© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
Procedure.Tax
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A3b. Deliberate, fraud, dishonesty
Capacity
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- Mental health problems meaning T did not have capacity to do something knowingly
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"[100] However, we find that he has rebutted this presumption by showing that he did not have the mental capacity to do this in 2013/14. This is shown by CD's evidence of his childlike behaviour and his inability to understand documents at the time. We do not find her to be dishonest in her testimony: while we acknowledge that it is not in any way appropriate to sign documents in her father's name as she did." (PO v. HMRC [2025] UKFTT 1121 (TC), Judge Blackwell)
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Meaning of deliberate
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- Deliberate means intentional or knowing
"[43] We have no hesitation in concluding that the second of those interpretations is to be preferred, for the following reasons. First, it is the natural meaning of the phrase “deliberate inaccuracy”. Deliberate is an adjective which attaches a requirement of intentionality to the whole of that which it describes, namely “inaccuracy”. An inaccuracy in a document is a statement which is inaccurate. Thus the required intentionality is attached both to the making of the statement and to its being inaccurate.
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[47] It may be convenient to encapsulate this conclusion by stating that, for there to be a deliberate inaccuracy in a document within the meaning of section 118(7) there will have to be demonstrated an intention to mislead the Revenue on the part of the taxpayer as to the truth of the relevant statement or, perhaps, (although it need not be decided on this appeal) recklessness as to whether it would do so." (HMRC v. Tooth [2021] UKSC 17)
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"[149] Here, we have found that Mr Rai provided gross takings numbers from the tills and Costcutter reports generated by the tills to AH to enable AH to prepare the VAT returns. Mr Lindsay submitted that there has been no explanation for the inaccuracies in the VAT returns. We disagree - Mr Rai's evidence was that he had not seen the VAT returns before their submission, and the lack of copies of information provided to AH, together with Mr Rai's accusations against AH, means that the explanation being put forward is essentially that Mr Rai provided correct information to AH but that information was not then used to prepare accurate VAT returns. We make no findings as to the conduct of AH. However, on the basis of the evidence before us, we are not satisfied that the Appellants knew that the VAT returns being submitted by AH were inaccurate. Accordingly, the conduct was not deliberate." (Rai v. HMRC [2024] UKFTT 511 (TC), Judge Zaman)
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“We agree with the approach in Auxilium Project Management that in order for the taxpayer to have acted deliberately, he must, first have submitted an incorrect document knowing that it did not represent the true position and, secondly he must have intended HMRC to accept the incorrect position as being correct.” (Baloch v. HMRC [2017] UKFTT 665 (TC), §123, Judge McKeever).
“I accept [the taxpayer’s] submission that what HMRC must do in order to satisfy the Tribunal to this effect is to show that Mr Munford had submitted his tax return actually knowing that he was not entitled to principal private residence relief.” (Munford v. HMRC [2017] UKFTT 19 (TC), §104).
“Also, in the context of this case, I agree with Mr Vallat who contends that “deliberately” means “intentionally” or “knowingly” (see eg Duckitt v Farrand [2001] Pens LR 155 at [9]).” (Tooth v. HMRC [2016] UKFTT 723 (TC), §49 Judge John Brooks)
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- Must know there was an error/failure to comply with the relevant obligation
"[116] In relation to a failure to notify liability to tax, we consider that, broadly, this means that HMRC needed to establish that Mr Campbell was aware of the obligation to notify and chose not to comply even though he could have done so.
[117] The FTT at [147]–[150] gave three reasons for its conclusion that Mr Campbell's failure to notify was deliberate. The first was that a statement made by Mr Campbell in an email to HMRC 'suggests an understanding of CGT'. The second was that he did not keep records. The third was that Mr Campbell did not 'make enquiries with HMRC as to the likely tax implications'.
[118] These reasons were insufficient to justify a finding of deliberate behaviour. The second and third reasons might be relevant to a consideration of whether Mr Campbell acted carelessly in not notifying a liability to tax, but, as we have explained, that was not the question before the FTT. The application by the FTT of an incorrect test to the issue is evidenced by the FTT's statement that Mr Campbell 'should have known' that the property disposals would have tax implications; that is not the threshold for deliberateness. As to the first reason, an inference that Mr Campbell understood CGT is insufficient of itself to justify a finding of deliberateness. In any event, this was an inference reached not on the basis of evidence as to Mr Campbell's intentions at the relevant time but on the basis of a statement in an email which was sent after the periods in respect of which the failure to notify arose." (Campbell v. HMRC [2023] UKUT 265 (TCC), Judges Thomas Scott and Brannan)
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"[111] The effect of the guidance from the Supreme Court in Tooth, and from the Upper Tribunal in Booth, is that to succeed in this case HMRC must demonstrate that when Mr Yip submitted his tax return for 2012-13, he knew that it contained an error, and intended to mislead HMRC. The question is not whether he behaved reasonably, but depends on his knowledge and intention at the time.
