revised that to say that it had taken place after he had sent that email. He then went on to say that he had intended, at some stage, to provide the details that he had been given by Mr Dunne but he was not going to put them in an email in April 2015.

His evidence was then that having received an email from HMRC on 8 April 2015, he decided he would not tell HMRC what he had been told by Mr Dunne.

But if he had had that conversation with Mr Dunne after the email of 8 April 2015, then why did he say that he intended at some stage to provide the details provided by Mr Dunne, when his subsequent evidence was that on that date he had decided not to tell HMRC of those details.

His oral testimony on this was wholly inconsistent.

Fourthly, in an email to HMRC dated 18 March 2022, the appellant said this about the joint bank account which was in the name of himself and his wife (bank account 5035 8789). “I can confirm that NO deposits into that bank account EVER (even when I was running the firm pre-feb 2003) constituted either (1) [income of the business or any associated companies], (2) anything other than gifts from me, my parents and John (none of which constitute untaxed income for me or my wife).”

However, when he was taken through a bank account statement for that account and it was apparent that other deposits have been made into that account, he revised his story and said that he did not realise at the time that Mr Dunne was paying salary and bonuses into that joint account. He went on to say that what he should have said and intended to say, to HMRC was that salary and bonuses were indeed being paid into their joint account.

In evidence during cross-examination, he said that he had noticed this error, that he knew at the time he made this statement in the letter that it was wrong and that he was planning to tell the tribunal this during his closing submissions.

In his own re-examination, he sought to clarify the position by saying that he did not get bank statements for that account, they went only to his wife, and she, having been told by him what to expect by way of deposits into it, would not question an account unless the deposits did not match up to what she had been told by him.

Then, in his closing oral submissions, he reverted to his original story and said that the only deposits into that account were gifts from his parents and from Mr Dunne.

This is an example of the appellant being caught out. He said one thing to HMRC, but once it became apparent that what was said was incorrect, he sought to revise his story and explain it away by a (not wholly convincing) narrative concerning his wife’s control of the joint bank account.

Fifthly, the appellant’s evidence was that one of the reasons he wanted to sell the business in 2002/2003, was that he suffered a mental breakdown in 2002 to which a contributory factor was that he was being defrauded by a boyfriend of one of his employees. This became apparent in 2001 (“it was when I returned to the office approximately four months later, that I found out about the fraud, which in total was over £200,000”).

However, in his evidence concerning a bank statement relating to the joint account, an entry on 6 April 2006 regarding the payment to Egg of £308.26, he said that this was a credit card payment and was part of the fraud that was being perpetrated on him.

We think it is inherently unlikely that this fraud was still continuing some five years or so after it had initially been discovered and reported.

In keeping with the legal principles set out above and given the human tendency to remember things in a way which might assist one’s own case, we place considerably greater weight on the contemporaneous documents and inherent probabilities than on the appellant’s recollection of events. Where his oral evidence was not corroborated by independent (i.e. compiled by someone other than himself) documentary evidence, or from which reliable inferences could be drawn from such documents, we exercised considerable caution in deciding whether it was reliable or reaching any findings of fact based on it.

Furthermore, throughout the hearing of the evidence and the hearing of the oral closing submissions, the appellant was constantly claiming that the correspondence contained mistakes. And that evidence he had given at one point in the proceedings was either incorrect or incomplete, and sought to correct it. He often apologised for the errors. Whilst none of these individually are fatal to his credibility or to the reliability of the underlying evidence, collectively they caused us to view his oral evidence as, broadly, unreliable and the facts that he claimed existed, with considerable suspicion. As the court said in Singh “that the appellant’s evidence may have been confusing, contradictory and patchy was a reason for treating it with real caution (as the judge did)…”. We have done the same.

We were provided with three witness statements for witnesses who did not attend. Officer Harris, Rosina Harris, and David Nathan.

As regards, Officer Harris we have considered the contents of her statement only where it has been submitted to us that it is consistent with contemporary documentary evidence. We have not used it as primary evidence of the process through which the officer went when coming to her discovery and best judgment assessments.

The same is true of Rosina Harris and David Nathan. We have expressed some misgivings about the context in which the former’s witness statement was compiled, above. And it is clear that the appellant had ample opportunity to ensure that the latter was available to give evidence in person. But we do not draw any adverse inference from this. We simply give their evidence little weight given that it was not tested in cross-examination. However, we have considered the contents of those statements where it is consistent with contemporary documentation.

Finally, we adopt the following approach to the operation of the standard of proof when it comes to disputed facts:

The appellant is a qualified chartered accountant who was the principal of a chartered accountancy practice trading under the name of Strauss Phillips & Co (“the business” or “the firm”).

The appellant has recently changed his name from Bradley Strauss to John Smith.

He started trading in approximately 1993. A sale agreement dated 26 March 2003 (“the sale agreement”) records the sale of the business to Mr John Dunne (“Mr Dunne”) with effect from 1 March 2023.The sale price was $1. The appellant asserts that the effective date of the sale was 1 March 2023, but that is not specifically set out in the contract. However, clause 13 states that invoicing and costs from 28 February 2003 are the responsibility of the purchaser and invoicing and costs incurred before 1 March 2003 remain the responsibility of the appellant.

Thebusiness records for this period have never been supplied to HMRC and were not provided to us.

The appellant was registered for VAT with effect from 1993 with VAT number 644978584 (“the 584 VAT number”). He submitted VAT returns for the periods: 05/03 (sales of £18,974) in June 2003: 08/03 (sales of £21,365) in September 2003 and for the period 11/03 (sales of £12,314) in December 2003.

The appellant’s father, Peter Strauss, had also traded as a chartered accountant using the name Strauss & Co. He was VAT registered with VAT number 228258650.Mr Peter Strauss died of cancer in 2012.

The appellant personally and for business purposes, operated a number of bank accounts (with Barclays Bank) before 2003. These included a joint bank account with his wife with account number 5035 8789 (previously referred to as “the joint account”); a further current account numbered 8011 6645 in the name of Strauss Phillips & Co, and a client premium account numbered 9082 7983 also in the name of Strauss Phillips & Co. (together “the bank accounts”).

Another business account numbered 1089 2653 in the name of Mr Bradley Strauss T/As Strauss Phillips & Co is also relevant. A bank statement for that account in that name was included in the bundle. The first page so included was “Account Frame 1”. This declares that it is for the period 10 December 04 to 10 March 05, and the first entry (a receipt of £581.63) was dated 24 February 2005.

A letter dated 10 October 2011 from the business to HMRC deals with the history of the bank accounts. It records that account number 1089 2653 was a business trading account in the name of the firm which was set up before the closure of another account and was “only designed to be the ongoing trading account of the firm until such time as the bank set up an account for the limited company”. It further recorded that in order to allow the company to continue to act, the appellant was asked to set up an account that the firm could use. Because of the inadequacies of the bank and the fact that the application to set up an account in the company name was taking time to conclude, the appellant decided to set up the account in his own name to facilitate the flow of funds. Due to the ongoing failures of the bank, this personal account had continued to be used as the firm’s/company’s accounts. This had caused the firm substantial issues “in that we have been required to continually contact Mr Strauss to arrange signing of payments…”. It goes on to say that “Mr Strauss signed cheques which we then fill out as appropriate and send to the relevant parties”.

A letter dated 5 September 2012 from the Court Orders Officer of Barclays Bank to HMRC in response to the information request received by the bank, confirms that the appellant was the only signatory to account numbers 8011 6645 and 9082 7983 for the period 9 March 2004 to 19 December 2011.)

The business operated from premises in Northwest London. Initially from the appellant’s house and subsequently at rented offices.

The appellant’s uncorroborated evidence was that he contracted a waterborne parasitic disease in 2001 which left him at a physically low ebb.

In 2002, the appellant employed (a broad term to include some of these individuals who may have been self-employed) eight individuals (a secretarial processor, two accounts clerks, a filing clerk, an individual responsible for office management, another for the payroll, a bookkeeping manager, and an individual who focussed on business development).

His further uncorroborated evidence was that in 2001, he had left one of his assistants in charge of the office whose boyfriend perpetrated a fraud on the appellant. During this period the appellant was absent from the office, and when he returned, he was told that she had left and that he had been defrauded (we are not sure if this was in his personal capacity or on behalf of the firm but for the purposes of this record, it makes no difference) of approximately £200,000. He reported the fraud to the police.

He suffered a mental breakdown and was off work again for another few months.

He had met Mr Dunne whilst on holiday in Majorca in March 1992. Mr Dunne was a businessman who was based in Athens. Mr Dunne died in December 2016.

He agreed with Mr Dunne to sell the business to him for $1 as evidenced in the sale agreement.

In 1999, 2000 and 2005, HMRC issued determinations for the tax years 1998 to 2002. The appellant subsequently submitted self-assessment tax returns for 5 April 2001 to 5 April 2006. It is HMRC’s view that these were not received until 28 April 2008 and so rejected the returns for 2001 and 2002 on the basis that they were late and so could not displace the determinations. HMRC’s view, too, was that the tax returns for years 1998, 1999, and 2000 were not delivered to HMRC until 11 August 2008, and so were rejected as displacing the determinations on similar grounds.

The appellant’s self-assessment tax return for the tax year ending April 2003 records a gross profit of £88,605 and total expenses of £92,589. Those expenses do not include any item in box 3.51 (Employee costs). It records (significantly) premises costs of £33,043, general administrative expenses of £15,892, motor expenses of £19,298, and interest of £13,207. It also records cost of sales as being £16,907.

His return for 2002 records cost of sales of £22,822 and no employee costs. Premises costs are £29,079. Total expenses amount to £85,888.

His return for 2001 records cost of sales of £27,480 and no employee costs. Premises costs are £31,564. Total expenses amount to £85,281.

His return for 2000 records no cost of sales nor employee costs but records “other direct costs” of £15,104 and premises costs of £14,564. Total expenses amount to £47,520.

His return for 1999 records no cost of sales nor employee costs but records other direct costs of £12,193 and premises costs of £14,337. Total expenses amount to £48,610.

His return for 1998 records no cost of sales nor employee costs, but records other direct costs of £11,044 and premises costs of £12,688. Total expenses amount to £34,850.

The appellant also completed and submitted tax returns for the years 2003/2004-2006/2007. These returns contain little information regarding income and expenses as they were submitted by the appellant on the basis that he was non-UK tax resident.

HMRC opened enquiries into the appellant’s returns for 2003 and 2004 on 3 November 2008. In their letter to the appellant of that date, they asked for all the books and records of the business for the years ended 31 August 2002 and for the period to 28 February 2003. As regards the year ending 2004, they noted that the appellant claimed to be both non-resident and non-domiciled and asked him to complete and return forms DOM1 and P85.

In response to third-party information notices, Barclays Bank supplied copies of the appellant’s bank statements to HMRC in the early part of 2012.

In July 2013, HMRC’s Specialist Investigations directorate told the appellant that it had taken over ongoing enquiries under COP 9.

HMRC concluded their enquiries on 20 April 2015. They issued closure notices for the tax years ending April 2003 and April 2004, and the discovery assessments. The appellant appealed against these on 30 April 2015 and subsequently requested a statutory review. This review was also requested in respect of the VAT assessments.

On 24 September 2015, HMRC wrote to the appellant setting out their statutory review conclusions for both income tax and VAT.

The appellant made a request for the deregistration of the 584 VAT number on 27 February 2003 on the basis that he was emigrating from the UK. He made a further request for deregistration on 8 July 2008 telling HMRC on the form VAT 7 that the business was no longer trading.

HMRC cancelled that registration number from 11 July 2008. Further correspondence between the parties continued, and the appellant submitted several VAT returns declaring nil figures.

Officer Harris, as part of her review, considered that the appellant remained liable to VAT after 12 July 2008 and compulsorily registered him for VAT with registration number 210221781, which was initially assigned to him in April 2015.

In May 2015 the appellant applied for cancellation of that VAT registration number. Officer Harris, in a letter dated 12 June 2015 rejected that request on the basis that she was not satisfied that the business was no longer making taxable supplies above the registration threshold, nor that the business had ceased. In her view, for the reasons given in her letter of 11 March 2015, the appellant had continued to run the business after he said it was deregistered.

However, another team in HMRC did give effect to the request from the appellant to deregister. When Officer Harris discovered this, she requested that compulsory registration be reinstated, and VAT registration number 222 214463 was assigned to the appellant.

The appellant requested that this too was deregistered.

On 12 March 2009 HMRC wrote the appellant advising that due to late submission of particular VAT returns, some overpayments of VAT central assessment amounts would be subject to capping and the appellant could not therefore claim payments.

On 17 April 2015 HMRC issued a VAT assessment to the appellant for accounting periods 01/03/95 to 11/07/08. These assessments were issued in respect of the 584 VAT number.

Centrally issued VAT assessments for the period 12 July 2008 to 30 November 2015 relating to the registration number 2222 214463 were issued to the appellant on 21 April 2016.

The review conclusion letter of 24 September 2015, in relation to VAT, upheld HMRC’s decision that the appellant had underdeclared VAT but varied the amounts assessed for certain periods.

It was the appellant’s evidence that following the sale of the business, he recovered mentally and physically, and that he left the UK on 1 March 2003 and went to Ireland where Mr Dunne’s brother lived. He set up an accommodation address in Dublin to receive mail. His evidence was that when mail was received at that accommodation address, it was sent by those who staffed that address, to Mr Dunne’s business in Greece who then scanned the relevant documents onto the system which was accessible by the appellant, and thus the appellant was able to access the correspondence and other paperwork which had been delivered to the Dublin address.

The appellant’s evidence was that he needed passwords to access the information but in September 2006, he had lost them and was unable access information sent to the Dublin address.

In a letter dated 27 February 2003 to HMRC, the appellant told HMRC that “I am emigrating from the UK…” And that his UK address would no longer be applicable from 1 March 2003 and that he would send details of his new address once he was settled abroad.

A declaration of trust dated 3 March 2003 recorded that the appellant was 50% legal and beneficial owner of property at 16 Uphill Grove, London and that his wife was the beneficial owner of the remaining 50% interest. It declared that from that date he held the beneficial ownership 100% for his wife.

In a letter to HMRC dated 25 September 2006, on paper headed with a Dublin address, the appellant said “I also note that you have been sending letters to my home address, as above, but as I have not been home for some time I have not had the opportunity to review and respond...”.

A letter from HMRC to the appellant of 13 September 2006 records that when a letter was hand-delivered by HMRC to the appellant’s address at 16 Uphill Grove, London, his wife confirmed that the appellant was resident at that address.

In a letter dated 12 November 2007 from the appellant to HMRC regarding his situation, the appellant explained his then current tax and domestic situation, recording the information that he had provided to HMRC and went on to say “… Give you some history about me so that you understand the position.” It recorded his business history, his illness, the fraud perpetrated on him, and the fact that he did not live in lavish splendour. No mention is made of the sale of the business in March 2003.

In that letter he also states that “my business has lost money and that is why I have had to raise these funds”. The reference to funds is to borrowings of approximately £644,000 incurred over the previous seven years which he needed to support himself.

A statement by a process server dated 10 January 2008 records that the process server attending on 16 Uphill Grove the previous day spoke to a neighbour who told him that the appellant lived at that premises with his wife and that he was seen at the address most days as he worked from home as an accountant.

A letter dated 27 April 2008 from the appellant to HMRC, regarding the appellant’s personal position, set out additional explanations of the figures within his tax returns for 2001, 2002 & 2003. It deals with, amongst other things, the leasing of two vehicles for business purposes. It records that they were leased for a period of four years. No mention there is made of the impact of the sale in 2003 on those vehicle leases.

An attendance note compiled by Officer Newman on a visit to the business premises on 24 February 2011 records that Officer Newman and Officer Dyce met with, amongst others, Rosina Harris who said that the appellant “attended the offices on a regular basis”.

In a letter dated 3 November 2008 from HMRC to the appellant HMRC indicated that they intended to enquire into the appellant’s tax returns for the years ended 5 April 2003 and 2004, requested sight of the books and records of the business for the year ended 31 August 2002 and for the period to 28 February 2003, and noted that he claimed to be non-resident and non-domiciled for the 2004 tax year. Enclosed with that letter were forms DOM 1 and P85 relating to that claim with a request that the appellant complete and return them.

Further copies of those forms were sent by HMRC (Officer Dyce) to the appellant on 16 February 2009. The covering letter explained that HMRC could not consider the appellant’s claim for non-Dom or non-resident status without those forms having been completed.

Further copies of the forms were sent to the appellant by HMRC in a letter dated 30 July 2010. That letter also requested that the forms be completed and returned.

HMRC have no record that they were so completed and returned notwithstanding the appellant’s evidence (see above) that he did so. We find as a fact that he did not complete and submit those forms to HMRC.

The appellant’s evidence was that he was employed by companies based in Greece which were ultimately owned by Mr Dunne. His role was to deal with building and infrastructure projects, and these were undertaken through special purpose vehicles set up for each particular project. The appellant’s evidence was that he was employed by each particular SPV.

In support of this we were shown wage slips addressed to the appellant “c/o suite 127 Athens Towers… Athens 11527, Greece.” These were for periods between 2007 and 2012. They demonstrate that the appellant was paid a gross salary (and his cumulative salary for the relevant period was also recorded) from which income tax and IKA deductions had been made.

In answer to a request made by the judge to show us evidence of his non-UK tax resident status, the appellant took us to copies of bank statements of an account held with the Siam City Bank in Bangkok in his name “C/O Epinos” at the Greek address previously recorded. These bank statements covered the period between 1 December 2004 and 29 November 2007 and demonstrate that monies were being paid into and withdrawn from that account on a regular basis. In particular they record withdrawals from a branch of the bank with code 0150000.

On 22 March 2003 the appellant sent an email to John McDonald (“Mr McDonald”) who, in his response, describes himself at the bottom of the email as the SFO of Eposis Financial, and the address given as being the same Athens address as above. It also includee a website address of

In his email the appellant deals with a number of things including closing down his involvement in the business, VAT, the bank account, and his “new function”.

He states that he would like to get the takeover sorted and finalised so it leaves him fresh to start a new business. He had discussed tying up the loose ends with Mr Dunne.

It records that “I am now working for John elsewhere in the group”.

It also goes on to state “I won’t be involved in SP from now onwards, that’s been agreed with John as I can’t really handle doing SP work… especially as I will be mainly outside of the UK from now onwards. I will help where I can but I appreciate that will be on an unpaid basis so you need to understand that my involvement will be limited and only for the betterment of the firm itself. A lot of the clients are my personal friends so there is an added reason why I want them to succeed, they trusted me to help them and I will continue helping them where they need it, you won’t need to pay me for it, it’s sort of a “labour of love” and, in any case, my long-term intention is to raise sufficient money to buy the business back from John sometime in the future…”.

Under the heading VAT, the appellant asked how the VAT situation was to be resolved, that he did not want to stay registered for VAT in his own name and would be closing “that down” with the close date being 28 February 2003. Mr McDonald would have to take it on after that point.

It also records that the appellant was “not happy with having to give the business bank account over to you to use, although it is a business account it is in my name personally and not the company name, and in my view, you should be setting up a company bank account for it all and that should have been done already, so what is holding that up. You have been in control since 1/3 so [its] worrying me that you are still using the same banking facilities, so let me know what the plan and timescale is so that I can tell the bank something. I have already told them I am closing it down at some stage, so I need to go back to them with something as to what that timescale is, so let me know ASAP…”.

As regards his new function, the appellant states that “I presume I am going on the payroll of the development arm, please confirm. Also I need to open a bank account and considering I am going to be based around Thailand and working in the far east, it’s probably best to have a bank account there. Do you have anyone in mind that I can use… Your travel arm will be arranging my travel and accommodation, but perhaps I should also have a business card to pay for business expenses on the ground so as to save you guys having to approve everything…Tell John I am looking forward to getting on with this new function and say that a very much appreciate his help in getting out [of] the hole that I was in. I know I have already told him, but he really is doing me a massive favour here and I want him (and you) to appreciate that I appreciate what you all are doing for me and that’s one reason why I am happy to be a little bit relaxed about things”.