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[113] We consider that there is an erroneous assumption underlying this position, which is that because HMRC concluded (and we have accepted) that the Disputed Amount was taxable as a payment for consultancy or management services, that Mr Yip would have viewed it in the same way. For HMRC to establish that the discovery assessment is valid, they must demonstrate not only that the Disputed Amount was taxable, but that Mr Yip knew it was taxable. We find that the evidence provided to us does not establish that this was the case.
[114] Mr Yip knew he had received a large sum of money from the family business, but we saw no evidence to suggest that he had given any consideration to whether it was taxable. HMRC submitted that he had experience in the self-assessment regime, having been registered for self-assessment since 1996, and had also had experience in the past of including self-employment income on his tax return. Therefore, according to HMRC, he knew that income from self-employment was taxable, and so was aware that the Disputed Amount should have been declared on his return.
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[121] We do not agree with this analysis. While it is possible that he knew the Disputed Amount was taxable and so deliberately chose not to disclose it to his accountant, the fact that he did not seek advice on this point is equally consistent with him not having thought about the tax treatment of the Disputed Amount at all. We therefore do not accept that Mr Yip not having sought advice is evidence that he knew the Disputed Amount was taxable." (Yip v. HMRC [2024] UKFTT 434 (TC), Judge Gauke)
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- Subjective test
"[97] At [158] to [159] the FTT identified that the issue was whether or not the Appellants’ behaviour in submitting the tax returns was deliberate. They expressed agreement with the statement of the FTT in Auxilium where at Auxilium[63] the FTT said in relation to “deliberate inaccuracy” in Schedule 24 Finance Act 2007: “In our view, a deliberate inaccuracy occurs when a taxpayer knowingly provides HMRC with a document that contains an error with the intention that HMRC should rely upon it as an accurate document. This is a subjective test. The question is not whether a reasonable taxpayer might have made the same error or even whether this taxpayer failed to take all reasonable steps to ensure that the return was accurate. It is a question of the knowledge and intention of the particular taxpayer at the time.”
[98] In CF Booth Ltd v HMRC [2022] UKUT 217 (TCC) (“CFB”) the Upper Tribunal has, at CFB[37], subsequently agreed with these comments of the FTT in Auxilium.
[99] It was common ground before us that the FTT had set out the correct legal test, and had not misdirected itself..." (Outram v. HMRC [2024] UKUT 203 (TCC), Judges Zaman and Greenbank)
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- Must be based on findings as to what T knew and understood
"[114]...However, there is no finding as to what the Appellants understood (however they came by that understanding) to amount to trading – eg, whether they were told that they should undertake “some” unspecified number of further transactions, or that “one or two” would be sufficient, or referring this back to their previous background transacting in oil futures and what they “must have known” based on their own experience. There is, similarly, no finding or inference earlier in the Revised Decision that the Appellants must therefore have known that the number of transactions that they entered into did not amount to trading. This is significant in the context of a subjective test and whether the Appellants knew that they were not trading and therefore knew that they were not entitled to claim the losses. We do recognise that the FTT did then reach a clear conclusion at [165] when it found that the Appellants knew that they were not carrying on a trade, but that is reached by reference to the findings at [164] and potentially contaminated by the reasoning at [164(b)]." (Outram v. HMRC [2024] UKUT 203 (TCC), Judges Zaman and Greenbank)
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- Not about whether T behaved reasonably
"[117] We agree with Mr Woolf that the FTT is here assessing whether the Appellants took reasonable steps to ensure their returns were accurate, and is applying an objective test of the kind that the FTT in Auxilium had warned against." (Outram v. HMRC [2024] UKUT 203 (TCC), Judges Zaman and Greenbank)
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- Deliberateness may amount to finding of dishonesty
"[HMRC's Counsel] accepted that the finding in this case that Firm A acted deliberately in causing an inaccurate entry to be made in the 2007/08 tax return could be characterised as a finding of dishonesty. She also accepted that it was not open to the FTT to make a finding of dishonesty where such an allegation had not been pleaded or put to the witness in cross examination." (Danpal v. HMRC [2023] UKUT 86 (TCC), Judge Herrington and Judge Bowler)
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Blind eye knowledge may not be
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"[52] We consider that even if Mr Milligan did not precisely know what he needed to do with respect to his tax affairs in the tax years in question, despite having previously filed tax returns, Mr Milligan "head in sand" approach meant that he chose to ignore his tax obligations in circumstances where we consider that he at least knew that he should have taken steps to find out what the correct position was with regard to his tax affairs.
[53] That was not merely carelessness. We find that it was a deliberate (but not dishonest) choice not to engage with his tax responsibilities and, instead, prioritise other issues in his life. We find that the behaviour which led to the loss of tax was, therefore, deliberate." (Milligan v. HMRC [2025] UKFTT 498 (TC), Judge Fairpo)
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- Query whether a finding of Kittel knowledge amounts to a deliberate inaccuracy
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"[36] It seemed to be common ground that the formulation used by the FTT in Auxilium was correct. In that case the FTT said:
“63. In our view, a deliberate inaccuracy occurs when a taxpayer knowingly provides HMRC with a document that contains an error with the intention that HMRC should rely upon it as an accurate document. This is a subjective test. The question is not whether a reasonable taxpayer might have made the same error or even whether this taxpayer failed to take all reasonable steps to ensure that the return was accurate. It is a question of the knowledge and intention of the particular taxpayer at the time.
64. The test of deliberate inaccuracy should be contrasted with that of careless inaccuracy. A careless inaccuracy occurs due to the failure by the taxpayer to take reasonable care (see paragraph 3(1)(a) of Schedule 24 Finance Act 2007 and Harding v HMRC [2013] UKUT 575 (TCC) at [37]).”
[37] We agree with these comments of the FTT in Auxilium.
[38] In Tooth the Supreme Court considered the test of “deliberate inaccuracy” in section 118 Taxes Management Act 1970, which was required in order to enable HMRC to serve a “discovery assessment” within a 20 year window. It held that the natural meaning of the phrase “deliberate inaccuracy” meant a statement which, when it was made, was deliberately inaccurate, rather than a deliberate statement that was in fact inaccurate. “Deliberate” attached a requirement of intentionality to the whole of that which it described, namely “inaccuracy”. The required intentionality therefore attached both to the making of the statement and to its inaccuracy (§43).
[39] At §47, Lords Briggs and Sales, delivering the judgment of the Supreme Court, said:
“It may be convenient to encapsulate this conclusion by stating that, for there to be a deliberate inaccuracy in a document within the meaning of s118(7) there will have to be demonstrated an intention to mislead the Revenue on the part of the taxpayer as to the truth of the relevant statement or, perhaps, (although it need not be decided on this appeal) recklessness as to whether it would do so.”
[40] As the Court of Appeal held in E Buyer, it is not necessary for HMRC to plead or prove dishonesty in order to establish Kittel knowledge (i.e. that the taxpayer “knew or should have known” that the transactions were connected to fraud). Mr McDonnell argued that a finding of dishonesty was, however, an essential element of deliberate inaccuracy for the purposes of the penalty assessment, such that the findings in the 2017 Decision could not suffice to establish deliberate inaccuracy.
[41] We disagree. There is in our judgment no requirement for HMRC to plead or prove dishonesty when seeking to impose a penalty for deliberate inaccuracy under Schedule 24 FA 2007. As the FTT held in Auxilium, deliberate inaccuracy occurs when a taxpayer knowingly provides HMRC with a document that contains an error with the intention that HMRC should rely upon it as an accurate document. We do not consider that anything said by the Supreme Court in Tooth calls that test into question.