In his response to this email, on 22 March 2003, Mr McDonald sent the appellant a copy of the latest accounts for Eposis Financial; recorded that that was the company through which all the accounting and tax advice side is run and that the appellant’s business would be integrated into that company which would declare the income “within” our company; there was a group VAT registration which included all group companies so any VAT due on the business would be declared by that group registration, and that any business profits would be subject to company income tax; the appellant needed to deregister the business for VAT once Eposis had confirmation that it could take over using the VAT number but that was likely to take some time; in essence the business would become a trading arm of Eposis; he noted the comments regarding the bank account and that they did not run a UK bank account but it might take some time to sort it out so please could the appellant bear with him.

It specifically records “I know you aren’t happy with us using your banking facilities but there’s nothing wrong in us doing so and the reality is that they aren’t your banking facilities now they are ours. Rest assured if anyone raises any issues myself John and Terry will all agree to act as witnesses to the fact that this account is our bank account and not yours. I will let you know when we have set up a bank account so that you can close the one we are using”.

It then goes on to confirm that the appellant’s new function was to go onto the payroll of each project as it was run. The way the projects were run was that each project was given its own bank account, its own staff and its own cost base. At that time, they had 5 to 6 projects running in excess of $10 million income. The appellant would be provided with a business credit card and Mr Dunne would provide banking contacts in Thailand.

An email dated 14 January, 2005 from the appellant states: “Hi John, I know I have been “banging on” about this for a while but it’s now almost 2 years since he took over and you still haven’t set up a company bank account and are still using my personal bank account that I had when the business was me as a self-employed accountant. I mean how long is this going to take to resolve. I can’t even speak to your bankers as they don’t recognise me to be able to talk to me, so it’s very frustrating and I just wanted resolve. It really shouldn’t be this difficult. I just feel so helpless here, help me out PLEASE”.

The email reply from Mr McDonald also dated 14 January 2005 states that “The situation is that John [Dunne] has tried to set up a bank account in many ways in the UK but as nobody from Epinos is resident in the UK for tax purposes they always get rejected. I appreciate the difficulties here but we really do have some issues with respect to setting up a company bank account in the UK… When we asked our bank to help us they go along to their UK affiliate bank and come back and tell us that the UK bank won’t do it and there’s nothing they can do about that. I even had an idiotic conversation with them when they asked how we were trading without a bank account and I told them we were using yours (personal) they just said why don’t we just continue doing that so I said but it’s wrong to do that and they just said whatever works…”.

The appellant responded by way of an email dated 14 January 2005 in which he expresses exasperation regarding bank account issue and his concern about how long it is taking to sort. He goes on to say that “You are still using the same bank account that I set up in 1993, that can’t be right. Just so that you are aware and to provide some differentiation between you guys and me, I am setting up a new bank account to replace the old one, but I don’t want that to be an excuse not to be setting up your own bank account, this is [another] short term measure that I am implementing so let’sall understand this isn’t the way it should be done and you need to get something sorted on it.” (Emphasis in the original).

In response, Mr McDonald re-emphasised the difficulties that they were having with the bank but that he would do his best to get things sorted.

An email of 19 July 2006 into which the appellant was copied, records Mr Dunne as being the CEO of Eposis Group. An email of 18 July 2006 records Mr Simon Bradley as being a senior manager at Eposis Financial. The email address and postal address are the same Suite 127 address as in the earlier emails recorded above.

In a letter dated 9 April 2009 to HMRC, the appellant said that “the organisation of “Strauss Phillips & Co (sole proprietorship), no longer exists and ceased to trade as of March 2003, it is now a limited company and has been trading as a limited company since March 2003”.

A letter from Strauss Phillips & Co to HMRC dated 12 November 2008 records that they do not act as agents for the appellant, but at the bottom of the letter are the words “Principal: BM Strauss BSc FCA”. BM Strauss is the appellant.

In a letter dated 17 April 2014 from Strauss Phillips & Co to HMRC Special Investigations Team, “RE: STRAUSS PHILLIPS & CO” purportedly written by the firm’s internal tax expert “who is not Mr Strauss himself”, the appellant’s involvement with the firm is described as “a third party consultant to the firm [who] has no direct relationship with any client of the firm in terms of contractual basis. All such relationships are between this firm, being a limited company, and the client”.

That letter had been written in response to third-party notices served on clients of the firm. In the letter, the firm expressed the view that the notices were invalid and indicated that they would be writing separately in respect of each individual and organisation that had been the subject of a notice.

Subsequently, on 6 June 2014, the firm provided a response in relation to some of the companies and individuals who had been contacted. Certain companies were identified as having never traded during the period in question and the firm had not issued any invoices to them, nor had any payments been made by them to the firm. Other companies were identified as having traded but as not having been invoiced by the firm nor making payments to it.

Certain individuals, too, were identified as having been neither invoiced by the firm, or of having made any payments to it.

A statutory demand for £444,192.11 was served on the appellant on 25 October 2007. This debt related to determinations of tax and/or national insurance contributions, interest penalties and surcharges, for the years 1999/2000 to 2005/2006.

Although the appellant had challenged the determinations in correspondence, he did not apply to set aside the statutory demand.

Accordingly, HMRC presented a bankruptcy petition on 13 December 2007 which was served on the appellant on 10 March 2008.

That petition was filed in the aforementioned figure, but was amended to £58,699, following HMRC processing self-assessment returns, filed by the appellant, for those tax years.

The appellant was declared bankrupt at a hearing he did not attend on 18 November 2008, but applied, twice, for that bankruptcy to be annulled. The second application was made on 9 June 2009 and was heard on 13 November 2009.

The transcript of those annulment proceedings records, amongst other things.

That the appellant disagreed with HMRC’s assertion that no tax returns had been submitted for the relevant years. The appellant’s evidence was that they had been so submitted and that even if they had not been, he had submitted some of them in 2003 and produced recorded delivery slips to demonstrate this.

A letter dated 5 March 2003 was produced enclosing self-assessment tax records for 2002/2003, along with signed copies of previous tax returns from 1997 to 2002. That letter also records that the appellant said that he was going to live overseas and gives an address in Dublin.

It records that the appellant produced a letter headed “Inland Revenue” and dated 11 March 2003 signed by Mrs T Peters, recovery officer at Finchley, which confirms receipt of letters, the letter of 5 March 2003, and of the tax returns for the years, effectively, 1997 to 2003. Their letter confirms that those returns will be forwarded to Newcastle to be reviewed and processed and that “in view of your letter and enclosures I have put a hold on all collection action…”.

It then records the history of bankruptcy proceedings and goes on to record: “…However, I do consider that the letters of 2003 need to be looked at more closely. Although counsel for Revenue & Customs very properly avoided the any assertion that the letter from the inland revenue dated the 11 March 2003 was a forgery, nevertheless he pointed out there were one or two oddities about the letter. I am not in a jurisdiction which can determine those oddities. … What this letter does point to, if I take it at its face value is that Revenue & Customs had in their possession in 2003, in plenty of time, the three returns on which they have based their determinations within the five year period… I cannot determine whether or not the letter of 11 March 2003 is genuine But I think I have to take it for the purposes of today at face value. That may well not be the case further down for another tribunal but at face value the Revenue & Customs had the returns in their hands well within the time limit. On that basis, the reliance by Revenue & Customs on the disputed determinations is simply not right and the bankruptcy petition is effectively based on a nullity. I do not know what the debt would be if those tax returns were properly assessed and it may well reduce the debt considerably, if not wipe it out altogether”.

As mentioned above, HMRC opened enquiries into the appellant’s 2003 and 2004 tax returns in November 2008. Extensive (and extremely spiky on occasions) correspondence passed between the appellant and HMRC for the next few years. In 2011, HMRC issued third party information notices, as a result of which they obtained details of the bank accounts numbered 1089 2653, 8011 6645 and the joint account.

They also obtained information from Strauss Phillips & Co in July 2014 as a result of issuing Third Party Information Notices.

HMRC also contacted clients of the business who provided copies of invoices, summaries of invoices, and emails concerning their dealings with the business, and the business carried on by the appellant’s father, Peter Strauss.

This information, and invoices, included the following.

A letter dated 13 January 2012 from the appellant to a client of the business enclosing the clients self-assessment tax return and providing information as to how to complete it.

An email dated 28 May 2010 from the appellant to a client confirming receipt of two cheques “in payment of my fees”.

A note of a telephone conversation of 8 July 2014 in relation to an application by HMRC for a client to provide information, recording that the client “ha[d] just spoken to his accountant Bradley Strauss who told him that he (Mr Strauss) has spoken to HMRC and “it was sorted…””.

A letter dated 4 April 2014 from a client to HMRC saying that the appellant had only recently started doing his accounts since his father passed away.

A letter dated 6 April 2014 from another client telling HMRC that the appellant had told him that his father had been seriously ill and would no longer be able to do the client’s accounts. But as the appellant had been working alongside his father for a couple of years, he was more than happy to take on the client’s business.

Letters from a variety of clients of the business, to HMRC, saying (essentially) that they had been provided services by the appellant and that they had been sent invoices.

Notably, however, many of these letters (for example letter recorded above) recorded those clients had previously been provided services by the appellant’s father.

The invoices, included invoices with the 584 VAT number on Strauss Phillips & Co branded stationary (“branded stationary”); invoices for 2008 to 2010, 2012 and 2013 on unbranded stationary with no VAT number; invoices between 2009 and 2011 on branded stationary with VAT number 644921808; invoices dated 2011 and 2012 on branded stationary with a VAT number 644921822, invoices in 2012 on branded stationary with VAT number 258650228; invoices in 2012 and 2013 on branded stationary with no VAT number, and invoices for 2012 to 2014 on branded stationary with a VAT number 151905422.

Many of these invoices did not refer to any terms or conditions. Many of them appear to have nonsequential invoice numbers.

An email from David Nathan to the appellant dated 13 April 2022 records that Mr Nathan’s understanding was that the 644921808 number was a replacement for the firm’s original VAT number; the 644921822 was a mistake, the invoice template had been corrupted and put a 22 instead of 08; the 258650228 number was, he believed, the group VAT number; and the 151905422 number was a brand new UK company VAT number which he thought HMRC should have a full record of.

The assessing officer for both income tax and VAT was Officer Sara Harris.

Her first involvement is evidenced by a letter from her to the appellant dated 3 April 2014 where she indicated that she had been asked to look into a complaint made by the appellant on 27 March 2014 and that she had reviewed the papers. She was writing to tell him of the outcome of that review. The complaint essentially involved allegations of fraud and misfeasance by HMRC officers. She rehearsed the history of the COP 9 investigation which had been offered to the appellant in July 2013, and the fact that he had declined to take the offer of making full disclosure under the contractual disclosure facility. It recorded HMRC’s powers to obtain third party information and the fact that HMRC had exercised those powers and issued third party notices. She conceded that those notices should have been served on the appellant, which had not been the case, and she included copies of the notices with her letter.

The appellant responded to that by telephoning Officer Harris on 4 April 2014. In his view, her letter had not accurately recorded the facts. He asked Officer Harris to withdraw the letter.

Officer Harris then spent some time analysing the bank statements which had been obtained from Barclays Bank using HMRC’s information notice powers in early 2012 and the information provided under third party information notices by Bradley Strauss & Co and directly by its clients.

In a letter to the appellant dated 11 March 2015, Officer Harris explained what she had done. She explained that HMRC suspected that the appellant had committed fraud and that because of that they could raise discovery assessments going back to the 1994/1995 tax year.

She recorded a summary of the evidence on which these suspicions were based. His business had been incorporated on 26 November 1991 and registered for VAT on 10 August 2023. It recorded that the appellant claimed to have become non-UK tax resident during the year 2003/2004 but no evidence had been seen to support that claim. It recorded the appellant’s address in Dublin, the fact that he paid a mortgage and utilities on a property in London after his purported date of departure. Credit cards were registered to that address.

In her view, regardless of his residence, the profits of the trade were taxable because they were derived from a UK business.

It recorded the appellant’s claims that he was not the individual behind Strauss Phillips & Co after 2003 and that he was no longer liable for the profits of the business. Officer Harris did not agree. The appellant had not told HMRC who owned the business nor had shown HMRC any evidence to document the sale of the business. It went on to record that the evidence showed that the appellant was the beneficiary of the income of that firm after 2003.

It recorded that the bank accounts with numbers 8011 6645 and 9082 7983 were held in the appellant’s name and he was the sole signatory. Transfers were made from both accounts to his joint bank account (5035 8789). She records HMRC’s disbelief of the appellant’s explanation that these accounts have been used by the people to whom he sold his business who could not obtain a UK bank account. It goes on to record that the appellant had provided no evidence in support of this contention, nor for his assertion that account 1089 2653 was opened on 15 February 2005.

It recorded further reasons to believe that he was running the firm after 2003. HMRC’s evidence showed that he regularly attended the offices and dealt with the clients of the firm, including collecting fees from those clients.

From an income tax perspective, it was her view that regardless of the appellant’s residence status, he was operating a business from the UK, the profits of which were chargeable to tax in the UK.

From a VAT perspective, her view was that he was continuing to run the business after 2003 and that after that date the income of the business was over the VAT threshold. Furthermore, the business continued to charge VAT on their services, but that VAT was not paid to HMRC. There were also inconsistencies between the outputs recorded on the VAT returns, and the bank statements which she had examined.

It recorded serious concerns about the way in which VAT had been accounted for on the basis of the invoices obtained from some of the firm’s clients. Some of those invoices showed the use of a VAT number which did not exist. The evidence showed that the VAT number registered to him was being used, and that the turnover of the business after February 2003 meant that he should have been paying VAT on services supplied.

It went on to record the assessments which were then currently in place including the out of time returns for the years 1997/1998-2001/2002. It commented on the returns for 2002/2003 and 2003/2004. As regards the returns for 2004/2005 and 2005/2006, Officer Harris noted that returns for those two years were filed with the appellant’s letter of 28 April 2008, but she could find no enquiry notices in respect of those returns and intended to raise discovery assessments for those years.

She then went on to consider the appellant’s tax liabilities. From the information available to her “it appears that Income Tax and VAT has been under-assessed in all years from 1994/95 to 2013/14”.

She had undertaken an analysis of the payments made to and from the accounts 1089 2653, 8011 6645 and 5035 8789. That analysis of approximately 80 pages was included with the letter.

In her view, during the period 2005/2006 and 2011/2012 some of the fees from the firm had been paid into those bank accounts and she had taken those to be turnover of his business. “You can see the summary analyses for 2005/06 - 2010/11 enclosed…” She claimed to have ignored transfers between accounts and so there was no double counting. The letter also included the full line by line and analysis as well as the summaries.

In tabular form (this is our summary which was not included with the letter):

As far as expenditure, she found this difficult to calculate as she had, effectively, nothing to go on, but “in the absence of further information I suggest expenditure of £30,000 per annum for rent, rates, utilities, insurance, staff and consumables might be a reasonable estimate. I would be happy to consider further expenditure if you would like to provide me with further information”.

She then went on to say that the profit figures that she had calculated seemed reasonable when compared to personal expenditure evidence by the bank statements. “In particular, there are indicators that the expenditure is that of a person who is [in] receipt of an income in excess of £100k per annum such as private school fees, large mortgage payments, a house extension, large credit card finance payments and private health insurance”.

She then set out a table of her estimated profit before and after the £30k deduction for expenditure.

This reflects her methodology which was that she used the bank account information to record the profits for the years 2005/2006 to 2010/2011 inclusive.

For those years the assessments were based on the turnover based on the bank account information.

For the tax year 2004/2005, Officer Harris used the figure of £300,000. In her letter the column in the table “origin of figure for computed turnover” records “Estimated from 2005/06 and 2006/07”. The computed turnover for those two years is, respectively, £288,616, and £455,905.

We were told by HMRC that the rationale for this figure of £300,000 was that it was an approximation of, (and below) the average of the turnover for 2005/2006 (£288,616) and 2006/2007 (£455,905). This averages at £377,260.50. However, there is no primary evidence that this exercise was undertaken by Officer Harris. The table in her letter simply records that it was estimated from the two subsequent years and is in an amount of £300,000.

She then extrapolated backwards to the tax years 1994/1995 through to 2003/2004, reducing that £300,000 figure by RPI.

For the tax years after 5 April 2011, a flat figure £135,000 was used based on the income paid into the accounts for the tax years 2009/2010 and 2010/2011. Again, this was lower than the average for those two years (which was £176,675.50).

A table of the turnover expenses and profits for the tax years 1994/1995 - 2013/2014, as adjusted on review, is set out below:

Officer Harris emailed the appellant on 11 March to explain that her letter was to be sent to him by fax and in the post, but that she would not fax the appendices.

The appellant responded to this letter in an email dated 31 March 2015 in which he said that he had received the 80-page document “today”, that it was the first time he had seen anything of a substantive nature from HMRC and that it would take him time to properly review. He asked for confirmation that he would be permitted three months to do so and that no further action would be taken until the expiry of that period.

A note of a telephone conversation between Officer Harris and the appellant dated 2 April 2015 records the fact that the appellant did not think that raising assessments would be productive. He asked for confirmation that he would have three months grace, but Officer Harris said that she would take no action until “next Wednesday because, in light of the comments he had made, I did not feel that it would be appropriate to commit to any particular course of action until I had the agreement of my manager. I said I could not assure him that I would not raise assessments at that point”.

In an email to the appellant dated 8 April 2015, Officer Harris recorded email and telephone communications between them, and that she was not intending to respond to each and every point raised therein. In the letter she says that “Although I appreciate that you would like further time to consider my letter before making any further information available to HMRC, I must balance that with the need to raise assessments in order to comply with the relevant time restrictions. With that in mind I will be raising assessments soon…”.

She went on to say that she would be happy to allow the appellant until 30 June 2015 “to provide further information to enable us to re-evaluate our position…”.

A document entitled “Request for authority to issue extended time limit assessments under FA 08/SCH 39 and/or FA09/SCH 51” was sent by Officer Harris to Julie Clark (Authorising Officer) on 14 April 2015. It records the person to be assessed as the appellant and sets out the years and nature of assessments to be made and the amounts to be assessed. These years start in 1997/1998 and end on 2013/2014. It records that “evidence of the person’s behaviour can be found in the case files and is referred to in the pre-decision letter of 11 March 2015”. The authorising officer has appended her signature to that document, authorising Officer Harris to make the extended time limit assessments. That signature appears to have been made on 15 April 2015.

The VAT assessments are set out in a letter dated 17 April 2015 from Officer Harris to the appellant (“the VAT assessments”). Officer Harris used the same turnover figures as she had used in the discovery assessments less £30,000 to adjust for the expenses.

Notices of income tax assessment for the relevant tax years were sent to the appellant by Officer Harris on 20 April 2015 (“the discovery assessments”).

The appellant sought statutory reviews of these assessments which were provided by HMRC on 24 September 2015. Essentially these upheld the assessments.

On 22 October 2015, the appellant filed appeals against HMRC’s decisions to issue discovery assessments and closure notices (income tax) and to issue the VAT assessments.

On 11 January 2016 HMRC issued penalty notices to the appellant under section 93 TMA 1970 for the years ended 5 April 1998-2002, 2005, 2006, and 2008-2010.

On the same date HMRC issue penalties under section 95 TMA 1970 for the years ended 5 April 2003 and 2004.

On the same date HMRC issue penalties under schedule 55 FA 2009 to the appellant for the years ended 5 April 2011 and 5 April 2012.

On the same date HMRC issue penalties under schedule 41 FA 2008 to the appellant for the years ended 5 April 2013 and 5 April 2014.

On 21 June 2016, HMRC issued a penalty under section 95 TMA for the year ended 5 April 2007.

On 7 April 2016 HMRC issued a penalty under section 60 VATA to the appellant for VAT number 644978684 for the periods set out in Appendix 1.

On 5 September 2016, HMRC issued a penalty under section 60 VATA to the appellant for VAT registration number 222214463 for the period 12 July 2008 to 31 March 2010.

On the same date, HMRC issued a penalty under schedule 41 FA 2008 to the appellant for VAT registration number 222214463.