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[84] In addition, [the taxpayer] argued that the Appellant was entitled to take a “filing position” on its returns. As we understand it, a “filing position” is where a taxpayer makes a claim in a return (e.g. to a tax relief or an amount of the receipt) in circumstances where the relief (or the amount of the receipt) may be the subject of dispute. It does not, as we understand it, apply to a position where a taxpayer knows in advance that it has no entitlement to a relief. The fallacy in the argument in this case is that the effect of the 2017 Decision was (as we have found, above) that the Appellant knew that it was not entitled to claim an input tax deduction on its VAT returns but did so nonetheless. That is not “a filing position” but a deliberate inaccuracy. There was no evidence that the Appellant had adopted what Mr McDonnell described as a “filing position”" (C F Booth Limited v. HMRC [2022] UKUT 217 (TCC), Bacon J and Judge Brannan)
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- Should have known of connection to fraud is not deliberate
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"[256] We do not agree with Mr Watkinson’s submission that an inaccuracy which is based on a finding that OWD should have known of a connection to the fraudulent evasion of VAT constitutes a deliberate inaccuracy. We gratefully adopt the explanation of a deliberate inaccuracy set out in Auxilium. As the Tribunal in Auxilium went on to explain, the question of whether there is a deliberate inaccuracy is a subjective test; it is not whether a reasonable taxpayer might have made the same error or even whether this taxpayer failed to take all reasonable steps to ensure that the return was accurate. It is a question of the knowledge and intention of the particular taxpayer at the time.
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[260] Mr Watkinson submitted that the description by Moses LJ of what is caught by “should have known” goes beyond carelessness. We agree that the description is such that someone who is found to meet this threshold will almost inevitably be found to have been careless; but the ease with which that conclusion can be reached does not mean that they should be treated as having knowingly provided HMRC with a document that contains an error with the intention that HMRC should rely upon it as an accurate document. Our conclusion was that OWD should have known that this was the case; but that is not actual knowledge.
[261] We have concluded that the inaccuracy in OWD’s returns was not deliberate." (Bachra v. HMRC [2023] UKFTT 91 (TC), Judge Zaman)
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Examples
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- Treating income as company income without doing anything to make it company income
“In general we do not consider that Dr Baloch could have believed that the income would become that of a company if he simply incorporated a company but took no steps actually to carry on the business in the company.” (Baloch v. HMRC [2017] UKFTT 665 (TC), §135, Judge McKeever)
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- Unlikely to be deliberate if T could easily have arranged affairs such that returned position was correct
"[52] The essential question therefore becomes whether the appellant honestly believed that pro-rating applied. We are in no doubt that he did honestly so believe. We arrive at that conclusion, not only because we found the appellant a credible witness, but also for the following reasons :
(1) If, as the respondents allege, the appellant should have known that he needed 70 days/nights occupation prior to 27 September 2011 to qualify, given that the property had, it is common ground, been let for 52 days/nights, we are satisfied that, as the appellant has asserted, it is overwhelmingly probable that he could/would have been able to facilitate commercial letting for a further 18 days/nights, so as to reach the magic figure of 70, had he considered that to be necessary. In other words, he had it within his power to meet (or to endeavour to meet) the qualifying condition had he known about it and not believed that pro-rating applied." (Cannon v. HMRC [2017] UKFTT 859 (TC), Judge Geraint Jones QC)
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- Adviser found to have deliberately claimed unallowable expenses
"[53] We have little doubt that Apostle acted deliberately in submitting tax returns containing the excessive and unallowable expense claims. Any competent tax agent would know that one cannot claim expenses in relation to meals. Apostle did not provide any rationale for the amounts claimed, nor did they appear to have any. The amounts varied randomly from year to year. We do not consider that this could have been a careless error in making the claim for Mr Lucas. Apostle's response to Mr Lucas' email following HMRC's enquiry letter was factually inaccurate and threatening. This was not the response of a legitimate business which had made a mistake. Mr Lucas was not an isolated case. As mentioned, he only approached Apostle because many of his colleagues had been contacted by the company and offered help to claim "rebates", for a very substantial fee amounting to 24% of the money received. Apostle was, in fact, conducting an industrial scale exercise. We understand that more than 800 people are affected and are having to repay the full amounts of the tax reclaimed by Apostle even though they only received 75% of it." (Lucas v. HMRC [2025] UKFTT 702 (TC), Judge McKeever)
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- Director treating DLA repayment as salary from which PAYE had been deducted deliberate
"[34] Standing back, and looking at the matter in the round, we are entirely satisfied that Mr Whines knew all along that he had not received a PAYE-able salary from Information Systems, but that - as he told us - his director's loan account had been adjusted. That was not the same as gross payment, and we are satisfied that Mr Whines - as a commercially aware individual - knew this. We are satisfied that Mr Whines also knew that PAYE had not been paid; because there was no salary which would have brought the need to pay PAYE about." (Whines v. HMRC [2025] UKFTT 597 (TC), Judge McNall)
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- Intentionally acquiring possession of excise goods knowing duty outstanding and intentionally not paying duty
"[63] We agree with the analysis of the First-tier Tribunal's decision in Hare Wines at [121] - [131] therefore the Appellant will have acted "deliberately" if it intentionally acquired possession of goods or was concerned in carrying, removing, depositing, keeping or otherwise dealing with the goods knowing that the payment of duty is outstanding, and intentionally does not pay that duty.