On 20 July 2016 the appellant filed appeals against the penalties.

His appeals against the assessments and closure notices, the VAT assessments, and the direct and indirect tax penalties have now all been consolidated under appeal reference 06427.

Officer Wright became involved when he took on responsibility for HMRC’s Fraud Investigation Services investigation into the appellant in March 2017.

In December 2021, a virtual ADR meeting was held. That ADR meeting did not resolve the issues between the parties, but following it, on 18 March 2022, the appellant sent 14 documents to Officer Wright. In summary these contained a great deal more information than had hitherto been disclosed by the appellant, concerning the sale of the business in 2003 and the subsequent operation of it by Mr Dunne’s companies. Some of this information (such as the email exchanges between the appellant, Mr McDonald, Simon Bradley, and Mr Dunne (“Mr Dunne’s people”)) has already been referred to at [115-130] above.

The email of 18 March 2022 also contains a brief critique of Officer Harris’s analysis of the amounts assessed for the tax years 2005/2006 and 2006/2007.

Following directions from the tribunal on 22 April 2022, that the appellant should provide HMRC with any further evidence on which he wished to rely in the appeals, the appellant, on 13 May 2022, sent Officer Wright a further 14 documents.

In reviewing those documents, Officer Wright noted that the name of the company or companies which the appellant had told HMRC had either employed him after 2003, or who owned and operated the firm after that date, were referred to inconsistently. There were references to Epinos, Eposis Financial and Eposis.

Officer Wright conducted a superficial website search to check on these entities and found no evidence of their existence. He therefore asked Officer Doherty of the Fraud Investigation Services Digital Support Innovation Team, to carry out open search Internet checks on those entities as well as searches for David Nathan.

Officer Doherty’s evidence was that he was asked to conduct open source enquiries to ascertain any digital footprint and links on Eposis Group, Eposis Financial, Eposis Properties, John Dunne, Terry Dunn, Simon Bradley, John McDonald and Bradley Strauss.

His evidence was that he could find no digital footprint for any of these entities or individuals. He frankly accepted however that this did not mean that they did not exist. It simply meant that he could not find digital evidence of that existence.

He fed this information back to Officer Wright. He did not use that information to come to any conclusions himself.

Dr Young’s evidence, in essence, was that Officer Doherty’s methodology gave rise to results from which it was not possible to conclude that the entities for which he searched did not exist. All that it was possible to say was that there was no evidence of that existence. “Absence of evidence is not evidence of absence”. In his view Officer Wright had come to a conclusion that there was no evidence that these entities existed when all that could be concluded was, as indicated by Officer Doherty, that the officer could find no digital footprint of them.

In response to a request by HMRC, the Greek Independent Authority for Public Revenue, in a letter dated 3 May 2022, noted that “in going through [their] database it was not possible to identify the companies Eposis Group, Eposis Properties, Eposis Financial SA nor the natural person Mr Bradley Malcom Strauss”.

Officer Wright set out HMRC’s view of the matter in an email to the appellant dated 27 May 2022 (this, too, was in response to directions issued by the tribunal).

It essentially reflected the officer’s misgivings concerning the evidence supplied by the appellant to support his contention that he had sold his business in 2003 and it had been subsequently owned, thereafter, by one or more offshore companies. It recorded the evidence supplied concerning the nonexistence of these companies by Officer Doherty. It recorded the letter from the Greek tax authorities.

It recorded that the documents supplied to support the use of the UK bank accounts by those overseas entities was not considered to be reliable evidence.

Similarly, the evidence supplied to justify the appellant’s non-resident status (overseas bank accounts and cash withdrawals, payslips, and emails from Mr Dunne) do not outweigh the lack of evidence concerning business trips, and the evidence that HMRC had from individuals who had told HMRC that the appellant was working from the UK.

It went on to justify the reliance on the bank statements on which Officer Harris had based the assessments and dealt with the challenges to the accuracy of those figures set out in the appellant’s email of 18 March 2022.

Having considered those challenges, Officer Wright agreed that the profit figure for 2005/2006 should be reduced by £242.18, and the profit figure for 2006/2007 should be reduced by £11,202.61.

He dealt with the £30,000 a year expenses. This was an estimate since there was no alternative reliable evidence and was in keeping with the appellant’s private expenditure on school fees, mortgage payments and other credit and finance payments. He dealt with the appellant’s assertion that business expenses for 2006/2007 would have amounted to £142,538.96. He observed that although the appellant had said that the details of the wages come from his records, the appellant had not supplied evidence on which he had reached those figures nor accounts or other records showing payment of those sums or identified in the bank records. “In the absence of any independent supporting evidence of the expenses itemised in your email my view is that the figure using our assessments remains a reasonable estimate”.

To the extent not reflected earlier in this decision, the appellant gave the following additional relevant evidence.

In his view, the investigation into his tax affairs have been driven by malicious and improper motives arising from his success in annulling the bankruptcy in 2008.

This heavily coloured his attitude towards HMRC’s investigation, and he accepts that some of the language used in his correspondence with HMRC was intemperate and aggressive. He apologised for this. It was, however, the reason why he did not supply information to HMRC when it was requested. He had felt persecuted.

He accepted that he had never supplied the books and records relating to the business requested by HMRC either following the opening of the enquiries in November 2008 or subsequently.

His father was diagnosed with cancer and died in 2012. He was very close to his father and this had a profound effect on his life. He was not, therefore, in a position to deal with HMRC’s queries during that period of his life.

Following the assessments in 2015, with which he profoundly disagreed, he thought that there was little point in providing HMRC with further information at that stage. In his view HMRC had arrived at a decision and everything rotated around that. HMRC had assumed he was guilty and was simply using anything he sent them to support that assumption. It was all back to front.

His relationship with HMRC changed when Officer Wright became involved. He had hoped (and in his view had been given the impression by HMRC) that the ADR would resolve the situation. His personal relationship with Officer Wright meant that he felt able to supply HMRC with further information concerning the sale of the business which he did in his email of March 2022.

There were a number of reasons why he didn’t respond to many of HMRC’s enquiries and requests for information. Following that bankruptcy, he felt he was being persecuted by HMRC and in particular by officer Newman in whom he had no confidence. Shortly after his bankruptcy he discovered that his father’s illness was terminal which had a massive effect on him. After his father’s death, he was not being asked any questions but then had the COP 9 letter which involved his wife and to which he reacted “the wrong way”. He wasn’t prepared to provide any evidence to HMRC at that stage. However, he did provide information to HMRC, and in particular to Officer Wright, following the ADR.

He was concerned about the accounting services provided by his father, especially towards the end of his career, and about his father’s insurance position. In order to ensure that there was no run-off liability, he made himself responsible for looking after clients of his father’s where he thought that there might be issues which could affect his father’s position. Most of the clients who had written to HMRC to explain their ongoing involvement with the appellant and the firm, were former clients of his father who he had agreed to look after for these reasons.

There were clients of the firm for whom he continued to act, simply for the purposes of continuity. Fees billed were credited to the firm and not to himself personally.

Apart from this and similar run-off work, he transacted no business on behalf of the firm after 2003.

His view was that the invoicing issues raised by HMRC regarding the lack of terms and conditions, the VAT numbers, and the inconsistent numbering, were things that would not have happened if he had been running the firm. But he was not and so had no insight into the reasons for these inconsistencies.

One reason that he had been held out as being the principal of the firm after 2003 was because it required a qualified individual to be identified for insurance purposes. Another reason was that he was acting as a figurehead, given his previous involvement, and that was one of the reasons why people said that they were dealing with him, after 2003, when in fact he was simply representing the firm under its new ownership. All income from his activities went to the new owners.

He was not involved in the running of the firm after its transfer to Mr Dunne in 2003. He had never said that the business had been sold to an overseas company. However, he knew that Mr Dunne had subsequently transferred the business to a Greek company (by which he meant a company based in Greece rather than a company that did not have reporting obligations in the UK), but he was not sure which company; hence the reason why he had given HMRC the names of what they perceived to be inconsistent entities at various times.

The reason why there were utility bills in his name following the transfer of his beneficial interest to his wife, was because the utility companies did not recognise a change in beneficial ownership and sent bills only to the legal owner.

The use of the firm’s bank accounts by the new owners post 2003 was intended only to be an interim measure pending the setting up of new UK bank accounts by the new owners.

Between 2003 and 2014, Mr Dunne, through a company called Crestfort Construction Ltd, was involved in a big development project in the UK. This made zero rated outputs and was recovering its associated input VAT at a rate of approximately £30,000 per month. This money went into the bank accounts which were analysed by HMRC.

His role within Mr Dunne’s companies, post-2003, was relatively simple. He was employed by each SPV which was set up to undertake overseas development projects. He would go to the project with a spreadsheet analysis that Mr Dunne’s company had already drawn up and analysed whether further savings could be made in respect of the project. He had had considerable previous experience of this sort of activity as chief accountant with a plc in the City of London in the late 1980’s.

The only information he had about the running of the business, after 2003, was what he had been told by Mr Dunne and Mr McDonald. He had no inside information. He did not think it was odd that, for example, he had been told that trading was being run through a company called NP Planning Ltd (a letter to the appellant from HMRC dated 19 March 2010 records that this is what the appellant told HMRC). He simply repeated what he had been told by the new owners and did not consider that it was strange that they were using a succession of companies.

His challenges to the amounts assessed for 2005/2006 and 2006/2007 are set out in his email of 18 March 2022.

In particular, he identifies that for the 2005/2006 tax year, Officer Harris has identified a deposit into the business bank account of £17,625 as being attributable to Focus and for the year 2006/2007, she has identified a further deposit £132,000 as being attributable to Focus. She has treated both deposits as being taxable income of the business.

These were not taxable as they reflected a deposit of £150k by Mr Dunne into that company’s bank account when Mr Dunne was considering buying the shares in that company. That purchase then failed, and the £150k, was then transferred from the Focus bank account into the business bank account.

He did not tell the tribunal in 2019 that he was going to call Rosina Harris as a witness when he submitted the listing information for the hearings as he knew she was not well and did not want to concern her. Indeed, at that stage he was not sure that he was going to call her as he had other witnesses who were capable of testifying. It was only when one of those fell through (John McDonald) that he decided that he wanted her to give evidence.

He never asked Rosina Harris for a copy of the notes which she recorded as having taken of the 2011 meeting with HMRC, in her witness statement.

After 2003, he assisted Mr Dunne when the business needed to move offices. He found a property for the business to move to.

He accepted that for the year ended April 2003, staff costs would have been in the region of £70,000, but these were not included in his tax return under employee costs. He thought that these expenses might have been included in the wrong box (for example the figure for motor expenses of £19,000 also seemed extremely high).

His tax returns while working for the business were based on an expenses ledger kept by a member of staff which was then reflected in a spreadsheet and which he then used to populate his tax returns.

In his email to Officer Dyce of 25 November 2011, he had said that he had recently made a decision to come back into the business. This was correct as at that time Simon Bradley was retiring and he had little work from the Greek companies. However, this was quite convenient as his father was unwell and he could spend more time with him. Following his father’s death, however, he found work picked up and thus there was no need for him to repurchase the business.

He had submitted VAT returns on behalf of the business, for periods after the sale in March 2003. These returns reflected cash received after the sale of the business and for which he was responsible for submitting VAT returns.

He accepted that he was a signatory to the relevant business bank accounts. His evidence was that bank account 1089 2653 could be operated via Internet banking, using a pass code. He had set up the Internet banking, and given the pass code to, amongst others, Mr McDonald. Payments made to and from that bank account could therefore be made by Mr McDonald or someone acting under his authority.

One of the reasons why the cost of sales in his tax returns was low was because of the arrangements he had with Steve King, who was involved in the firm before its sale and who would go into a client’s business as a consultant to recommend using the firm as the client’s accountants. He would then use the staff and resources of the firm to service the client and would pay the staff for this. The costs of the staff, therefore, because they were reimbursed by Mr King, were not reflected as costs of the business in his tax returns. This arrangement ceased on or around the time that he sold the business in 2003. There is no paperwork reflecting this arrangement.

An email, the subject of which is “Focus” from Simon Bradley to Mr Dunne and the appellant, dated 13 December 2005, records Simon Bradley as saying that “this could be a very good deal for us the business is stagnating in their hands… But we can take it on and make it better. I am happy for this to become my baby provided you are happy to put the funds in John. I have calculated that we need £150k in to get going and may need more after that… If that’s okay John”.

In response to that email, on the same date, the appellant replied that when he was dealing with the company “I seem to recall that the main client was Allied Bakeries and the contract they had was one that didn’t hold much water, so you need to be really careful how to deal with this”.

He goes on to suggest that Mr Dunne should buy the majority of the shares and invest in the company but only deposit his £150k into the company’s bank account once he had control.

In response, Mr Dunne says that he would go forward on the basis suggested by the appellant and asks Simon Bradley to sort out the paperwork and to ensure that the bank account is sorted before “we put any money their way”.

A further email, the subject of which is Focus, sent from Mr Dunne to Simon Bradley, copied to the appellant, dated 10 March 2006, records dissatisfaction by Mr Dunne of the due diligence undertaken by Simon Bradley and asks how Allied Bakeries could “run away from the contract the way they have. If Brad hadn’t protected me I would be £150k down and not a happy bunny… I presume the £150k is still sitting there. Let’s leave the money in Focus account for the moment and transfer it across as we needed. I am probably going to use it to fund SP with the funds it needs… I know that you need some funds to pay this month so pay across £15k to cover things and that will tide over for couple of months”.

The summary document of the bank account 1089 2653 compiled by Officer Harris for 2006/2007, records a receipt of £132,000 the details of which are “FOCUS” and further records that this is a taxable receipt.

In summary, the appellant submitted as follows:

The central issue in this appeal is whether the appellant controlled or owned the business after he sold it to Mr Dunne in March 2003.

The burden of establishing this is on HMRC and they have not discharged that burden. They have provided no evidential foundation for their submission that he continued to control or owned the business after that date. Their case is based on presumptions or inferences which in turn are based on inadequate evidence. There is no primary evidence that he remained the owner or in control of the business after its sale.

Assessments based on estimates and assumptions cannot stand in the face of contrary credible evidence which demonstrates that those assumptions are unsafe. HMRC’s case is based on assumptions derived from the bank accounts and the appellant’s name in administrative records.

The facts on which HMRC rely are equally consistent with his involvement only as a self-employed subcontractor and not as the operator or controlling mind of the company. HMRC have provided no evidence whatsoever of any management, operational or strategic input by the appellant after the sale. He made no decisions affecting the business after that date. After that date he was only involved in “run-off work”, arranging cars, and assisted in the Focus transaction.

When he returned to England, he did so to facilitate the business relationship with certain clients.

He also looked after former clients of his father’s business post 2003. But any billing of those clients for work undertaken by him benefited the business and not himself personally.

HMRC have not said who they thought was operating the business after the sale. This is something that they need to do in order to discharge the burden of proof. They are basing their case on the assumption that there was continuity of the running of the business after its sale in March 2003. This flies in the face of the evidence provided by the appellant which clearly shows that the business was operated under the control of other individuals/entities following that sale.

Letters sent by the business to HMRC in 2014 when he wasn’t involved, clearly show that he was involved in the business only to the extent of a self-employed consultant.

Once he left the UK following the sale of the business, he was non-UK tax resident.

There was clear evidence that he was not involved save to that limited extent. This is clear from Rosina Harris’ witness statement and email of October 2017, David Nathan’s witness statement, and the appellant’s oral evidence. This evidence contradicts HMRC’s suggestion that the appellant operated the business after its sale.

The bank accounts on which HMRC rely were used by Mr Dunne’s companies because they could not get a UK bank account. The same goes for the use, by those companies, of a variety of VAT numbers. This can be seen from the emails disclosed to HMRC in 2022.

To the extent that these accounts reflect money earned by the business, then that money was beneficially owned (ultimately) by the relevant Mr Dunne company, and not by the appellant.

Those emails also showed that Mr Dunne and John McDonald were involved in the business, as was Simon Bradley.

Given that he was no longer involved in the business, he had no insight into the legal or operational structure through which Mr Dunne incorporated the business into his group companies after the sale. It is not surprising, therefore, that he was unable to provide detailed information about this operational structure to HMRC. This resulted in the confusion of names such as Epinos and Eposis.

HMRC’s notes of the visit they undertook to the business premises on 24 February 2011 are incorrect. Rosina Harris’ evidence is to be preferred.

The documents recorded that he went to Dublin when he said he did. They record that he returned to the UK on occasions but thereafter he was working abroad for Mr Dunne’s companies. This is demonstrated by his wage slips and the withdrawals from the Bangkok bank account. He has provided contemporaneous documentation of his departure from the UK and his residence overseas.

It would not have been feasible or practical for him to have operated or controlled the business whilst residing abroad.

Further evidence of his change of lifestyle following the sale of the business include; transferring the property to his wife; his tax return demonstrating that he had ceased to carry on the business with effect from 28 February 2003; his application to cancel the business VAT registration and the sale agreement.

The evidence from the process server should be treated with suspicion. If he was really operating or controlling the business after that date he would have had access to office space so he would have worked from those offices rather than from home.

The invoices on which HMRC rely reflect run-off work undertaken by the business and not by him personally. Since he was not involved in operating the business after 2003, he cannot explain why there were VAT idiosyncrasies as regards the use of VAT numbers and the numbering of invoices. That wouldn’t have happened on his watch.

He was not made aware of these issues until 2019 and these were not properly explained until he received the hearing bundle in 2021. He asks, rhetorically, what practical steps he could have taken to correct those issues at that stage.

He was identified as the principal on the letterhead for regulatory and insurance purposes.

HMRC’s suggestion that the vehicle leasing arrangements prior to March 2003 demonstrate continuing involvement after that date is rejected. It does not demonstrate continued operational control of the business, but a practical arrangement relating to a vehicle used by the appellant’s family after the transfer of the business.

The fact there was no digital footprint of Mr Dunne’s companies or of the existence of David Nathan does not mean that they did not exist. This is borne out by the evidence of Dr Young which should be preferred to that of Officer Doherty.

The letter from the Greek tax authority simply states that no relevant record could be identified from the information provided. This is not the same as confirming that no such record (of the relevant companies) did not exist. Nor that those companies did not exist.

He was able to identify staff costs with some precision in his letter to Officer Wright of 18 March 2022 since these were the figures with which he was familiar when running the business prior to March 2003.

He rejects any adverse inference that he failed to cooperate based on the fact that he had the opportunity to supply information but failed to do so. He thought he had provided information. He was certain that he had returned the residence forms to HMRC. He did not receive certain items of correspondence requesting information. He had health issues and had informed the tribunal of these. He wanted to protect John Dunne from HMRC because of his experience with their investigations. It was not worth providing information since, in his view, HMRC had already made up their mind and whatever he provided them with would not have affected their conclusions.

Furthermore, given that these matters took place over 20 years ago, it would not be reasonable to expect that the business records would still be available.

He took responsibility for the contents of his tax returns.

In the bankruptcy proceedings, it was accepted that his tax returns for pre-sale periods had been submitted when he says they were sent, something evidenced by HMRC’s internal notes (which record that they had been examined in 2006). In those proceedings it was also accepted that he was non-UK tax resident, and the tax returns on which the bankruptcy proceedings (and their annulment) were based were correct. HMRC cannot now challenge the accuracy of those returns.

The assessments are flawed. Officer Harris had prior involvement in connection with a complaint against a fellow officer and thus was not acting objectively reasonably when she made the assessments. Officer Dyce had all the information available to Officer Harris sometime before the assessments were made and should have assessed at that time.

The assessments were based solely on the bank accounts. Officer Harris made the mistake of identifying deposits as trading income. There was no justification for this. For example the Focus money which went into the business bank account was money that had originally been paid to purchase Focus and then returned by Focus to the firm’s bank account when that deal went off. That is clearly not trading income.

Deposits into the accounts say nothing about the operation of the business.