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[70] On balance, we are satisfied that the Appellant has shown that it genuinely attempted to find out more about the circumstances of the Load and proceeded on the basis of its checks. Therefore, we are not satisfied that HMRC have shown that the Appellant intentionally acquired possession of goods or was concerned in carrying, removing, depositing, keeping or otherwise dealing with the goods knowing that the payment of duty is outstanding, and intentionally does not pay that duty ie that the Appellant's behaviour was deliberate. This conclusion also disposes of HMRC's submissions on "Nelsonian or blind-eye" knowledge." (FTU Pod Trans v. HMRC [2025] UKFTT 753 (TC), Judge Pettifer)
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- Failure to notify chargeability re rental income despite HMRC letter
"[75] We have determined that the Appellant's failure to notify his chargeability to income tax for the tax years 2020/21 and 2021/22 was deliberate (but not concealed). We have reached this conclusion for several reasons, not least because of the letter that the Appellant received from HMRC dated 22 January 2007. That letter was written in clear terms and should have immediately placed the Appellant on notice of the requirement to notify HMRC if there were any changes in his financial circumstances. Any doubt about that would have been dispelled by what is stated overleaf in that letter, under the heading "We need a Tax Return each year", whereby it was explained that a tax return would be required if the person has "income from letting any property or land". That was the situation which applied in the Appellant's case. We therefore do not accept that the Appellant could have been under any reasonable misapprehension as to what was required of him. In any event, if he had been unsure as to what was required of him notwithstanding the clear explanations in the letter, the Appellant could have spoken to HMRC for further guidance and/or sought his own tax advice." (Locke v. HMRC [2025] UKFTT 956 (TC), Judge Lee)
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- False statements in order to access loans from pension
"[81] We conclude that Mr Trachtenberg knew from the outset that the loans were not on commercial terms and that false statements were made to obtain the loans to Mr Bishop and Ms Doyle, and that a false statement was made in the loan agreement between himself and Ms Doyle (that the funds were for investment purposes).
[82] Given our findings above, we conclude that Mr Trachtenberg was not a credible witness and we find that he knew that the arrangements would give rise to a tax charge as the funds were to be made available to him and that he arranged for false statements to be made in the documentation to ensure that his pension administrators did not realise that he was entering into such arrangements. We do not accept Mr Trachtenberg's statement that this was because he wanted to buy time to repay the loans; there would have been no reason for the false information in the documents at the outset if the arrangements were legitimate." (Trachtenberg v. HMRC [2024] UKFTT 376 (TC), Judge Fairpo)
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- Quantity of false invoices and money concerned could not have been signed off by mistake
"[159] The quantity of false invoices and the amount of money concerned, £3.9m, was such that it is inconceivable that these would have been signed off by mistake.
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[165] Even if the directors were not aware that there were no supplies or even if supplies were in fact made, it would still have been apparent that this was a VAT fraud as it was known within the Appellant and specifically by Messrs Cooke and Hosier that Folwell was invoicing in the name of four different entities. There was no legitimate reason for that and yet it was never questioned. No checks were made on the companies because it was known that these companies were just pseudonyms for Folwell." (Lancer Scott Limited v. HMRC [2024] UKFTT 545 (TC), Judge Rankin)
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- Agent had pattern of behaviour of inflating client's expenses
"[82] We have taken into account also the tribunal findings in each of the CLAC Cases that Mr Lunn had artificially increased his clients' expenditure in order to reduce their tax liabilities.
[83] In particular we note in McFarlane the Tribunal's finding that CLAC had in one year included claims for expenses including mobile telephone, home telephone, printing, postage and stationery travel which bore no relation to a schedule of expenses given to CLAC by his client, Mr McFarlane. The Tribunal's conclusion in that case was that there was no doubt that CLAC had acted deliberately to inflate the expenses - so resulting in a loss of tax.
[84] We accept of course that the current case must be considered on its own merits and that what happened in the CLAC Cases is not necessarily what has happened in this case. However, the similarity in the approach taken to expenses is remarkable and we find it a relevant factor in helping us determine what has happened in this case.
[85] We have noted also Mr Lunn's criminal conviction for cheating the public revenue. We have not sought to investigate any aspect of that case - notwithstanding Mr Lunn's numerous references to it. It is simply not appropriate in this case to do so. What we have noted is that Mr Lunn has been convicted of an offence of dishonesty in relation to tax which involved inflating expenditure. As with the Tribunal's findings in the CLAC Cases we find this a relevant factor in making our determination in this case." (Lunn v. HMRC [2024] UKFTT 509 (TC), Judge Tilakapala)
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- Trade devised as a means of transferring amounts without regard to reality
"[206] For the 2005/06 tax year we have found that, on the balance of probabilities, Mr Lunn chose to inflate the amounts initially specified in Ms Lunn's accounting papers. Those amounts were intended to be and were actually taken into account as deductible expenditure in Ms Lunn's tax return which was prepared by CLAC. We find that this behaviour was clearly deliberate.
[207] For 2006/07 and 2007/08 we have found, again on the balance of probabilities, that Ms Lunn was not carrying on a trade. We also found that the purported trade was a mechanism devised and implemented by Mr Lunn to transfer amounts between VML and Ms Lunn in order to reduce taxes payable without regard to the reality of the arrangements between them."(Lunn v. HMRC [2024] UKFTT 509 (TC), Judge Tilakapala)
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Deliberateness due to blind eye knowledge
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​- Open to Tribunal to draw inference of knowledge conscious decision to refrain from taking steps to confirm existence of suspected facts
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“But it is perhaps worth remarking, in the hope that it may further allay the anxiety of the council about the enforcement of licensing control of sex establishments, that it is always open to the tribunal of fact, when knowledge on the part of a defendant is required to be proved, to base a finding of knowledge on evidence that the defendant had deliberately shut his eyes to the obvious or refrained from inquiry because he suspected the truth but did not want to have his suspicion confirmed.” (Westminster CC v. Croyalgrange Ltd [1986] 2 All ER 353 at 359 per Lord Bridge - underlining added).
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"[86] In the recent decision of Canada Square Operations Lt v Potter [2023] UKSC 41, Lord Reed observed that wilful or Nelsonian blindness corresponds to constructive knowledge and would provide the necessary intentionality for deliberate behaviour. I confirm therefore that the appellant's failure to notify his chargeability to tax was deliberate on the basis that his close involvement in the running of the pub business meant that he had actual or constructive knowledge that the wages he received from the Pub had not borne any income tax or NIC, which renders his failure to notify his chargeability 'deliberate'." (Hague v. HMRC [2024] UKFTT 139 (TC), Judge Poon)
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"[37] It is HMRC’s burden to show, in accordance with the cases that they cited, that the behaviour of Atlas was deliberate. The two driving arguments they submitted to support this conclusion were the conversations on days 1 and 2 of the visit and the earlier assessment for VAT in 2014. As noted above, neither of these arguments are unequivocal and, even taken together, do not meet the burden of showing that Atlas had consciously and intentionally submitted incorrect returns; or consciously and intentionally chose not to find out how to make sure their returns were accurate." (Atlas Garages (Morpeth) Limited v. HMRC [2022] UKFTT 101 (TC), Judge McGregor)
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"[82] We agree with the basic statement of the Tribunal in Auxilium set out at [50] above. We would also endorse the principle that if a taxpayer is aware of the existence of facts or circumstances which they know will or might render a return inaccurate and they choose not to investigate further in the light of those facts or circumstances in order to verify the accuracy of the return, then any inaccuracy which they would have uncovered if they had done so should be regarded as being a deliberate inaccuracy so far as the taxpayer is concerned. This is simply another way of expressing the proposition set out in Clynes v HMRC [2016] UKFTT 369 (TC) at [86]:
Our view is that, depending on the precise circumstances, an inaccuracy may also be held to be deliberate where it is found that the person consciously or intentionally chose not to find out the correct position, in particular, where the circumstances are such that the person knew that he should do so. A person cannot simply escape liability by claiming complete ignorance where the person clearly knew that he should have taken steps to ascertain the position. We view the case where a person makes such a conscious choice not to take such steps with the result that an inaccuracy occurs, as no less of a "deliberate inaccuracy" on that person's part than making the inaccuracy with full knowledge of the inaccuracy.