There is no justification for the £30,000 allowance for expenditure. This is a wholly arbitrary figure. It is not possible to ascertain how Officer Harris arrived at this figure. HMRC had visited the premises in February 2011 and would have noted the extent of the premises and their cost. There is no evidence that any such cost was factored into the estimate for expenses. Furthermore, given the expenditure set out in the pre-2003 tax returns, the officer should have realised that there were significant costs of sales yet these were not seemingly taken into account when reaching the expenditure figure in the assessments. The assessments were not made to best judgement.

The bank account into which most of the money was paid and which formed the basis of the assessments was set up by him in December 2004 so considerably after the sale in 2003.

There were also other flaws in the numbers as set out in his letter to Officer Wright of 18 March 2022. That officer therefore was in possession of information which should have reduced the assessments yet he did nothing about them.

Officer Wright’s opinion that the assessments were reasonable is largely irrelevant.

Relying on the bank accounts was therefore not either subjectively or objectively reasonable. Officer Harris was aware of the letters sent by the business to HMRC in 2014 in which the business explained that the role of the appellant was solely as self-employed consultant. She did not take this into account. Nor did she take into account the information she was given in 2009 that the business had ceased to trade in 2003. Nor did she take into account the information and contemporaneous evidence that had been provided to HMRC regarding the fact that the appellant was living and working abroad after 2003.

HMRC were in possession of his pre-2003 tax returns, and it is to be expected therefore that the assessments would be in line with those returns. They are not.

For the later years of the assessments, HMRC rely on estimates. They had a duty to obtain the information for those years but chose not to do so.

The presumption of continuity is not a reasonable basis for the assessments. There was a clear change of circumstance on the sale of the business in March 2003 and thus projecting backwards from later years to years preceding March 2003, using the presumption, is flawed methodology.

Transfers into the joint account represented gifts from Mr Dunne and not income arising from the business.

As regards penalties, the burden of proving deliberate or careless behaviour rests with HMRC. They have not discharged it.

Given the fact that the appellant did not operate or control the business after 2003, there was no obligation on him to record any income in the tax years following that sale, and thus any failure to do so could not be deliberate.

The income and expenditure, and tax liability, recorded on the pre-2003 tax returns was correct. He is not liable for any tax or penalties in respect of those periods.

In summary Mx Lunt submitted as follows:

HMRC have the burden of proving the validity of the discovery assessments, the VAT assessments and the penalties. And that they were validly served and in time. The standard of proof is the balance of probabilities. HMRC also have to establish deliberate behaviour to that standard.

If they can do that, then the burden shifts to the appellant to show that the assessments overcharge him to tax and he is not liable for the penalties. On quantum, he has to show, based on evidence, what the tax is more likely to be.

HMRC have based their assessments on primary records (the bank statements) and the documents set out in Officer Harris’ letter of 11 March 2015. The appellant has seen HMRC’s analysis. It was provided to him in 2015. He has never produced any alternative primary evidence that the figures in that analysis were incorrect. In his letter of 18 March 2022, he has challenged certain of the figures for the 2005/2006 and 2006/2007 tax years but has provided no documentary evidence to support that challenge.

He has been asked on numerous occasions to provide documentary evidence to support the assertions he has made in correspondence but has failed to do so. In his skeleton argument the appellant asserts that deposits of £30,000 were made into the business bank accounts which reflected repayments of VAT arising from construction projects, but no independent evidence has been supplied to support this assertion.

He was asked several times to complete and return to HMRC forms dealing with his residence status. He failed to do so.

HMRC have never accepted that the appellant is or has ever been non-resident.

In her letter of 11 March 2015, Officer Harris asked the appellant to provide further information about his expenses, but that information was never supplied.

She cited Anderson v Revenueand Customs Comrs [2018] UKUT 159 (TCC) (“Anderson”) as authority for the proposition that the discovery process involves both a subjective and objective element. It is clear that Officer Harris made a subjective discovery which was an objectively reasonable one, as was her subsequent assessment. The matters she took into account were set out in her letter of 11 March 2015. They included; the lack of corroboration for the appellant’s assertion that he left the UK during the tax year 2003/2004; the lack of evidence of his movements thereafter; his continued ownership of a London property; the lack of evidence regarding the purported sale of the business in 2003; the ongoing use of bank accounts in his name after that date; the lack of evidence that they were used by a third party after that date; the invoices provided by clients of the business; the use of a variety of VAT numbers including that used by the appellant.

In her submission, the same principles and evidence apply for the VAT assessments. These were made to best judgment.

The appellant has criticised the figure of £30,000 for expenses. At the time of the assessments HMRC had not visited the premises. They had no idea, as asserted by the appellant, of the staff costs or rental income. It is not clear today whether the staff were employed or self-employed. No figures were included as employee costs in the appellant’s tax returns. There were no primary records provided to HMRC to justify the figures in those tax returns.

Indeed, when taken to the expenses in his tax returns, the appellant was unable to explain why, given the number of employees or members of staff which he had agreed were active in the business in 2003, the costs of those members of staff were so low.

Officer Harris took an independent and objective view of the position when she came to consider the evidence on which she based her assessments. She is not tainted by having been involved in a previous complaint against a fellow officer. She behaved honestly and above board.

She had not been involved in the investigation until April 2014. She made her discovery sometime between April 2014 and 11 March 2015.

It was entirely reasonable for her to average the income for two tax years and then to extrapolate backwards using the presumption of continuity. Similarly, it was entirely reasonable for her to average the income for two later tax years and use that as the basis to extrapolate forwards using the presumption of continuity.

As regards that presumption, nothing changed in the way that the business was run to render it unreliable. Nothing happened to disrupt that presumption. As far as HMRC are concerned, the business continued to be operated by the appellant in the same way after 2003 as it had been operated, by him, before that date. In reality nothing changed. The appellant still enjoyed the economic benefits of the business after 2003. There might have been changes to the particular clients, or the nature of the office space occupied by the business. But neither of these is a change of such profound impact on the way in which the business was run so as to displace the presumption.

The appellant suggests that the officer should have taken into account the figures set out in his tax returns. But it was reasonable for her to take the view that since these were based on records that had not been provided, they should be treated with some suspicion unless and until they were so verified.

HMRC’s calculations are correct rational and evidence-based. Any estimates have been reasonable and proportionate. The assessments should not be displaced by the appellant’s unsupported assertions.

Even if (which HMRC do not readily accept given that the terms of the sale agreement do not appear to have been complied with (the business did not automatically revert to the appellant on Mr Dunne’s death in 2016)) the business was sold to Mr Dunne in March 2003, HMRC’s view is that the appellant continued to operate and enjoy the economic benefits of it. The emails with Mr Dunne’s people in 2004 and 2005 do not demonstrate that those people had roles in running the business.

It was clearly possible for him to work for Mr Dunne on projects overseas, while still operating a business in the UK. These were not mutually exclusive.

There is no independent corroborative evidence to support his version of events. Much of the evidence which he says supports his story come from letters which he himself authored. We should treat that oral and written evidence with suspicion given the number of times the appellant has tried to change things which he said in writing and the inconsistencies in his evidence.

He has been given multiple opportunities to provide evidence to support his version of events but has failed to take them. It was not, for example, until 2022 that the appellant provided a copy of the purported sale agreement to HMRC. He failed to mention that the business had ceased or been transferred until 9 April 2009, notwithstanding that he had purportedly set out the history of the business in correspondence before that date. For example, in his letter of 27 April 2008 when referring to leasing of motor vehicles, such leases spanning the purported sale, no mention is made of that sale.

Although he was asked for these in November 2008, he has never supplied his pre-2003 business records.

And in his letter of 9 April 2009, the appellant does not say that the business had been purchased by Mr Dunne. It simply says that it no longer exists and ceased to exist as of March 2003 and since then had been trading as a limited company. No details of the company were provided.

He was repeatedly asked for information about the identity of the company or companies which had acquired the business yet failed to provide that information. When it was provided, it is still not clear, even on the last day of the hearing, whether the appellant had provided accurate information. It did not seem that he was clear whether it was Epinos or Eposis which had acquired the business.

Correspondence also shows that after 2003 the appellant identified with the business and was involved in it to a much greater degree than simply acting as a self-employed contractor doing run-off work and acting as a figurehead.

It is instructive, too, that in his letter of 18 March 2022 to Officer Wright, the appellant was able to state, with some precision, the employment costs for the years 2005/2006 and 2006/2007 which contradicted his assertion that he did not know what was going on in the business since it was being run by Mr Dunne’s companies.

Indeed, the appellant has been inconsistent in his evidence about which of those companies was ultimately in control of the business after 2003.

We should prefer HMRC’s note of the visit of February 2011 to the appellant’s evidence. This and other evidence from, for example, process server, shows that the appellant was actively involved in doing client work for the firm after 2003. Similar evidence comes from invoices, VAT returns, the use of bank accounts in his name, being identified as principal for years following the purported disposal, correspondence with clients of the business identifying him as their accountant, and the use of multiple VAT registration numbers including that used by the appellant when he was running his business as a sole trader.

The use of multiple VAT registration numbers was designed to confuse and mislead HMRC.

Although the correspondence in 2004/2005 with Mr Dunne’s people suggests that the appellant was anxious that new bank accounts are set up, no evidence of any such bank accounts having been established, or a new VAT registration number being used, has been provided.

The simplest explanation for the appellant’s involvement is that he was still, de facto, running the business after 2003.

HMRC have not found any digital footprint of any of the entities mentioned by the appellant to whom the business was transferred, nor of Mr Nathan’s existence. This was Officer Doherty’s evidence. Evidence was also obtained from a Greek authority who reported they had no record of the entities in question. They however accepted that a negative result did not establish that the entities did not exist.

The appellant asserts that it is up to HMRC to demonstrate the business structure after 2003 and have failed to do so. But that failure does not mean that the appellant could not have been operating the business after that date and reaping the economic rewards from it.

He also asserts that there is no single piece of evidence which proves HMRC’s case. HMRC accept this. Both parties are using snippets of evidence to support their respective positions. HMRC are relying on objectively demonstrable pieces of evidence such as the bank statements, invoices, client information, visit records, the lack of documentary evidence supplied by the appellant etc, whereas the appellant is relying on uncorroborated oral testimony (in the main).

The bankruptcy transcripts show that the court did not accept, as asserted by the appellant, that he was non-UK tax resident, nor that the court agreed that the tax returns under consideration were true and accurate.

His justification for failing to provide information on the basis of poor health or personal bereavement should be treated cautiously. He has never provided evidence of poor health. He only has himself to blame for failing to organise Mr Nathan so that he could give evidence from an overseas jurisdiction.

As regards the appellant’s behaviour, it was clearly deliberate/fraudulent. Given HMRC’s figures, the tax returns before 2003 clearly understated his income and VAT turnover. He failed to submit tax returns after that date in the full knowledge that he was benefiting from the income of the business.

He failed to provide records to HMRC and never engaged with HMRC. This was designed to obstruct and obscure. He used multiple VAT registration numbers for the same reason. He must have been aware of his obligations to record and return income and VAT yet failed to do so.

He deregistered the business for VAT yet carried on running it after that deregistration and before the business obtained a new VAT number.

As can be seen from the foregoing provisions of this decision, there are a very large number of diffuse matters which we need to consider. It is unsurprising, therefore, that this decision has a lot of moving parts. We need to determine the validity of the assessments which involves a consideration of the assessing officer’s actions and mental state, as well as, in the case of the validity of the discovery assessments, the behaviour of the appellant. His behaviour is also relevant, of course, to the issue of whether the extended time limits for serving both the discovery assessments and the VAT assessments applies to either or both (as well as to the penalties). An essential ingredient to this analysis of his behaviour is to find as a fact whether the appellant sold the business to Mr Dunne in March 2003 and thereafter was involved only to the extent of a self-employed subcontractor doing run-off work, or whether to all intents and purposes, he carried on as principal enjoying the economic benefits accruing to the business.

A further aspect of the behaviour analysis requires us to consider whether, if the assessments are made to “best judgment” (useful shorthand to describe the technical requirements for both the discovery assessments and the VAT assessments), the appellant has shown that the assessments overcharge him. Clearly if the assessments are made to best judgment and we find that he was involved after 2003 as principal, then if he can show that the amount of tax properly due is very little, that will have an impact on our analysis of his behaviour.

We also need to consider the penalties.

The appellant has submitted that this case stands or falls on whether we agree with him that he sold the business in March 2003 and thereafter was only involved in it to a very limited extent. We disagree, and whilst this is clearly, as mentioned above, highly relevant to certain issues we have to decide, it is not as fundamental as the appellant suggests.

We therefore intend to deal with the issues in the following order.

We will first consider the validity of the discovery and VAT assessments leaving aside, for the time being, the question of the appellant’s behaviour to the extent that it is relevant to that point.

We will then consider the appellant’s involvement with the business after May 2003.

We will then consider whether the appellant has established that the assessments overcharge him.

We will then consider the appellant’s behaviour, and circle back, once we have come to a conclusion on that issue, to the validity and time issue aspects of the assessments.

We will then consider the penalties, following which we shall consider the fair trial issue.

Clearly, if at the first stage of considering the validity of the assessments, we conclude that Officer Harris did not make best of judgment assessments, then there will be no need, for the purposes of this appeal, to consider the remaining matters.

We have set out, in Appendix 2, the provisions of section 29 TMA 1970 which sets out the relevant legislation. There has however been considerable case law on the interpretation of those provisions.

The Upper Tribunal in HMRC v Shawn Hart [2026] UKUT 00112 described the basic structure of section 29 as entailing “1) discovery of loss of tax; 2) consideration of whether one of the two conditions is satisfied; 3) assessment in order to make good the loss of tax”.

In this case, the relevant condition is the culpability of the appellant rather than the knowledge of the hypothetical officer.

The Upper Tribunal in Jerome Anderson v HMRC [2018] UKUT 0159 (“Anderson”) undertook an extensive review of the legislation and case law relating to the making of a discovery which they summarised at [24] of that decision as follows.

As can be seen, they concluded that the concept of an officer discovering something involves an actual officer having a particular state of mind in relation to the relevant matter which involves the application of a subjective test; and it also involves that officer’s state of mind satisfying an objective test.

They went on to say:

In Charlton v HMRC [2013] STC 866 (“Charlton”) the Upper Tribunal considered what was required for there to be a discovery by an HMRC officer. The Upper Tribunal said this at [37] of their decision:

In HMRC v Tooth [2021] UKSC 17 (“Tooth”), the Supreme Court endorsed the principles set out in Anderson and Charlton recorded above. It went on to say that the focus is on the state of mind of the relevant decision maker, and that the officer in question needs to know if a discovery has been made in order to know if they have power to issue an assessment. A reference to that state of mind enables them to know with confidence that they have that power.

The court went on to say that there is no place for the idea that a discovery which qualifies as such should cease to do so by the passage of time. A taxpayer is protected by the time limits within which a discovery assessment must be issued.

Furthermore, even if there has been an administrative failure which causes delay in the issuing of a discovery assessment, that does not invalidate the assessment.

Anderson focused on the first limb of the discovery process (the discovery).

In Kearney v HMRC [2026] 00125 (“Kearney”) Judge Baldwin undertook a masterful analysis of the case law relevant to the third limb (the consequential assessments). He asked whether the assessing officer had formed the relevant objective opinion of the amount of tax which needed to be assessed in order to make good the loss of tax. To cite from his decision:

Having then considered further relevant case law, he concluded as follows:

The thresholds for the subjective and objective tests for making a discovery are low. All HMRC have to show is that Officer Harris believed that the information available to her pointed in the direction of there being an insufficiency of tax. And that her belief that there was that insufficiency is objectively reasonable. The officer must act honestly and reasonably. The reason for the officer concluding that there is an insufficiency can be for any reason, including a change of view, change of opinion, or correction of an oversight.

However, the officer must have something to go on. She must have some information which points in the direction of there being an insufficiency. So, what information did Officer Harris have, and rely on, to make the discovery?

We have set this out in considerable detail at [165]-[188] above, but record it again, for ease of reference, in summary, below:

The bank statements for the period 2006 to 2011 for the three accounts mentioned above, two of which were business accounts in the appellant’s name, and the third was his joint personal account.

These bank statements reflected deposits.

The appellant’s tax returns for 1997/1998 to 2002/2003.

Invoices obtained from clients which used a variety of VAT numbers including a VAT number which did not exist and a VAT number used by the appellant’s father.

Letters from clients of the business recording that the appellant had undertaken work for those clients after 2003.

Copies of the firm’s stationary which records the appellant as being principal of the business.

Correspondence from the appellant in which he asserted that he had ceased to become UK tax resident during the tax year 2003/2004; that he had lived in Dublin immediately thereafter; and the letter of 9 April 2009 in which the appellant said that the business had ceased to exist as of March 2003.

The correspondence with the business in 2014 which sets out the role played by the appellant after 2003 and deals with the invoices and letters with former clients.

It is clear from her letter of 11 March 2015 that Officer Harris took these and the documents and information in them into account, when reaching her conclusions.

It seems to us that further information would have been available to her, for example the record of the bankruptcy proceedings, but no mention is made by the officer in that letter that she took these into account.

Notwithstanding this information, the officer explained in that letter her misgivings about some of it. In summary she said that there was little or no underlying evidence of the assertions made by the appellant, or by the firm, to verify the statements made in correspondence.

For example, the appellant had supplied no primary evidence of his assertion that he had been non-resident, had moved to Dublin, or who had beneficially owned the business after the appellant had sold it in 2003.

She records that there is evidence pointing in the other direction, namely that he paid a mortgage on a property in the UK, that he was on the electoral roll there, paid council tax on utilities for many years on the property after his departure in 2003, he had credit cards and loans registered at that address, and that he renewed his passport in 2010 and gave his address as his London residence.

The appellant had not provided any information about the persons who subsequently beneficially owned the business; he had shown HMRC no documents as evidence of the sale; and the evidence showed to her that he was the beneficiary of the income of the business after 2003 (as evidenced by the deposits in the bank accounts).

There was no verification of the appellant’s assertion that this money had been beneficially owned from the date of sale by the new owners. Furthermore, he had supplied no evidence that the new owners (as asserted in correspondence) had difficulty in obtaining their own bank accounts.

She also states that his email address was used by the firm to advertise its services after 2003 and that from information HMRC had received, that he regularly attended the offices of, and dealt with the clients of, the firm, including collecting fees from clients. Although not specifically referred to, we suspect this reflects (inter alia) the affidavit of the process server of 10 January 2008.

It is clear to us from the foregoing that the subjective test is met. Officer Harris clearly believed that the information available to her pointed in the direction of there being an insufficiency of tax. That is for all the reasons set out in her letter of 11 March 2015.

It is our view too, that the objective test is met. As we have said above, this is a low threshold. All that HMRC have to show is that the officer was acting honestly and reasonably.

Officer Harris clearly had information which she took into account and which formed the basis of her assessment. That information is set out above. This was not a situation where she had nothing to go on. There was clear prima facie evidence that the appellant had continued operating the business after the purported sale in 2003 and that the money that had gone into the bank accounts which she had analysed was beneficially owned by him.

This was not an irrational or capricious decision. It was evidence-based. It might be one with which the appellant disagrees, but that does not invalidate it.

We consider that it was objectively reasonable for the officer to conclude that the information available to her pointed in the direction of there being an insufficiency of tax. When coming to this conclusion, we do not take into account the view, promulgated by Officer Wright that the officer came to a reasonable conclusion. That is a matter for us and not him. Officer Harris could see that money had gone into the bank accounts after the purported sale. The appellant provided no information about that sale, let alone provided any primary evidence to verify his assertions that the money was beneficially owned by someone else. Similarly, having been given ample opportunity to do so, the appellant provided no primary evidence to support the figures set out in his tax returns, or his assertion that he had become non-UK tax resident after 2003.

The appellant submits that it was not objectively reasonable because the officer did not take into account the explanations given by the business in the letters in 2014 concerning the work done for clients, the invoicing arrangements, and the fact that he was identified as principal by the business after 2003.

We disagree. No underlying evidence was given to support the assertions made in that letter which had clearly been written if not by him, then certainly based on information supplied by the appellant. He supplied information to the business who then passed it on. It is simply additional self-serving “evidence” which has no empirical objective basis.