[83] From the documents before us, it appears that HMRC started their overt criminal investigation of Mr Arthur’s affairs with a raid on 15 August 2015. We consider, on a balance of probabilities, that Mrs Arthur became aware no later than that date that her husband’s conduct of their tax affairs was perhaps not as proper as it should have been. From that point on, she clearly knew that she should not simply continue to entrust the making of her returns to Mr Arthur without checking them herself." (Arthur v. HMRC [2022] UKFTT 216 (TC), Judge Poole)
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“[112] The Tribunal in Clynes held that a behaviour can be deliberate if a person consciously or intentionally chooses not to find out the correct position.
[113] I find that the principles articulated by Lord Scott relating to blind-eye knowledge are applicable to the subjective assessment of knowledge for the purposes of Schedule 24, and are binding upon me. The fact that the relevant individual in had a professional accounting qualification was not relevant to the decision of the Tribunal, rather it was the fact that the individual consciously and intentionally chose not to find out the correct position.
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[115] Although Mr Bashir may not have filled-in the body of the VAT 7, he does not dispute that he signed and dated it. I find that either he must have had actual knowledge of its contents, or, alternatively, he deliberately refrained from reading it. He was an experienced business person used to dealing with formal documents, and knowing that he should read them before signing them. If in the circumstances of this case he decided not to read the VAT 7 before signing it, I find that his decision not to read it could only have been made - not because he was stupid, naïve or careless - but because, in his own secret mind, he knew it was likely there was something wrong, and if he read it, it would no longer be his suspecting it, but his knowing it.” (Chohan Management Limited v. HMRC [2021] UKFTT 196 (TC), Judge Aleksander)
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- (1) Firmly grounded suspicion targeted as specific facts
"“[41]…Moreover, the imputation of blind-eye knowledge requires two conditions to be satisfied: (i) the existence of a suspicion that certain facts may exist, and (ii) a conscious decision to refrain from taking any step to confirm their existence (see Lord Scott at [112] in Manifest Shipping). The suspicion in question must be firmly grounded and targeted on specific facts, and the deliberate decision not to ask questions must be a decision to avoid obtaining confirmation of facts in whose existence the individual has good reason to believe. Blind-eye knowledge cannot be constituted by a decision not to enquire into an untargeted or speculative suspicion (Manifest Shipping at [116]). Suspicions falling short of blind eye knowledge are relevant in that suspicions of all types and degrees of probability may form part of a person's state of mind, and therefore part of the overall picture to which the objective standard of dishonesty is to be applied. We were told that the UK Supreme Court refused the LLP defendant permission to appeal in Group Seven on the grounds that the applications did not raise an arguable point of law in the light of the recent case law in the UKSC.
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[46] Secondly, the reality of SIB's pleading, looked at as a whole, is that it is alleging gross neglect on a grand scale. This is a case that falls squarely within Lord Scott's strictures in Manifest Shipping. If a plea of dishonesty were to be permitted in these circumstances, it would be to allow blind eye knowledge to be constituted by a decision not to enquire into an untargeted or speculative suspicion rather than a targeted and specific one. It would be to allow gross negligence to be the basis for a finding of dishonesty, which can never be the case.” (Stanford International Bank Limited v. HSBC Bank Plc [2021] EWCA Civ 535)
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[59] The discussions of knowledge by Lord Hoffmann and Lord Millett in Twinsectra indicate that knowledge of a fact may be imputed to a person if he turns a blind eye to it, as Nelson is supposed to have done at Copenhagen, or if in legal parlance he deliberately abstains from enquiry in order to avoid certain knowledge of what he already suspects to be the case. It is convenient to use the expression "blind-eye knowledge" to denote imputed knowledge of this type. In the context of dishonest assistance for breach of trust or fiduciary duty, it was common ground before us, and we consider it correct in principle, to equate blind-eye knowledge with actual knowledge for the purposes of the first stage of the test laid down in Tan and endorsed in Barlow Clowes and Ivey. It is important, however, to understand the limits of the doctrine. It is not enough that the defendant merely suspects something to be the case, or that he negligently refrains from making further enquiries. As the House of Lords made clear in the Manifest Shipping case, the imputation of blind-eye knowledge requires two conditions to be satisfied. The first is the existence of a suspicion that certain facts may exist, and the second is a conscious decision to refrain from taking any step to confirm their existence: see the speech of Lord Scott at [112], and the observations to similar effect of Lord Hobhouse at [25]. The judgments also make it clear that the existence of the suspicion is to be judged subjectively by reference to the beliefs of the relevant person, and that the decision to avoid obtaining confirmation must be deliberate.