Similarly, the appellant asserts that the officer should have taken into account the information provided in his tax returns. Again, the officer makes clear that she has been unable to undertake any form of verification of the information in those returns since the appellant has provided no business records to support them. This is entirely reasonable.

The appellant further asserts that the discovery should have been made by Officer Dyce as he was in possession of all the information which was available to Officer Harris at an earlier date. That may well have been the case, but, as set out in Charlton “All that is required is that it has newly appeared to an officer, acting honestly and reasonably, that there is an insufficiency in an assessment. That can be for any reason, including a change of view, change of opinion, or correction of an oversight. The requirement for newness does not relate to the reason for the conclusion reached by the officer, but to the conclusion itself…”.

Here it newly appeared to Officer Harris, acting honestly and reasonably, that there was an insufficiency of tax. That is a discovery even if that information is also available at an earlier date to Officer Dyce.

Finally, the appellant asserts that Officer Harris, by dint of having been involved in his affairs before she became involved in making the assessment, was not acting independently or objectively when it came to making the assessment. We disagree with this assertion. Firstly, as submitted by Mx Lunt, her previous involvement was in relation to a complaint rather than in relation to the enquiry or assessment process.

Secondly, there is no evidence whatsoever that Officer Harris had some form of hidden agenda and had acted irrationally and capriciously when reaching her conclusion. As we have said above, she had ample evidence on which to make the discovery assessments.

We now turn to the third stage of the discovery assessment process at which the officer must determine the amount which needs to be assessed to make good to the Crown the loss of tax and that decision must meet an objective criterion.

When considering the objective criterion, we take into account the matters which we have summarised at [291]-[293] above. And test the assessment, and the process pursuant to which Officer Harris arrived at that assessment, against those matters.

That process is set out in some detail at [165]-[189] above, and can be summarised as follows:

Officer Harris took the figures from the bank accounts, identified double counting and certain income which could be specifically identified as not being business income.

She used those figures for the years in which she had the bank statements, namely 2006-2011.

To obtain taxable income for years before 2006, she used the figure of £300,000 (we were told that this was based on an average of the 2006 and 2007 figures although this is not apparent from Officer Harris’ letter).

She then reduced that amount by RPI for the tax years ending April 1995 through to 2004.

The use of RPI was based on the presumption of continuity.

For tax years after 2011, she used an average of the 2010 figure of £220,411 and the 2011 figure of £132,940 which she then rounded down to £135,000. This was not increased by RPI.

She had little information about expenses (rent, rates, utilities, insurance, staff and consumables) and so used a flat rate of £30,000 for each of the years.

As far as the income figures are concerned, this methodology seems to us to be entirely objectively reasonable. The way in which she has come to her figures demonstrates that the officer exercised judgement and made an honest guess at the additional income. This was quantitatively based on the numbers in the bank account, and qualitatively on the conclusions she had reached, again honestly and reasonably, that the appellant was carrying on the business after 2003.

So whilst there was clearly an element of guesswork, that was neither spurious nor capricious. It was a value judgement based on material before her.

The appellant submits that the use of RPI, and the presumption of continuity were not appropriate given the change in ownership in 2003 which disrupted that continuity and the presumption therefore was an inappropriate method by which to gauge income before and after that.

He further submits that the presumption is inappropriate as it was clear that the 1089 2653 bank account, which contained much of the money, was set up after the sale of the business in March 2003. It could not, therefore, have reflected money that was earned prior to that date.

Officer Harris in her letter of 11 March 2015, has expressed her view that she did not believe that it was credible that the purchasers of the business could not get a bank account. Furthermore, the appellant had produced no evidence in support of this contention. She goes on to say that she understood “for example, that account 1089 2653 was opened on 15 February 2005, which is after you say you sold the business”.

We do not know where Officer Harris got the date of 15 February 2005 from. If it came from the appellant, then we were not taken to that correspondence in which it was provided to HMRC.

And Officer Harris clearly did not have the correspondence between the appellant and Mr McDonald concerning the bank accounts, including that of 14 January 2005, since that was only provided to HMRC in 2022.

We have found that Officer Harris considered the material before her. It was entirely rational and objectively reasonable for her to have reached the conclusion that the appellant was continuing to run the business of Strauss Phillips & Co after he had purportedly sold it in March 2003. On the basis of this conclusion, it is reasonable for her to adopt the presumption as, as far as she was concerned, the money in the new account was generated from the business which, in turn, continue to be operated by the appellant.

We disagree therefore with the appellant’s submission. As far as the officer was concerned, the appellant provided no primary evidence for the figures set out in the earlier years tax returns. Having received the bank statements and analysed them, she had material on which to base her alternative numbers. There was nothing supporting the appellant’s assertion that the business had changed hands in 2003, nor of the identity of the new owners nor (importantly) that any new owners had changed the nature of the business to such an extent that it was being carried on in a different way.

We therefore find that the use of the figures in the bank records as the basis for the assessments for earlier years, using RPI on the basis the presumption of continuity, fulfils the objective criteria required at this stage.

Officer Harris also had to make a guess as to the quantum of expenses which she should allow against the income. She used a flat rate figure for all of the years, of £30,000 for all tax deductible outgoings.

It is not clear to us why this was a flat rate when the income figures have been adjusted by RPI. Why did she not adjust the expenses in a similar fashion for the earlier years.

It is clear from her letter of 11 March 2015 that the figure of £30,000 was in her view a reasonable estimate and that she would be happy to consider further expenditure “if you would like to provide me with further information”. She also said that she did “not have a breakdown of expenditure from which to work from…”.

She made a guess. The requirement for objectivity does not preclude this. It does preclude her from acting dishonestly, vindictively or capriciously. But in our view she did not do so. It is clear from her letter that she considered the background information that she had. It is equally clear from that letter that, when considering the profit figures, she took into account personal expenditure. And that she could see from the bank statements that there were outgoings such as private school fees, large mortgage payments, a house extension, large credit card finance payments and private health insurance, which were consistent with a person in receipt of an income (by which we take as net income) in excess of £100k per year.

So looked at in the round, she did not make a spurious estimate or guess in which all elements of judgement were missing. She made an honest guess on materials as were available. Admittedly, these materials were limited.

The appellant criticises her for this but to be honest, he is the author of his own misfortune. He had ample opportunity to provide primary records to justify his assertions as to income and expenditure in the tax returns which he had submitted. He failed to do so. He had ample opportunity to provide primary records to justify his assertions concerning non residence, the transfer of the business, the identity of the new owner and their difficulties concerning the new bank account and VAT.

He has never provided primary records regarding the tax returns nor non residence, and only provided information about the transfer of the business in March 2022, long after the discovery assessments had been issued.

The appellant submits that it would have been apparent to Officer Newman when he attended the business premises on 24 February 2011 that (as evidenced by his note of that meeting when he was admitted onto the premises and met a number of staff) the business was incurring considerable overheads. And this is bolstered by the witness statement of Rosina Harris and her email of 18 October 2017.

We disagree. Firstly, neither that witness statement nor the email was available to Officer Harris in 2014. Secondly, we prefer the record of Officer Newman which was contemporaneous. Thirdly there is nothing to suggest, in that record, that HMRC were aware of the numerical extent of any expenditure. Nor of the extent of the staff or their costs which the appellant only provided in his oral evidence and in his letter to HMRC of 18 March 2022.

There is nothing to suggest that the guess made by Officer Harris flew in the face of empirical, verifiable independent evidence supplied by the appellant before the date of her assessments or which was clearly available to the officer (and which she ignored).

The appellant also submits that the tax returns for the earlier periods demonstrate expenses considerably in excess of the £30,000 used by Officer Harris.

It is clear that Officer Harris did not consider this to be material on which she could base her assessment of expenditure. We strongly suspect that this is because there was no underlying corroborative evidence to support the expense figures in those tax returns. The appellant had never supplied the business records. The figures in those returns were, therefore, self-made evidence by the appellant without any independent primary records. We think it was reasonable, therefore, for the officer to conclude that the figures in those tax returns could not be seen as a reliable basis for the actual expenditure incurred by the business for the years in question.

It is also clear that Officer Harris considered whether the business was being run by the appellant, from the UK, and thus he was liable to income tax on the profits. In her view he was, and so regardless of his residence status, he was so liable. The material which she had considered enabled her to come to this conclusion which we deem to have been both subjectively and objectively reasonable.

Subject to the question of culpability, with which we deal later, it is our conclusion that Officer Harris made both a subjectively and objectively reasonable discovery, which was reflected in the discovery assessments which in turn were in amounts which were objectively reasonable in order to make good the loss of tax to the Crown.

We now need to consider the validity of the VAT assessments and whether they were made to best judgment (leaving aside for the moment the question of culpability which is relevant to the extended time limits within which the assessments need to be made and with which we deal later).

We can deal with this comparatively quickly in light of our findings in relation to the discovery assessments.

The relevant legal principles are set out below.

By virtue of section 73(1) Value Added Tax Act 1994 (“VAT Act”), where it appears to HMRC that tax returns made by a taxpayer are incomplete or incorrect, HMRC may assess the amount of VAT due from him to the best of their judgment and notify it to him.

Under section 73(6) VAT Act an assessment must be made not later than either 2 years after the end of the prescribed accounting period or 1 year after evidence of facts, sufficient in the opinion of the Commissioners to justify the making of the assessment, comes to their knowledge (whichever is the later).

This is, however, subject to the general rule that the time limit for making an assessment is capped at 4 years after the end of the relevant accounting period. This is found in section 77(1) VAT Act 1994.

This time limit is extended by virtue of section 77 (4) and (4A) VAT Act where deliberate or deliberate and concealed behaviour is established. In these circumstances, the assessment period is 20 years after the end of the prescribed accounting period.

Section 83 VAT Act provides:

There is then set out a series of actions, decisions, and other matters arising under the Act listed under paragraphs (a) to (z). Paragraph (p) is as follows:

In Van Boeckel v Customs and Excise Commissioners [1981] AER 505 (“Van Boeckel”) the High Court (Woolf J as he then was) considered the application of best judgment.

In the Court of Appeal decision of Customs & Excise Commissioners v Pegasus Birds Ltd [2004] EWCA Civ 1015 (“Pegasus”), that court approved the approach of Woolf J. It went on to add that the tribunal’s primary task is to find the correct amount of tax on the basis of the material before it and in all but very exceptional cases this should be the focus of the hearing; any mistake which I consider that HMRC has made in its assessment may still be to best judgment if it is consistent with an honest and genuine attempt to make a reasoned assessment of the VAT payable; and an assessment which appears to be unreasonable or wholly unreasonable may still be the result of an honest and genuine attempt to assess the VAT properly due.

Generally, the burden lies on the taxpayer to establish the correct amount of tax due:

We have set out at [283]-[326] above the materials available to Officer Harris and the process undertaken by her to come to a discovery and issue the discovery assessments. And we have concluded that she made an objectively reasonable discovery and that the assessments were objectively reasonable to make good the loss of tax.

The cases on which the tests for objectivity were based included both Van Boeckel and Pegasus. Those two cases show that all that HMRC have to do to satisfy the condition for a best judgement assessment is to show that “the commissioners will fairly consider all material placed before them and, on that material, come to a decision which is one which is reasonable and not arbitrary as to the amount of tax which is due”.

It is our view for all the reasons given in relation to the discovery assessment above, that Officer Harris fairly considered the material which was available to her and came to a reasonable and not arbitrary decision as to the amount of VAT which was due.

She gave credit against VATable outputs for the £30,000 expenses. This was a rational and reasonable thing to do.

It was her view that the appellant continued to trade as Strauss Phillips & Co and the turnover of that business was higher than the VAT registration threshold. He was therefore liable to pay VAT on the taxable outputs. Based on material before her, we think this shows best judgment for the reasons given above.

We find that the VAT assessments were made to the best of HMRC’s judgment.

The appellant challenged the assessments on the basis that the information on which they were based was available to Officer Dyce had all the information available to Officer Harris some considerable time before the assessments were actually made.

As far as the one-year time limit is concerned, it was HMRC’s submission, as set out in Officer Harris’ witness statement, that this one-year period started in or around May 2014 by which time a number of substantive responses had been received from the third party clients of the business in response to the schedule 36 notices. We also observe that information was also obtained from the business in June 2014 as recorded at [133] - [136] above. And, furthermore, in their letter of 17 April 2014, the firm had indicated that it would make further representations in respect of the entities that have been subject to the third party notices. It was those representations which were sent to HMRC in June 2014.

The approach that we adopt towards the one-year period is:

To decide what were the facts which, in the opinion of the officer making the assessment on behalf of HMRC, justified the making of the assessment; and

To determine when the last piece of evidence of these facts of sufficient weight to justify the making of the assessment was communicated to HMRC.

The one-year period runs from the date in (2) above.

The burden of establishing that the assessments were made outside the one-year time limit is on the appellant (see Nottingham Forest Football Club Ltd v HMRC [2024] UKUT 145 at [46] and [47]).

The VAT assessments were issued to the appellant on 17 April 2015. The one-year period therefore started on 17 April 2014.

In her letter to the appellant of 11 March 2015, Officer Harris sets out a summary of HMRC’s position. It is essentially a synopsis of the reasons why they believe that the appellant was continuing to run the business after 2003.

These reasons included that they had information that the appellant was collecting fees from clients and that they had obtained invoices from some of those clients.

This information had been obtained pursuant to, inter alia, the schedule 36 notices issued on 20 March 2014 to clients of the business.

It was entirely reasonable, therefore, for the assessing officer to await the information sought by these notices before coming to a conclusion regarding the making of an assessment.

It was equally reasonable, having been told by the business in their letter of 17 April 2014 that they would write separately in relation to the entities that had been the subject of the notices, for her to await that substantive response, which was only forthcoming in June 2014.

According to her witness statement she prepared a spreadsheet to track the responses which were “received between 27 March 2014 and 4 July 2014”.

This is corroborated by the documentary evidence which indeed shows a variety of responses from clients or former clients of the business received by HMRC between 28 March 2014 and 17 July 2014.

If one starts the one-year period on 28 March 2014, then the VAT assessments are out of time. If one starts from the 17 July 2014, they are clearly in time.

In truth, we do not believe that any single item of correspondence received from a client or former client comprises a “smoking gun” which attracts a hard deadline. Instead, the information requested by the schedule 36 notices was dribbling in during March, April, May, June and July 2014, some of which was before 17 April and some of which was after.

So when Officer Harris says that it was her assessment that sufficient evidence had been gathered by around May 2014, we accept that this was her opinion on which she based the assessment and that it was not until then that there was sufficient weight of evidence from the accumulated information and the responses to the schedule 36 notices to justify the making of the assessment.

We also observe that given the onus is on the appellant to establish that the assessments were made outside the one-year time limit, he provided nothing other than a bald submission that the information was available to Officer Dyce well before the assessment was made. He did not take us to any of the foregoing information and make a detailed challenge to the assertion made by Officer Harris that it was not until May 2014 that she had sufficient information on which to base an assessment. He did not take us through any of the evidence that we have mentioned above.

Accordingly, we find that the VAT assessments were made within the one-year time period.

We deal with the extended time period later in this decision.

The issue between the parties is not that the appellant was involved in the business after 1 March 2003. It is the extent of that involvement.

The appellant submits that this is the most crucial element of the appeal. In his view HMRC have not provided any reliable evidential basis to discharge their burden of establishing that he owned or controlled the business after 1 March 2003 and was the beneficiary of the funds deposited in the bank accounts after that date (together “owned or controlled the business”).

The appellant submits that his involvement was only as a self-employed subcontractor of the business, doing gladhanding and run-off work.

HMRC submit that he owned or controlled the business.

Mx Lunt accepts that there is no single piece of evidence which demonstrates this, but it is a conclusion which we can reach based on the pieces of evidence that have been provided by HMRC.

We agree that there is no single piece of evidence. We do not necessarily agree that it is HMRC’s burden to establish that he owned or controlled the business. It seems to us that this is a finding of fact which we must make based on the evidence. That evidence is the primary evidence of fact and also, to the extent there is no such primary evidence, on the evidence which can be inferred from it.

When considering any such inference, we adopt the test set out by Arden LJ in Barlow Clowes International Ltd v Henwood [2008] EWCA Civ 577, in which she said at [68]:

We emphasise that any inference must be drawn from the relevant and proved facts.

We remind ourselves that given the unreliability of the appellant’s oral evidence, and indeed of the matters set out in correspondence between himself and HMRC, we are not prepared to accept his evidence unless it is corroborated by independent documentary evidence. And by independent we mean that it is evidence which was not generated by him or was submitted to HMRC on his behalf, based on what he told someone else (for example the 2014 letters from the business to HMRC).

At this stage, too, we wish to address HMRC’s submission (an accurate one in our view) that the appellant has had ample opportunity to provide information regarding the sale of the business to HMRC ever since they opened their enquiry in 2008, and yet substantive information was not submitted until the appellant’s letter of 18 March 2022.

It is clear from the correspondence that HMRC asked for information concerning, for example, the appellant’s assertion that he was non-resident, and details of the circumstances in which the business either ceased to trade, or changed hands, following notification to that effect by the appellant on 9 April 2009.

It was the appellant’s story that there were good reasons for this. Shortly stated these were: Firstly, he did not receive the opening enquiry letter. Secondly, he was then suffering considerable mental health problems. Thirdly, his father was extremely ill. Finally, he did not want to tell HMRC of the transfer of the business since he did not want Mr Dunne to be involved with HMRC, and only told HMRC of the transfer, and details of it, following Mr Dunne’s death in 2016.

We reject these as being good reasons. We do so for the following reasons.

Firstly, there is no independent corroboration of these alleged mental health difficulties.

Nor is there any independent corroboration of his assertion that the opening enquiry letter did not arrive. In any event, he received many further communications from HMRC (for example in connection with his non-resident status, as set out earlier in this decision) and yet he did not respond. We reject his assertion that he did respond. There is no corroboration and we find it inherently implausible given HMRC have no record of receiving any such response.

Furthermore, the appellant was perfectly capable of writing extremely aggressive and, frankly, intemperate letters, to HMRC following the opening of the enquiry. We suspect that this would have caused him considerably more emotional trauma than simply providing HMRC with the information that they had sought.

It is clear from his letters of 12 November 2007 and 27 April 2008, that he had ample opportunity in those letters to explain details of the transfer of the business, and to provide a copy of the sale agreement and the emails between himself and Mr Dunne’s people yet he did not do so. We do not accept his explanation that this was to spare Mr Dunne the attentions of HMRC. There is no corroboration for this explanation.

In the letter of 12 November 2007, he says “Just to give you some history about me so that you can understand the position” and then goes on to detail his involvement with the business, his illness, the fraud and his personal circumstances. No mention is made of the sale of the business.

Similarly in the letter of 27 April 2008 which deals with car leasing, he could easily have included details of the sale yet did not do so.

In simple terms, the appellant has been serially uncooperative with HMRC and has failed to provide information reasonably requested by HMRC having had ample opportunity to do so and without any good reason for not doing so.

We now turn to what we consider to be the relevant evidence.

The sale agreement. We accept that the sale agreement purports to sell the business to Mr Dunne. However, we also accept, as submitted by Mx Lunt that it has not been fully carried out in accordance with its terms, given that the business was not automatically transferred back to the appellant following Mr Dunne’s death. Furthermore, we also agree with HMRC’s case that simply because the business was sold does not automatically mean that the appellant was no longer involved in running it and enjoying the economic fruits generated by it. We too need to look at the operational reality rather than words on paper.

The emails with Mr Dunne’s people. These demonstrate a number of things to us. Firstly, it is clear from them, on the basis that they are contemporaneous documents, that the appellant was indeed discussing the business bank accounts and the VAT registration number with Mr Dunne’s people, in 2005 and 2006.

They also tell us, however, that in March 2003, the appellant was sent a copy of the accounts for Eposis Financial and was told that that was the company through which the business would be run. We cannot see, therefore, why, in his letter of 9 April 2009 to HMRC, the appellant told HMRC that the business had ceased to exist as at March 2003. It was perfectly open for him to tell HMRC that it had been sold and was then operating through that company.

It was the appellant’s evidence that the account 1089 2653 (Bradley Strauss T/A Strauss Phillips &Co) was not set up until after he had left the firm. This oral testimony is corroborated by the bank statement to which we refer above, which appears to show that it was set up sometime between December 2004 and 10 March 2005. It is also corroborated by the exchange of emails with Mr McDonald in January 2014 in which the appellant says that he was proposing to set up a bank account. The first entry into the account on 24 February 2005 is consistent with this timeframe.

He also told us that he had set up Internet banking for this account which anyone could operate provided they had the appropriate pass code, and that pass code had been given by the appellant to Mr Dunne’s people.

This too is consistent with the appellant’s narrative that the bank account was set up for the benefit of the purchaser. But equally, there is no independent corroboration that this is indeed what happened. We know that a bank account was set up. We do not conclusively know by whom it was operated.

There is conflicting evidence on this. It was the appellant’s evidence that the account was set up as an online account and that he gave the pass code to Mr McDonald. But if this was the case, it directly contradicts the contents of the letter written by the business on 10 October 2011, which was either written on the instructions of the appellant or, given that it was a business bank account, is likely to reflect the view of how the business of the bank accounts operated. It is clear from that letter that they were beholden to the appellant to operate the account. He was the one who signed cheques and it is clearly implied that no one else could. This caused the firm substantial issues. And it also confirmed that the funds in the account belonged to the firm/company and that the appellant was the signatory. It does not say sole signatory, but the context strongly suggests that he was.

But this in turn is not supported by the bank letter to HMRC of 5 September 2012 where the 1089 account is not identified as an account to which the appellant was sole signatory.

It is clear from the letter of 10 October 2011 that the appellant actively signed cheques and operated the account. We find this is a fact, and contrary to any suggestion by the appellant that he did not operate the account.

However, whilst it is clear that the money in that account reflected business income (expressly confirmed by the letter of October 2011), the operation of the account is not conclusive as to ownership of that income.

It is our view that, on balance, the fact that the appellant was identified in the letter of 10 October 2011 as being the sole signatory to the account is evidence which weighs slightly in favour of HMRC’s narrative that he continued to be running the firm after March 2003 and the money in the account was beneficially his. This is not only the simpler explanation. It is also entirely consistent with his continuing involvement as owner and controller of the business.

The appellant was also identified as being the sole signatory to account number 8011 6645 and 9082 7983 by the bank in their letter of 5 September 2012, for the period between March 2004 and December 2011.

Furthermore, simply because these and the other accounts might have been used by the purchasing company does not mean that it had exclusive use. We have clear evidence that money was paid into the account in respect of Focus. The ownership of the money in the account, therefore, is nuanced. Simple use by the purchasing entities of the business bank accounts does not preclude money in those accounts reflecting beneficial ownership by the appellant by dint of his involvement with the business after March 2003.

We have no evidence of what ultimately happened in practice either to the VAT numbers or the bank accounts. There is no evidence before us as to whether the bank accounts used by the business in 2005/2006 were ever closed. We have seen a spreadsheet of bank accounts used by the appellant for both business and personal purposes. This does not contain information about when the accounts were opened but does include information about when they closed. It identifies the three bank accounts which Officer Harris used as the basis for her assessment. It does show that on 16 February 2011, one account had been closed (the appellant’s tax account). But by that date, the three accounts used by Officer Harris were still open as was the client premium account. It does not seem credible to us that some five years after the date of those emails with Mr Dunne’s people, the bank accounts about which the appellant was complaining (and in particular the 1089 account), remained open. And we have no evidence that between 2006 and 2011, the appellant continued to complain about the position. Nor do we think it is credible that had the buyers been serious about changing the bank account, they could not have done so during that period.

The same is true about the VAT registration number. We simply have no idea what ultimately happened. We have seen a number of emails dealing with the issue but none dealing with any resolution.

Nor does HMRC have any record that the buying company, purportedly operating the business after 2003, declared any UK income at any time.

The tax returns. We have set out details of the tax returns submitted by the appellant for the earlier periods. There is no corroboration for the numbers in these returns. The appellant has provided no underlying records. There are clearly inconsistencies. The appellant has told us, in evidence, that some of the personnel “employed” were in fact self-employed. He could not then identify the amounts paid to them with either cost of sales or any other item in his tax returns. He claimed that they might have been mixed up, and included, for example, under motoring costs. He also claimed that it was inherently unlikely that he would file incorrect returns as he was a qualified chartered accountant. He also took full responsibility for the contents of those returns. We find it incredible, in the circumstances, that the appellant is not able to identify where he recorded in those tax returns the outgoings of the employees (even if some were self-employed). These returns might have been submitted a very long time ago, but the appellant has been living this case since 2015. Given HMRC’s position in relation to them, we would have thought he would have got his story straight some time ago.

VAT deregistration. This tells us nothing about the appellant’s involvement in the business after March 2003. We accept the appellant applied for deregistration. And we accept that that is consistent with his submission that he was no longer principal of the business after March 2003. But HMRC’s case is not only that that deregistration is inconsistent with the fact that he was held out as principal after that date (see for example the firm’s notepaper) but that he was, de facto, reaping the benefits of the business after that date as if he had remained as principal. Deregistration tells us nothing about that.

The BS&Co letters of 2014. These letters, by their own admission, are based on information provided by the appellant. The representations in them, therefore, that the appellant was involved post March 2003 as a self-employed consultant, are self-serving and we accord them little weight.

Wage slips. The appellant has supplied payslips for five monthly periods for the annual salary periods 2006-2012 inclusive. Those that show that the annual salary for 2006 was 35,000 (we assume this is pounds sterling although it could be euros given that the slips are from A Eposis Group Payroll based in Athens). For 2007 the yearly wage is 35,000, for 2008 it is 35,500, for 2009 it is 35,500, for 2010 it is 36,500, for 2011 it is 36,500, and for 2012 it is 37,000.

This supports the appellant’s position that he was employed by Mr Dunne’s companies during that period.

However, there is no evidence of overlapping employments during those years, and given this is evidence supplied by the appellant, it is our view that this is his only employment by Mr Dunne’s companies during those periods.

The numbers are gross amounts, from which tax was then deducted. Even assuming, therefore, that the figures reflect payments in pounds sterling, these are very modest amounts, and certainly inconsistent with a lifestyle which Officer Harris had identified as being undertaken by the appellant when she undertook her analysis in 2014.

They seem to be inconsistent with that lifestyle and the appellant would have needed to have additional income to support that lifestyle. His evidence was that Mr Dunne had been generous and made gifts to him and his wife. His parents had also sold a property in Spain and gave some of the proceeds to him.

There is absolutely no independent evidence corroborating these assertions so we therefore give them very little evidential weight.

But the slips also tell us that given the modest income, not only would the appellant have needed to undertake other paid work but would also have had the time to do so. He submits that when working abroad, it was not possible for him to come back to the UK and involve himself in the business to the extent asserted by HMRC. We reject this submission. The wage slips evidence the fact that his work overseas was unlikely to have required his full-time presence. And that he would therefore have ample time to return to the UK and operate the business.

Bangkok bank statements. We accept that these demonstrate withdrawals from a bank account in Bangkok on about the dates set out in their statements. But that is far from establishing that throughout the period covered by those bank statements, the appellant was constantly overseas. It simply shows that on certain dates, money was extracted. We do not know whether that was extracted by the appellant or by someone to whom he had lent his card (on his evidence he appeared to be reasonably comfortable in allowing others to operate the 1089 2653 bank account). What it certainly does not do is show that the appellant was so consistently present outside the UK that he was unable to come back to the UK to run the business after 2003.

Eposis accounts. The appellant has supplied a copy of the Eposis Financial SA accounts for the year ended 31 December 2002, which he submits demonstrates the existence of that entity and that it was a substantial business is demonstrated by its turnover of approximately £4.5 million for the year to 31 December 2002. It also identifies the directors as including Mr Dunne’s people. This demonstrates, he alleges, the existence of that entity something which HMRC have questioned.

We are prepared to accept that submission. However, as mentioned above, we find it strange that this information was not given to HMRC until 2022

Dr Young’s evidence. Similarly, we are prepared to accept Dr Young’s evidence (which is effectively accepted by both Officer Doherty and Mx Lunt) that the fact that Officer Doherty’s searches did not reveal the digital footprint of the Eposis entities or of David Nathan, does not mean that those entities or that individual ever existed.

We are also prepared to accept that the letter from the Greek authority does not conclusively demonstrate the nonexistence of these entities.

The witness statements of Rosina Harris and David Nathan. As we have said before, we attribute little weight to either statement. Mr Nathan did not attend. There are considerable inconsistencies in the statement made by Rosina Harris when compared to her email of 18 October 2017 in relation to HMRC’s visit in 2011. Given that both were written some six years after that visit, and given the fallibility of human memory, we attribute little weight to her recollection. This is especially true given that in her witness statement she said that she “wrote a note about it” yet neither this note nor any reference to it was made in her email of 18 October 2017. We prefer, therefore, HMRC’s contemporaneous record of that meeting as being an indication of what was really said. We return to this below.

The bankruptcy proceedings. The appellant’s assertion is that the judge in the bankruptcy annulment proceedings confirmed that the figures in his tax returns for the earlier years were correct; and that he was non-UK tax resident. We reject both assertions. It is absolutely clear from the transcript that the judge was simply saying that the determinations, on which the bankruptcy proceedings were based, might have been displaced by the subsequent tax returns submitted by the appellant. It was HMRC’s position that they had not as they were submitted late. It was the appellant’s assertion that they had been submitted in time. Although the judge had misgivings about the veracity of the appellant’s assertion, she was prepared, for the purposes of the hearing, to accept it and thus accept too that the determinations had been displaced. There was nothing therefore on which the bankruptcy could bite. This is no endorsement whatsoever of the figures in the appellant’s tax returns.

Similarly, there is no statement by the judge that the appellant was non-UK tax resident. The appellant sought to tell us that this was something that was accepted, orally, by HMRC, at the hearing and was not recorded by the judge. We place no weight on that submission given that it is not corroborated by any independent evidence. And we think it inherently unlikely that in bankruptcy proceeding, HMRC officers would give any such assurance regarding the tax resident status of the appellant.

The letter of 18 March 2022. This letter is something to which we will return when we consider quantum. But at this stage we would observe that it contains a very large number of details which we would not expect to have been available to someone who is peripheral to an organisation and simply acting as a self-employed consultant. It contains details of invoice numbers relating to purported income justifying in the appellant’s view that the income was not business income. For example; in relation to the tax year 2006/2007, he says that “£50,000 is Turf Tours… Below are the main invoices but there were others as well…” He then goes on to identify five invoices which relate, according to him, to that organisation.

When cross-examined as regards these invoices, the appellant ultimately appeared to accept that they were not invoices which were associated with the income for 2006/2007 and 2005/2006 but were invoices which he had retained copies of when he sold the business in March 2003.

This is just another example of where the appellant, in our view, was seeking to mislead HMRC. He was clearly trying to give the impression that the invoices which he claimed to have based his analysis on, were relevant to those years. And it was only when cross-examined that he ultimately admitted that they were only relevant in relation to earlier years. And this is just a further example of the unreliability of what was said by the appellant to HMRC.

The appellant has not provided copies of any of these invoices to justify his criticism of HMRC’s figures.

Indeed, by mentioning that he has invoices, the appellant put himself in a difficult position. If he produced them in relation to the relevant tax years, that would clearly indicate an involvement with the business which extended beyond his assertion that he was acting only in a self-employed subcontracted capacity. By failing to produce them, he cannot verify the numerical criticisms he makes of HMRC’s figures.

The odd VAT numbers. As recorded above, it is clear that after 2003, the firm used a variety of VAT numbers as recorded on their invoices and other paperwork. The firm continued to use the appellant’s original VAT registration number ending 584. It also used a number ending 822 to which was a number registered to an unconnected company. In response to this, the appellant said that it was a mistake based on an email from Mr Nathan and it should have been the registration number ending 808. That registration number does not exist. Finally, the appellant said that another VAT number used by the firm, ending 650, was a VAT group number used by Mr Dunne’s business. Yet this was the VAT number used by his father in his business.

After 2003, the firm was using a variety of VAT numbers. It is not clear whether this was due to administrative inefficiency or deliberate obfuscation.

But what this does not show is whether the appellant was only involved in the business post March 2003 as an independent subcontractor. The email exchange with Mr Dunne’s people in 2005 and 2006 does demonstrate that the appellant was discussing VAT, and a new registration number, during that period. But we have seen nothing which demonstrates that that position was resolved.

The appellant says that his involvement with the business ceased on 1 March 2003 and he can provide no reasons why the business used these odd VAT numbers thereafter. And this is consistent with his assertion that he was a self-employed subcontractor.

But it is equally consistent, as asserted by HMRC, that it demonstrates a deeper involvement in the business, and one where it was an advantage to the appellant to confuse the VAT position in order to distance himself from his ongoing operational control of the business.

Had the VAT numbers been nonsensical, or random, we would have considered this a neutral point. However, the fact that they included the number used by the appellant’s father is unlikely, in our view, to have been random. It must be more than coincidence. In our view it is a reflection of a deliberate decision to use that number, and we think it is more likely than not that this was at the instigation of the appellant. He was the only person who knew of his father’s VAT number and its use by the business after 1 March 2003 evidences his ongoing involvement in the business.

The client letters. The appellant’s view is that these reflected run off work that he had done for clients of the business or clients of his father’s business which he had taken on in order to protect his father’s financial and reputational position. The letters seem to go further than that. A letter to a client dated 13 January 2012 encloses a self-assessment tax return and is signed by the appellant. It encloses an invoice in respect of “my fee” (not the firm’s fees).

Another letter from a client in March 2014 says that “we have dealt with Mr BM Strauss of [the business] for two years” and that during that period he (not the firm) had issued invoices to those clients.

A letter to HMRC dated 30 March 2014 from a client records that the client had “telephoned and spoke to Mr Strauss about a month ago asking him to send me copies of the outstanding invoices…”.

A letter to a client from Rosina Harris in 2010 records that the appellant “has asked me to write and thank you very much for your cheque…”.

A letter from a client dated 6 April 2014 records that the appellant had taken over the client’s work from the appellant’s father and although the appellant had taken on those accounts and the client had provided him with two sets of accounts, he had not been invoiced.

An email dated 14 April 2014 from a client confirms that “Mr BM Strauss has provided me with advice and prepared my personal tax return the last two years”.

An email dated 17 July 2014 from a client to HMRC records that the client had “met with my accountant [the appellant] today”.

This correspondence, and indeed other items of correspondence, confirm the appellant’s evidence that he had taken over clients formally serviced by his father.

But they also reflect work done by the appellant himself up until 2014. The clients identified the appellant as the person who was undertaking the work rather than the business.

Whilst this seems rather a long time to be doing run off work, it is consistent with the appellant’s version of events. However, it is equally consistent with HMRC’s narrative.

The Firm’s notepaper. A letter from the business to HMRC dated 12 November 2008 clearly states, at the foot of that letter that the principal of the business is the appellant. The appellant’s evidence was that this was for regulatory and insurance purposes. But this is a long time after the sale of the business. Furthermore, as submitted by HMRC, if those involved in the business after the sale were not chartered accountants, and there is no evidence that they, or any other individual who subsequently “ran” the business after its sale were chartered accountants, and the appellant was not so involved in running it, how was the firm able to hold itself out as Chartered Accountants after the sale, which it was clearly doing up to and including 2014.

We agree with HMRC that this is a pointer towards the ongoing involvement of the appellant in more than a self-employed/subcontracting capacity.

The meeting notes. On 24 February 2011, Officer Newman and another HMRC officer attended the premises of the business. Their visit notes record that they were met by a bookkeeper and taken to the first floor premises. They were told that the office opened at 10am. Rosina Harris was described as a receptionist and is recorded as having said that she could not give any information to HMRC concerning a company whose name was recorded on a sign on the front of the office, and that she would “need to speak to [the appellant] who was out visiting clients today and should be in tomorrow. She did advise that he attended the offices on a regular basis”.

The appellant asked us to disregard this evidence as it was likely to have been tainted by Officer Newman’s antagonism towards him and did not reflect what was actually seen or said.

It is also directly contradicted by what Rosina Harris says in her witness statement where she says that she told the officer that the appellant wasn’t in the office and “we didn’t know when he was going to be in the office”.

However, in that statement she also goes on to say that “I had been instructed to give the answer to anyone calling for Mr Bradley. I knew that it was unlikely that he would be in the office at any stage, but that was the answer I was instructed to give…”.

She also says that she was clear of her version of events because her memory was very good and that she had written a note about it.

This seems to have been gainsaid by her email to the appellant dated 18 October 2017 where she makes no reference to that note and observes that “the visit was a few years ago and my memory isn’t what it was…”.

She went on to say that she had never told the HMRC officers that the appellant was going to be available at any time, nor that he would be back in the office at some stage, nor that he worked in the office.

We prefer the evidence of the notes of visit compiled by Officer Newman as an accurate record of what was said at that visit. Firstly, it was contemporaneous, something which could not be said about either the witness statement or the foregoing email purportedly drafted by Rosina Harris. Secondly, it is our view that she never made a contemporaneous note of that meeting. Had she done so, it is inconceivable that she would not have referred to it in her email of 18 October 2017. Finally, having had her memory jogged by the compilation of her witness statement which was not until some six years after the visit, and given what we consider a desire to please the appellant, she sought to recant the original statements in that email. Given the passage of time, the circumstances in which this email was written and what she says she had been instructed to say we accord little evidential weight to those corrections.

So the evidence we take from these documents is that the appellant was indeed out visiting clients on the day of the visit, and that he did attend the offices on a regular basis.

The process server. The appellant’s presence in England is confirmed, too, by the report from the process server who attended the appellant’s premises on 28 December 2007 and 9 January 2008 and who made a statement, for the purpose of the bankruptcy proceedings, on 10 January 2008. That statement records that when he knocked on the appellant’s door, he asked for the appellant and a lady told him to wait whilst she would “see if he is in” and then closed the door on him. He waited for 15 minutes but then left when the door was not reopened.

He also records that he spoke to a neighbour who told him that the appellant lived with his wife at the residence and that he was “seen at the address most days as he worked from home as an Accountant”.

The appellant said that this was incorrect, and that we should place little weight on this record as the process server had not been called to give evidence and thus could not have been cross-examined on what had been purportedly said to him.

Given that this is contemporaneous evidence from a wholly independent source, we are inclined to give it some weight, something which we are not prepared to do where written evidence has been provided on behalf of one of the parties (which is therefore not an independent source).

This evidence supports HMRC’s version of events, namely that the appellant was in the UK on a regular, rather than a peripatetic, basis.

The Dublin phase. We accept that the appellant used a Dublin address for correspondence after 1 March 2003. We do not accept his oral testimony, which is uncorroborated, that he lived in Dublin. Nor do we accept that this phase of his life went anywhere close to establishing that he was non-UK tax resident.

House ownership etc. The ownership of his residence (he had transferred beneficial ownership to his wife) payment of utility bills and the use of the address for his passport renewal application in or around March 2010 are neutral as far as this issue is concerned. Transfer of beneficial ownership without anything more, does not necessarily reflect any form of desire to sever his contacts with the UK. It is commonly done by people on a daily basis, for any number of reasons, who continue to reside in the premises.

As the parties have submitted, there is no single piece of evidence which conclusively resolves the degree of involvement by the appellant in the business after 1 March 2003.

We therefore have to consider the proven and relevant facts and, on the balance of probabilities, draw an inference from them.

We have recorded many of the proven and relevant facts above, but we summarise them here:

The appellant remained the sole signatory on business bank accounts 8011 6645 and 9082 7983 after 1 March 2003 (until 2011).

Income from the business was paid into business bank accounts 8011 6645 and 1089 2653 and after that date.

He operated those accounts after 1 March 2003.

The evidence from the meeting notes and the process server show that the appellant was regularly in the UK and working in the business.

The use of the appellant father’s VAT number after 1 March 2003.

The level of wages drawn by the appellant from Mr Dunne’s companies after that date.

The fact that the appellant was held out as principal of the business long after 1 March 2003.

We also factor in the matters that are referred to at [385]-[396] above, and in particular the failure by the appellant to provide timely information to HMRC and his confused evidence on any number of issues. We also factor in the attempt, in his letter of 18 March 2022, to mislead HMRC by clearly implying that the numerical criticisms he made of the analysis of the 2005/2006 and 2006/2007 tax years was based on information and invoices which related to those tax years rather than two tax years ending before he sold the business in March 2003.

We have considered the evidence which the appellant has provided which, he asserts, shows that he was involved only as an independent contractor. As can be seen from our comments in connection with this evidence, we are not persuaded that they support his assertion.

Taking all of the foregoing into account, it is our conclusion that, on the balance of probabilities, the appellant was, essentially, in operational and strategic control of the business after 1 March 2003 notwithstanding its purported sale. In practical terms, little had changed, and we find as a fact that he was the beneficial owner of the income generated by the business after that date.

Officer Harris had concluded that regardless of the appellant’s residence status, he was carrying on a trade in the UK the profits of which are chargeable to income tax.

Having found as a fact that the appellant continued to run the business after 1 March 2003 and was a beneficial owner of the income generated by it after that date, it is our view, too, that the appellant is liable to income tax on the profits made by the business after that date.

In light of that finding, we also take the view that the appellant was making taxable supplies after 1 March 2003 on which, to the extent that they were above the VAT registration threshold, he should have accounted for output tax (whether registered or not).

The appellant clearly accepted that he was liable for VAT on the supplies that he made before that date. In truth, he made no realistic challenge to HMRC’s assertion that if he was running the business after that date, he was also liable to VAT. The focus of his challenge was whether he was running the business after that date.

If we find that HMRC have made valid discovery and best judgment assessments, then the burden, or onus, of showing that those assessments overcharge the appellant, rests with the appellant.

This is the effect of section 50(6) TMA for income tax and section 83 VAT Act.

The appellant must adduce evidence to show that the assessments overcharge him. He must establish this on the balance of probabilities.

This evidence can be evidence of primary fact, or evidence from which we can draw valid inferences (see [383] above].

It is worth pointing out here that should we find that the assessments overcharge the appellant, that does not call into question our conclusion that the assessments were made to best judgement. As the court made clear in Van Boeckel “what the tribunal was doing when they decided to reduce the assessment was making a decision on the material before them as to the proper amount of tax in fact due. It was quite open to the tribunal, on the balance of probabilities, to come to the conclusion that there had been in fact pilferage which had to be taken into account in arriving at the amount of tax which was in fact due. But that does not mean that you can challenge the validity of the exercise performed by the commissioners, through their officers, in making the assessment. Just as the tribunal, on the material before them, were entitled to come to a conclusion as to the likelihood of pilferage being an explanation for part of the deficiency, so it was open to the commissioners, having heard what the taxpayer said to have come to a conclusion that this was not a case where it was proper on the material before them to make a reduction”.

We need to consider the material before us.

We also remind ourselves, once again, that we are not prepared to accept the appellant’s oral testimony, or written testimony in correspondence authored by him, unless it has either been unchallenged by HMRC or it is corroborated by independent sources.

The material which we have, but which was unavailable to Officer Harris when she made her assessments, include, relevantly:

The appellant’s witness statements and oral testimony at the hearing.

The appellant’s email of 18 March 2022 to Officer Wright and the enclosures with that which included the emails between the appellant and Mr Dunne’s people in 2005/2006.

The witness statements of Rosina Harris and David Nathan.

We also take judicial notice of the considerable experience and involvement of the panel with professional services firms.

We start by considering the appellant’s evidence in relation to the income or turnover figures for 2006/2007 and 2005/2006.

These are the two periods used by Officer Harris which she averaged out and then extrapolated backwards and used for earlier periods.

They are also the only two periods for which the appellant has given us any sort of numerical information concerning turnover.

That information is set out in his email of 18 March 2022 to Officer Wright.

The appellant in each case starts with the amount assessed by Officer Harris.

For 2006/2007, that is £455,905.67.

His comments in relation to that figure are as follows:

£122,896.34. General fees charged by the firm.

£52,222.67. Transfers (personal money gifted to the appellant.

£7,206.61. Contra unpaid direct debit.

£3,996.96. Contra unpaid direct debit.

£22,538 .96. GDK Garages (bookkeeping fees).

£132,000. Focus.

£210.16. Interest.

£1,456.28. Refunds.

£20,000. Hanover.

It has been clear to the appellant since 2008 that HMRC wanted corroborative information concerning the appellant’s income. It would also have been clear to him from their pleadings that on appeal, the onus is on the appellant to establish the amount of that income (an accurate reflection of the law). We told the appellant at the beginning of the hearing that we would not consider evidence unless we were specifically taken to it.

Notwithstanding this, the appellant has put forward only very limited independent corroboration of the numerical information set out above, and indeed in connection with the information provided subsequently about the 2005/2006 tax year.

For example, in respect of the £20,000 for Hanover he says that this came from a different company as Hanover was very late with its fee payments. He goes on to say that the income should have been dealt with in earlier years and there are “other invoices which make up the balance but these were the main ones”.

With respect to him, we do not know what invoices he is talking about. However, he goes on to list six invoices and their dates. He also records their amounts.

This is somewhat baffling. He did not produce those invoices. So we cannot verify what he is saying. He might have plucked these figures out of the air.

And given that the appellant’s case is that he was not involved, save in a self-employed subcontracting capacity after 2003, we are not certain why he would have had these invoices nor how he was able to get his hands on them in 2022.

Similarly, in respect of £50,000 which “is Turf Tours” he explains that this was a client which was behind on fees, identifies a number of invoices with their dates and invoice numbers and provides an explanation which was that they were an old client which needed helping out. We are mystified why this prevents the fees being taxable. There is no suggestion that this was money paid in by that client but expended, in an identical amount, on subcontractors. Nor are copies of the invoices appended.

In that email he describes the payment by GDK as a “very old client” and the whole of this cost as a “subcontract cost, the whole of the money collected was paid to subcontractors and the firm made no profit.” But there is no corroboration of this statement.

Similarly, he says that £30,000 was a payment by Mr Dunne for a vehicle supplied by Market Motors. Having bought one car for £40,000 he then bought another for £30,000 and demanded repayment for the original. The £30,000 was part of that repayment, the balance having been paid in 2005/2006. Again, there is nothing which independently corroborates this assertion.

In cross-examination, the appellant was asked when he had undertaken the analysis set out above. He answered that it was some time before March 2022. When he was asked whether it was close to this date or a couple of years prior to it, or something in between, he said that he could not remember.

He also said that the analysis was based on bank statements and invoices of which he had copies. When asked whether it was based on anything else, he said that he might have had a paying in book for one of the business accounts. The amounts paid into the bank accounts would have been identical to the information in the bank statements. When asked why he would have had that information, he answered that that was when he was running the business. It was put to him that his analysis had been done in relation to the 2005/2006 and 2006/2007 tax years. His riposte was that this was information which he had at February 2003. If this was indeed the case, then it cannot be relied on as an explanation for the money paid into the accounts in 2005/2006 and 2006/2007.

Furthermore, he was taken through the 2005/2006 entries by Mx Lunt, and, as we have found, there was virtually no verification in the bank statements of the numbers and entities set out in his analysis.

We are not prepared to accept the appellant’s evidence save where it is corroborated by primary independent documentation. So as far as the foregoing figures are concerned, we are only prepared to give a deduction for the £132,000 for Focus, for which there is independent corroboration (see below).

HMRC have already conceded that the £3,996.96 and £7,206.61 are contras and have reduced the amounts for that year accordingly.

The independent corroboration for Focus stems from the emails between the appellant and Mr Dunne’s people referred to at [258]-[263] above.

The appellant has undertaken a similar exercise for 2005/2006. He has started with Officer Harris’ assessment. Again, he has identified a number of items which he says should not have been included, for example contras, GDK Garages, Hanover, and Turf Tours.

Once again there are explanations without any corroboration, and we can only identify two contras of £1,370 and £567 where there is a direct and immediate correlation between the income figure and the payments figure.

We cannot see, either, the £17,625 which the appellant attributes to Focus in this year. There is no single sum for this amount identified in the analysis. It might well be that it is made up of several smaller payments. But it is not our job to come to a view as to what they might be. It was for the appellant to take us through them and to show how that figure is made up. He has failed to do so. We are not prepared therefore to give a deduction against the assessed income for this amount.

Finally, he suggests that £24,000 was an amount received for the lease on the motor vehicle ultimately used by Simon Bradley who had financed the purchase using a loan company and raised £24,000 personally in doing so. We cannot understand what he is saying here, let alone accepting that the income figure should be reduced by that amount. There is no corroboration to support his contention that the £24,000 was not fee income.

For these two years therefore, we are prepared to reduce the 2006/2007 income by £132,000 (for Focus) and £11,202.61 (verifiable contras) and the 2005/2006 income by £1,937 (verifiable contras) and £242.18 (already conceded by HMRC as an opening balance).

This means that for those two years, the income/turnover is £312,702.39 for 2006/2007, and £286,436.82 for 2005/2006.

Like HMRC, we have used the average of these two figures, rounded down to £299,000, for the income/turnover for the previous tax years i.e. those between 1994/1995 to 2003/2004, further scaled back by RPI.

Like HMRC, we consider the presumption of continuity to be a reasonable way of assessing the income for those periods given the finding that the business had continued after 2003 in the same way in which it had been carried on before.

The appellant suggest that this is an inappropriate method of calculation given there had been a discontinuance in 2003. However, we do not think that there was. He also suggests that given that the bank account into which most of the money was paid was not opened until after he reportedly sold the business, it could not be used as the basis for income which was generated before it was opened. We disagree. It is clear, even on the appellant’s case, that business income was paid into this account. The issue is the extent of that income. The appellant has not shown to us that it was not business income generated at the time when he was effectively acting as principal of the business. In those circumstances reducing the known amounts for 2005/2006 and 2006/2007, by RPI, for previous years, on the basis of the presumption of continuity is a reasonable and rational basis for computing the amounts for the years where there is no primary independent evidence of the appellant’s income/turnover.

The appellant has provided no evidence on which we can base any adjustment to the income figures used by Officer Harris as the basis of her assessments for 2007/2008 to 2010/2011.

HMRC have used the income/turnover figures of £132,940 for 2010/2011 and £220,411 for 2009/2010 as the basis for the tax for periods 2011/2012 to 2013/2014. They have reached the figure of £135,000 for these three periods.

We can see no logic to this. The average for these two periods is £176,675. We have used this figure, uplifted by RPI on the basis of the presumption of continuity, for those three years.

We have therefore concluded that the appellant’s income/turnover for the years under assessment are as set out in the table below:

We now need to come to a view regarding the expenses/inputs in relation to the foregoing income/turnover.

It was pointed out by Rosina Harris, in her witness statement that the £30,000 allowance given by HMRC for allowable expenses/inputs was unrealistic in light of the business turnover.

From the panel’s experience of working in and for professional services firms over many years, we agree. In our experience it is very unlikely that turnover of £300,000 could be generated from outgoings of £30,000. This view does not undermine our finding that the discovery and subsequent assessment by Officer Harris was not based on what she honestly believed was a fair and proper estimate. She made a guess which, in our view considering it afresh, turned out to be wrong. This reflects the principles set out in Van Boeckel [465] above.

To generate a turnover set out in the table at [524] above, the appellant would have had to incur considerable overheads. The problem for the appellant is that, in a similar way that he has produced and talked us through only negligible primary evidence to support his assertion that the assessed turnover is overstated, he has provided minimal primary evidence to support any assertion that the expenses are understated.

However, what we do have, and which Officer Harris did not have, was the benefit of his oral testimony, his letter to Officer Wright of 18 March 2022, and the witness statement of Rosina Harris.

The appellant’s unchallenged evidence was that in 2003 the business “employed” (it is still not absolutely clear to us whether these were employees or self-employed) eight individuals, details of which are at [69] above. The business also occupied premises for which it paid outgoings.

The difficulty we have is putting a numerical value to the amounts paid to those individuals and for the premises (along with other expenditure a more general nature).

However, we do have the appellant’s tax returns for 1997/1998 to 2002/2003.

There is no underlying primary evidence (for example the business records) which corroborate the figures that the appellant has put on these returns. And so, entirely justifiably, they were dismissed by HMRC as being a verified record of the true income and expenditure of the business for the period in question.

But in light of the information available to us, we are prepared to use them as the basis of the expenditure incurred by the business for those years. There is corroboration that money was spent on employees and the premises, and the appellant has asserted in those tax returns that they are a true record.

So for the purposes of income tax for those years, we have taken the expense figures set out in those tax returns for the relevant years as being the deductible expenses of the business.

For the years before 1997/1998, we have used the average for 1997/1998 and 1998/1999, reduced by RPI on the basis of the presumption of continuity.

For the periods after 2002/2003, we have done two things.

Firstly, for the periods 2003/2004 and 2004/2005, we have used the average for 2001/2002 and 2002/2003, increased by RPI.

Secondly, for the period 2005/2006 onwards, we have deducted the premises costs for those two periods (£29,079 and £16,907), re-average the revised figures which gives £88,466, and then added premises costs of £20,000, as this was the amount which the appellant had told Officer Wright was being paid for renting the premises: “The company was also renting a property across this period for which they were paying approx. £20,000 pa”.

We used the revised average figure, uplifted by RPI, for the period 2005/2006 to 2013/2014.

The deductible expenses for income tax purposes are set out in the table below:

The combined effect of these adjustments to turnover and expenses and the revised profit figures can be seen in the table below:

But while the tax returns might provide a basis for adjustment to the deductible expenditure for income tax purposes, they shed no light on the inputs which might be allowable for VAT purposes. For example, if the employees were indeed employees, no input VAT would have been suffered by the business on their salaries. We suspect the same be true if they were self-employed. It is likely that their turnover would have been under the VAT registration threshold. Furthermore, there is no indication from the appellant’s tax returns or his assertion that the property rent was £20,000, whether that was net or gross of any VAT payable to the landlord. Similarly, as far as motor expenses were concerned, there is no indication whether repair costs, for example, suffered VAT.

Without any such information, there is no justification for us to say that the entirety of the deductible expenses for income tax purposes, are also deductible from the turnover figure for VAT purposes.

HMRC have taken the view that £30,000 of the expenses was deductible for VAT purposes (in essence saying that VAT have been suffered on those expenses which were deductible against output VAT payable on the supplies made by the business).

We have no material on which to disturb this view. In our view it is a rational approximation. This is true of all years in question. We are not inclined, for example, to identify this £30,000 in any particular year, and then adjusted upwards or downwards by RPI.

The adjusted turnover (and thus the figures on which output tax should be calculated), therefore, after £30,000 has been deducted from it in accordance with the above principle, is set out in the table below:

Clearly our findings above will have a material impact on the assessments and the penalty assessments should we find that the appellant’s behaviour was deliberate.

So, we now turn to the question of culpability, and whether, as asserted by HMRC, the appellant’s behaviour was deliberate or fraudulent. This is relevant to the technical validity of the discovery assessments, the extended time periods for both the discovery assessments and the VAT assessments and to the penalties.

HMRC submit that the appellant’s behaviour was deliberate. They say this is demonstrated by the following:

In the years before 2003, the appellant understated business income and turnover.

He falsely claimed to have disposed of the business in 2003 and operated only as an independent contractor thereafter.

He provided contradictory information about the purported disposal.

He failed to keep proper records and has not disclosed any primary records to HMRC throughout the years of investigation.

He was involved in false invoicing and the use of incorrect VAT registration numbers after March 2003.

He deregistered the business for VAT in the full knowledge that he would continue to trade as a taxable person.

He has claimed to be non-UK tax resident without any meritorious basis for that assertion.

He has failed to cooperate, throughout, with HMRC’s investigation, or their attempts to verify the accuracy of his returns.

The test for deliberate behaviour, set out in Tooth and confirmed in CF Booth Ltd v HMRC [2022] UKUT 217 is straightforward. HMRC need to show an intention to mislead HMRC on the part of the appellant as to the truth of the relevant statement.

For the periods when the appellant filed tax returns, this essentially means that in this case they must show that he had provided HMRC with those returns which he knew contained errors with the intention that HMRC should rely upon them as accurate documents.

For the periods when the appellant filed no tax returns, this essentially means that they must show that he knew that he had a source of taxable income which he knowingly refrained from informing HMRC about and refrained from submitting tax returns when he knew he should have done so.

We have found as a fact that the appellant was beneficially entitled to the income of the business after 1 March 2003, and the amount of that income, and turnover (for VAT purposes) is as set out at [524] above.

The appellant, therefore, knew that for the periods for which he submitted tax returns, those returns understated his business income and turnover for the periods before that date. Yet he submitted those returns intending that HMRC should rely on them as an accurate reflection of that information.

This is clearly deliberate behaviour.

Similarly, for the periods in which he submitted no tax returns, he knew that he was in receipt of business income which generated a liability to inform HMRC and to submit tax returns, yet he failed to do either.

For the periods prior to March 2003, when the business submitted returns under the 584 VAT number, the appellant understated the turnover of the business as set out above. He knew of this understatement. He submitted VAT returns with the intention that HMRC would rely on the accuracy of the information in those returns. This is clearly deliberate behaviour.

The turnover was above the VAT registration threshold (something which was reflected in the fact that the business continued to use VAT registration numbers after that date). He continued to operate the business essentially as principal and he therefore was the taxable person who was responsible for submitting and accounting for VAT.

We strongly suspect that the time he first applied to deregister the 584 VAT number (27 February 2003), he knew that he would be continuing to run the business after 1 March 2003. But certainly, when he requested deregistration of that number on 8 July 2008, he was running the business.

Applying to deregister in these circumstances is deliberate behaviour. He knew that he was making supplies above the VAT registration threshold yet sought to deregister.

Furthermore, he failed to account for VAT under that registration number for the period between 1 March 2003 and the date of deregistration on 11 July 2008.

On our revised figures, the appellant was above the VAT threshold for all the years in question save 2008/2009.

The appellant would have been fully aware of his filing obligations. He is a chartered accountant. He accounted for VAT over many years on his taxable supplies.

His failure to do so under his 584 VAT number between March 2003 and July 2008, and subsequently once that VAT number had been cancelled, in the full knowledge that his business was making taxable supplies above the VAT threshold in all the years bar one, is clearly deliberate behaviour. He provided no returns for the taxable years, his intention being to mislead HMRC into thinking that he was making no taxable supplies.

A civil evasion penalty under section 60 VAT Act can only be levied if a person has behaved dishonestly. The legal test for dishonesty was clarified by the Supreme Court in Ivey v Genting [2017] UKSC 67 (“Genting”) and is as follows:

The standard of proof is the civil standard, being the balance of probabilities.

We have found as a fact that following the purported sale of the business in March 2003, the appellant continued to operate the business, effectively as principal, and the income generated by the business after that date was beneficially owned by him.

As set out at [56] above, this means that there is no room for finding that this might not have been the case. And it follows from this that the appellant knew full well that the income generated by the business was his, and, given his experience and status as a chartered accountant, he also knew full well that he had to account for both income tax on income and VAT on the taxable outputs. This is our finding of fact regarding the appellant’s knowledge or belief of the facts.

The matters recorded at [550] demonstrate to us that in light of that knowledge, the appellant’s failure to file the appropriate returns and pay the appropriate tax was dishonest applying the standard of the ordinary decent person. That person, in the appellant’s position, would have made the appropriate filings and payments.

We now need to consider the impact of our finding that the appellant’s behaviour was deliberate, on the discovery assessments and the VAT assessments.

As far as these are concerned, HMRC have the burden of establishing (shortly stated) under section 29 (4) TMA, that the insufficiency of tax was brought about by the deliberate behaviour of the taxpayer and under section 36 TMA that the extended 20-year time limit for the making of the assessment can apply.

The finding of deliberate behaviour for the former franks the obligation to find deliberate behaviour as regards the latter. See Mullens v HMRC [2023] UKUT 00244:

We have found deliberate behaviour by the appellant. However, in our view HMRC also have to demonstrate that the assessing officer considered deliberate behaviour at the time that she was issuing the assessments.

Officer Harris clearly did so. In her request for authority dated 14 April 2015, she told the authorising officer (Officer Clarke) that “Evidence of the person’s behaviour can be found in the case files and is referred to in the pre-decision letter of 11 March 2015”. That letter, to which we have her referred extensively earlier in this decision, demonstrates the deliberate behaviour which in her view formed the basis of her decision to issue extended time limit assessments.

The authorities show that she does not have to come to the right conclusion on deliberate behaviour (although in the circumstances of this case, we have concluded that she was correct to do so) as that is a matter for the tribunal. But she must have considered that the behaviour on which she based the extended time limit assessments was deliberate.

She clearly did so.

We conclude, therefore, that the discovery assessments were validly made based on deliberate behaviour and that the extended assessment period of 20 years applies to them.

In truth, as submitted by HMRC, the assessments for the tax years ending 5 April 2012, 2013, and 2014 were issued within the four-year ordinary time period. So there is no need for a finding of deliberate behaviour for those four years. But our finding of deliberate behaviour means that the extended time period of 20 years applies to the discovery assessments for the earlier years.

This finding of deliberate behaviour, too, means that the extended 20-year time limit under section 77(4) and (4A) (a) VAT Act for making the VAT assessments applies to the VAT assessments.

The penalties took a back seat as far as oral representations were concerned.

We can deal with them reasonably succinctly.

There are essentially four groups of penalties:

Penalties for failing to comply with notices to file income tax returns.

Penalties for failure to notify chargeability to income tax and VAT.

Penalties for filing fraudulently incorrect income tax and VAT returns.

Civil evasion penalties for dishonestly evading VAT.

For the reasons given below, we have allowed the appeal against the penalties for failing to comply with notices to file but dismissed the penalties in relation to the fraudulent or negligent returns and the civil evasion penalties.

Under Section 8 TMA 1970 a taxpayer, chargeable to income tax and capital gains tax for a year of assessment, (year 1) who is required by an officer of the Board to submit a tax return, must submit that return to that officer by 31 October immediately following the year of assessment (year 2) (if filed by paper) and 31 January in year 2 (if filed online).

However, this general rule is amended in certain circumstances. Under section 8(1F) TMA 1970 if a notice to file in respect of year 1 is given after 31 July in year 2 (but on or before 31 October) a return must be delivered within three months of the date of the notice (for a paper return), or on or before 31 of January in year 2 (for an electronic return).

Under section 8(1G) TMA 1970, where the notice to file is given after 31 October in year 2, the return (whether electronic or not) must be delivered during the period of 3 months beginning with the date of the notice.

Under section 12D TMA 1970, voluntary returns (i.e. returns which are not submitted in response to a notice to file) are treated as having been made in response to such a notice which was given to the person on the same date as the return was received by HMRC.

Section 12D TMA 1970 was introduced by sections 87 FA 2019. That section deems the amendments to the TMA 1970 made by it as “always having been in force”.

However, they do not apply in relation to a purported return delivered before 29 October 2018 if, inter alia, the person has appealed against an assessment on the ground that the purported return was not a return under section 8 because no relevant notice was given.

Failure to file a return on time pursuant to a notice to file brings with it the penalty regimes in section 93 TMA 1970, and schedule 55 FA 2009.

The burden of establishing that the penalties have been validly issued and served upon the appellant and properly calculated rests with HMRC. They must establish these to the civil standard of proof.

So HMRC must establish, to that burden, that they served section 8 notices to file on the appellant for the years in question.

As mentioned at [21] above, we had told the parties that we would not consider any documentary evidence to which we were not specifically taken during the hearing.

HMRC have failed to do this. We have seen absolutely no evidence of any such notices being served, and we were certainly taken to no correspondence, copy notices or even pro forma notices (usually the tax returns themselves) by Mx Lunt. No reference to any such documentation can be found in the statement of case, HMRC’s skeleton argument or HMRC’s closing submissions.

The only reference we can find to these notices is in the penalty assessments/explanations which simply refer to the penalties having been issued on the basis that the appellant has failed to comply with a notice to file.

Even using the presumption of regularity, which was not suggested to us by Mx Lunt, this goes nowhere near fulfilling HMRC’s evidential burden.

HMRC’s burden of establishing the service of a valid notice exists even if the appellant does not challenge the penalty on the basis that he did not receive one. But in this case, the appellant has clearly mounted such a challenge. In his email to Officer Harris of 18 July 2016 he says “can you also explain why there is a penalty determination to for failure to comply with a [section 8] notice for 1997/98-2009/10 when there has been no notice served under section 8 for some of the years and others were filed and you had them on record…”.

So HMRC were on notice that the appellant was disputing that he received notices to file yet still failed to provide any evidence that such notices were served.

We therefore find as a fact that HMRC did not serve valid notice to file on the appellant for any of the years for which penalties for that failure have been visited on him.

We never got anywhere near a submission by HMRC that in those years in which the appellant filed returns, the deeming provision in section 12D TMA 1970 applies. But we have considered whether it does.

The appellant submitted tax returns for years 1997/1998 to 2006/2007.

There has always been some dispute about the dates as to when these were submitted. For the purposes of this analysis however we shall use the dates asserted by HMRC, namely April, May/June and August 2008.

For the periods in which HMRC are assessing penalties for failure to comply with notices to file (so not the case with the return for 2006/2007) this is clearly after 31 October in year 2. So, the date on which the returns should have been filed was within three months of the date on which notices were given. The deeming provision in section 12D deems a notice to have been given on the same date that the returns were received by HMRC (relevantly May/June 2008). It follows that they could never have been late.

We would also observe that if the appellant’s email of 18 July 2016 comprises part of his grounds of appeal, then the deeming provisions in section 12D would not apply to the appellant in any event.

Given, therefore, that the HMRC have not made out that they have served a valid notice to file on the appellant for any of the years in question, we allow the appellant’s appeal against the penalties under section 93 TMA 1970 and Schedule 55 FA 2008.

Paragraph 1 Schedule 41 FA 2008 provides that a person who has failed to notify HMRC of their liability to income tax under section 7 TMA 1970 or their liability to register for VAT, is liable to a penalty. Where that failure is deliberate and concealed the penalty is 100% of the “potential lost revenue”; but paragraphs 12 and 13 provide for a reduction in that percentage in the case of disclosure.

Paragraph 14 Schedule 41 provides that HMRC may reduce a penalty because of special circumstances (and by paragraph 19 the tribunal may do so where HMRC’s decision in this regard is flawed). Paragraph 20 provides that liability to a penalty does not arise if the taxpayer satisfies HMRC or the tribunal on an appeal that he had a reasonable excuse for the failure.

Penalties under these provisions have been visited on the appellant for the income tax periods 2012/2013 and 2013/2014, and for the VAT period between 12 July 2008 and 6 May 2014 in respect of VAT registration number 222 144 63.

For these periods HMRC have given a 0% reduction for mitigation, and imposed the penalty based on deliberate behaviour.

They consider there are no special circumstances, nor does the appellant have a reasonable excuse.

We agree. We have found that the appellant’s behaviour was deliberate. He deliberately refrained from telling HMRC that he was in receipt of business income for those years, and that his income was above the VAT registration threshold in all the years in question apart from 2008/2009.

We see no reason for interfering with HMRC’s view on mitigation. In our view there are no special circumstances, nor does the appellant have a reasonable excuse.

We therefore dismiss the appellant’s appeal against these penalties. As regards the amount of these penalties, we deal with that later.

Where a taxpayer has fraudulently or negligently submitted an incorrect income tax return, he is liable to a penalty under section 95 TMA 1970.

Where a person has a reasonable excuse for not doing anything required to be done he shall be deemed not to have failed to do it unless the excuse ceased and after the excuse ceased, he shall be deemed not to have failed to do it if he did it without unreasonable delay after the excuse had ceased.

HMRC have imposed penalties under these provisions for the income tax periods 2002/2003, 2003/2004, and 2006/2007.

HMRC have allowed a 5% reduction for seriousness. However, that is the only mitigation they have given the appellant.

In view of our finding that the appellant has acted dishonestly, we have no hesitation in saying that he has also acted fraudulently for the purposes of these provisions. We see no reason why we should disturb HMRC’s 5% mitigation, and so we dismiss the appeals against these penalties. We deal with the amount of these penalties below.

Under section 60 VAT Act, where a person has done something or omitted to do something, for the purposes of evading VAT, and his conduct involves dishonesty, HMRC can assess that person to a penalty equal to the amount of VAT evaded.

HMRC have assessed the appellant under these provisions for two periods. Firstly, under VAT registration number 644978584 for the periods between 05/95 and the period following 11/07. Secondly, for VAT registration number 2214463 for the period 12 July 2008-31 March 2010.

For the reasons given at [540]-[544] above, our view is that the appellant has acted dishonestly towards his obligations to file VAT returns and to account for VAT on his business income in the proper amounts.

We therefore dismiss his appeal against the civil evasion penalties. As regards the amounts of these penalties, we deal with this below.

The appellant has identified what in his view are a number of procedural irregularities by HMRC which amount to an abuse of process, and as a result of which he will not benefit from a fair trial.

He has set these out in his skeleton argument but said little about them in his closing oral or written submissions. Similarly, Mx Lunt said little about them in their closing submissions.

No matter. We have considered the position and our view is set out below.

In the F-tT decision of Andrew Nuttall v HMRC [2022] UKFTT 192 Judge Cannan set out the state of the law in this area and confirmed that the tribunal has jurisdiction to consider allowing an appeal based on HMRC’s behaviour where it amounts to an abuse of process.

Having reviewed other authorities, the judge concluded that we have jurisdiction to consider the first category, namely where the alleged abuse directly affects the fairness of the hearing before the tribunal, but not the second.

In the case of this appeal, we are concerned with this first category. As we say, the appellant alleges that the behaviour by HMRC results in sufficient prejudice to him which amounts to an abuse of process and as a result of which he cannot receive a fair hearing.

Simply stated, his assertions are these:

Abuse of position by HMRC. In this category the appellant’s case is that: HMRC have not provided the document bundle in a timely fashion so as to enable him to undertake a full analysis; they failed to inform the tribunal of the bankruptcy proceedings; they relied, in the discovery assessment, on incomplete cost figures; they made no lawful discovery; they relied on anomalous years; they failed to disclose relevant material, including the appellant’s National Insurance records;

Other failings. In this category the appellant’s case is that: HMRC failed to act as a model litigant and failed in their duty of candour; they failed to report the inappropriate inclusion of his wife in the investigation; they continued with the proceedings notwithstanding the clear evidence regarding his residence abroad; and continued when it is clear that their case cannot be supported by the evidence.

Experts. The appellant’s case here is that HMRC have objected to the inclusion ofDr Young as a witness who can give evidence on his behalf.

As a result of these failings, the appellant asserts that “it is not in the public interest for a decision to be made that is adverse to the Appellant which will only lead to further hearings and decisions, when the evidential basis that the Respondents have provided is so flimsy, so lacking in legal support and so much in breach of the legal framework and when the inappropriate approach and abuse of position is inherent within how the Respondents have acted throughout… Deciding in favour of the Appellant now would stop all future hearings, confirm the evidential bases and clearly be in the public interest in the circumstances”.

It is for the appellant to demonstrate that this behaviour has led him to suffer such prejudice in pursuing his appeal that he cannot have a fair trial.

He has not demonstrated this to us. In our view there is no element of HMRC’s behaviour, as summarised above, which has prejudiced him to such an extent that the appellant’s trial has been unfair.

Taking his assertions in order.

We were fully apprised of the bankruptcy proceedings and have dealt with them in this decision.

We have dealt with the discovery assessments and the VAT assessments and the material on which they were based, in this decision. The appellant has challenged the validity of those assessments, and based on the evidence before us, we have upheld them as being valid. The issues have been fully canvassed in a fair way.

We have also dealt with his point that the material on which the assessments were based was known to HMRC before the assessing officer made her assessments.

In our view the National Insurance record adds nothing to the relevant evidence.

Whilst we accept that HMRC have a duty of candour, we cannot see that the appellant has made out any, or any convincing, case that they have failed in this (they have clearly provided a substantial bundle of documents). HMRC witnesses attended and were available for cross examination. He cross-examined the witnesses and was able to put to them his case that the original enquiry by Officer Newman was, in his view, acting vindictively and not objectively. He was able to give evidence on this point himself. And so we are in a position to consider this point. We have done so. It has had no impact on the fairness of the trial.

Nor do we think it is an abuse of process for HMRC to continue with an appeal based on evidence which it believes will persuade a tribunal to reject the appeal. Whilst the appellant might think that his evidence was overwhelmingly convincing, it will be apparent to him from the foregoing provisions of this decision, that we do not think that. Testing the evidence is a matter for the respective parties at the hearing and for the tribunal to determine on the appeal. Asking the tribunal to do that promotes a fair trial, not prejudice it.

Dr Young has given evidence with which we have dealt earlier in this decision.

Prior to, and over the course of the hearing, the appellant has had ample time to consider the documents in the bundle. Many of them were documents which he had been sent (for example the assessments and the letter of 11 March 2015). It was clear from the way in which the appellant managed his case during the hearing that, notwithstanding that he was a litigant in person, he was familiar with the documents in the bundle.

In truth, many of these assertions were simply further submissions as to the veracity of the evidence which he was bringing regarding his case that he had sold the business in March 2003 and thereafter had been involved only as a self-employed subcontractor; and criticisms of the way in which HMRC had arrived at the assessments.

Both of these matters were dealt with, extensively, at the oral hearings, in written submissions, and in this decision. We can see nothing in the appellant’s case which goes anywhere close to demonstrating that he has suffered such prejudice as a result of HMRC’s behaviour that he could not have, and has not had, a fair trial.

Accordingly, we reject this ground of appeal.

Drawing the strands of this lengthy and convoluted decision together, we have concluded that the discovery assessments and VAT assessments were made to best judgment on the basis of deliberate behaviour and that the extended time limits apply to both.

We have found that the appellant continued to run the business, essentially as principal, following its purported sale to Mr Dunne, on 1 March 2003, and that the sums deposited in the relevant bank accounts as evidenced by the bank statements, were beneficially owned by the appellant and were derived from that business. They consequently attracted income tax and, to the extent that the turnover exceeded the VAT threshold, VAT.

We have found that the quantum of the assessments requires adjustment given the decrease in turnover and the increase in allowable expenses that we have determined should apply.

We have found that the penalties for failing to comply with notices to file have been improperly imposed. However, we have found that the other penalties have been properly imposed.

We have found that HMRC’s behaviour has not amounted to an abuse of process as a result of which the appellant could not receive a fair trial.

Although we have been able to revise the income and VAT turnover figures for the years in question, we have not been able to compute replacement income tax or VAT assessments from those figures. Nor have we been able to revise the penalty amounts for those penalties for which the appellant remains liable.

We shall provide directions in relation to these matters under separate cover.

We dismiss the appeals against the discovery assessments and the VAT assessments.

We allow the appeal against the penalties under section 93 TMA 1970 and schedule 55 FA 2008 for failure to comply with notices to file but dismiss the appeals against the other penalties.

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

Section 18 of the Income and Corporation Taxes Act 1998 provides that income tax is charged under Schedule D on profits arising to a UK resident in respect of any trade carried on in the United Kingdom or elsewhere.

Under the provisions of the Income Tax (Trading and Other Income) Act 2005, a UK resident person receiving or entitled to the profits of a trade profession or vocation is liable to income tax on those profits.

Furthermore, under that Act, when calculating the profits of a trade, no deduction is allowed for expenses not incurred wholly and exclusively for the purposes of the trade.

Under the provisions of the Taxes Management Act 1970 (“TMA 1970”).

An individual must notify his chargeability to income tax, to HMRC, by way of a return (section 8).

HMRC may open an enquiry into such a return by giving notice of that enquiry to a taxpayer (section 9A).

Where HMRC have opened an enquiry, they may amend the amount of tax stated in the return if they think that that amount is insufficient (section 9C).

An enquiry is completed when HMRC provide a taxpayer with a final closure notice which states the officer’s conclusions and whether any amendment is required to be made to the return (section 28A).

Section 29 TMA provides:

Section 34 TMA provides:

Section 36 provides:

Section 50 TMA provides:

Where a taxpayer has failed to comply with a notice to file under section 8, he is liable to a penalty under section 93 TMA 1970. Where a taxpayer has fraudulently or negligently submitted an incorrect return, he is liable to a penalty under section 95 TMA 1970. Both such penalties must be determined by HMRC and the served on the taxpayer.

Where a person has a reasonable excuse for not doing anything required to be done he shall be deemed not to have failed to do it unless the excuse ceased and after the excuse ceased, he shall be deemed under not to have failed to do it if he did it without unreasonable delay after the excuse had ceased.

Failure to file a return on time engages the penalty regime in Schedule 55 Finance Act 2008 (“FA 2008”). Where that failure is deliberate and concealed the penalty is 100% of the “potential lost revenue”; but paragraph 14 provides for a reduction in that percentage in the case of disclosure.

If HMRC think it is right to reduce a penalty because of special circumstances, they can do so. Special circumstances do not include (amongst other things) an ability to pay (paragraph 16).

On an appeal to the tribunal under paragraph 20, we can give effect to the same percentage reduction as HMRC have given for special circumstances. We can only change that reduction if we think HMRC's original percentage reduction was flawed in the judicial review sense (paragraph 22(3) and (4)).

A taxpayer is not liable to pay a penalty if he can satisfy HMRC, or this tribunal (on appeal) that he has a reasonable excuse for the failure to make the return (paragraph 23(1)).

However, an insufficiency of funds, or (broadly speaking) reliance on another, are statutorily prohibited from being a reasonable excuse. Furthermore, where a person has a reasonable excuse, but the excuse has ceased, the taxpayer is still deemed to have that excuse if the failure is remedied without unreasonable delay after the excuse has ceased (paragraph 23(2)).

Paragraph 1 Schedule 41 FA 2008 provides that a person who has failed to notify HMRC of their liability to income tax under section 7 TMA 1970 or their liability to register for VAT, is liable to a penalty. Where that failure is deliberate and concealed the penalty is 100% of the “potential lost revenue”; but paragraphs 12 and 13 provide for a reduction in that percentage in the case of disclosure.

Paragraph 14 Schedule 41 provides that HMRC may reduce a penalty because of special circumstances (and by paragraph 19 the tribunal may do so where HMRC’s decision in this regard is flawed). Paragraph 20 provides that liability to a penalty does not arise if the taxpayer satisfies HMRC or the tribunal on an appeal that he had a reasonable excuse for the failure.

Under section 4 of the VAT Act, VAT is charged on the supply of goods or services made in the United Kingdom where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him. Under section 3 of that Act, a person is a taxable person while he is or is required to be registered under that Act.

Where a person has failed to make any VAT returns or where those returns appear to HMRC to be incomplete or incorrect, they may assess the amount of VAT due from that person “to the best of their judgement”.

The assessment must be made on the later of 2 years after the end of the prescribed accounting date, or one year after evidence of facts, sufficient in the opinion of HMRC to justify the making of the assessment, comes to their knowledge.

The general time-limit for making assessments is not more than four years after the end of the prescribed accounting period. But this is extended to 20 years in cases involving the loss of VAT brought about deliberately by the taxpayer.

Under section 60 VAT Act, where a person has done something or omitted to do something, for the purposes of evading VAT, and his conduct involves dishonesty, HMRC can assess that person to a penalty equal to the amount of VAT evaded.

The time limit for issuing such an assessment is before the end of two years beginning with the time when the amount of VAT due for the prescribed accounting period concerned has been finally determined.

A civil evasion penalty can be mitigated by reducing the penalty to such amount (including nil) as is considered proper (section 70 VAT Act). That mitigation is open to both HMRC and to this tribunal. Shortage of funds, or acting in good faith, cannot, however, be taken into account when considering such mitigation.