[60] Furthermore, Lord Scott (with whose speech Lord Steyn and Lord Hoffmann agreed) said at [116]:
"In my opinion, in order for there to be blind-eye knowledge, the suspicion must be firmly grounded and targeted on specific facts. The deliberate decision must be a decision to obtain confirmation of facts in whose existence the individual has good reason to believe. To allow blind-eye knowledge to be constituted by a decision not to enquire into an untargeted or speculative suspicion would be to allow negligence, albeit gross, to be the basis of a finding of privity. That, in my opinion is not warranted by section 39(5) [of the Marine Insurance Act 1906, which provides that the insurer is not liable for any loss attributable to unseaworthiness where, with the privity of the assured, the ship is sent to sea in an unseaworthy state]."
As this quotation indicates, the issue in Manifest Shipping arose in the context of marine insurance; but the principles there stated apply with equal force to the law of accessory liability, as Lord Hoffmann's reference to Manifest Shipping in Twinsectra at [22] makes clear.” (Group Seven Ltd v. Notable Services LLP [2019] EWCA Civ 614)
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- Questions and concerns not sufficient/not to be equated with negligence
“[129] However we should add that, even if it were open to him on his pleadings (a matter of some debate before us, which it is unnecessary to resolve), we were not persuaded by Mr Parker's alternative argument that all the claimants needed to do in order to prove dishonesty for the purposes of establishing that the Traders dishonestly assisted in the perpetration of a VAT fraud by CarbonDesk's clients was to establish that Mr Gygax had "questions and concerns" about the trading with CarbonDesk which he knew or believed he ought to have brought to the attention of Compliance (Mr Savage). Mr Parker submitted that if a trader has the degree of doubt about the legitimacy of the trading that he (the trader) says would lead him to go to Compliance, and he fails to do so, he is necessarily dishonest. The Judge was therefore wrong to approach the matter on the basis that it was necessary for the claimants to establish that the Traders suspected VAT fraud and deliberately turned a blind eye to it. We reject those submissions. The argument is not supported by the cases that Mr Parker cited, and involves an unwarranted dilution of the correct legal test.
…
[131] At [59] the court expressly endorsed the test for blind-eye knowledge in Manifest Shipping, reiterating that "it is not enough that the defendant merely suspects something to be the case, or that he negligently refrains from making further inquiries." At [60] the court quoted from the passage in Lord Scott's judgment at [116] of Manifest Shipping, where he said that:
"to allow blind-eye knowledge to be constituted by a decision not to enquire into an untargeted or speculative suspicion would be to allow negligence, albeit gross, to be the basis of a finding of privity."” (Natwest Markets Plc v. Bilta (UK) Ltd [2021] EWCA Civ 680)
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- Suspicion of inaccuracy must be more than merely fanciful
"[121] Deliberate behaviour, in this context, requires proof that the taxpayer knowingly provided HMRC with a document which contained an inaccuracy, intending that HMRC rely upon it as accurate. This incudes where a taxpayer suspects that a document contains an inaccuracy but deliberately and without good reason chooses not to confirm the true position before submitting the document to HMRC. However, the suspicion must be more than merely fanciful: CPR Commercials Ltd v HMRC [2023] UKUT 61. As noted in the statement of case, the burden of proof is on HMRC." (BJ Shere Khan Star City Limited v. HMRC [2024] UKFTT 639 (TC), Judge Blackwell)
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- (2) Deliberate decision not to ask questions to avoid obtaining certain knowledge
See quotes above.
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Examples
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- Deliberate choice not to engage with tax responsibilities found to be deliberate
"[52] We consider that even if Mr Milligan did not precisely know what he needed to do with respect to his tax affairs in the tax years in question, despite having previously filed tax returns, Mr Milligan "head in sand" approach meant that he chose to ignore his tax obligations in circumstances where we consider that he at least knew that he should have taken steps to find out what the correct position was with regard to his tax affairs.
[53] That was not merely carelessness. We find that it was a deliberate (but not dishonest) choice not to engage with his tax responsibilities and, instead, prioritise other issues in his life. We find that the behaviour which led to the loss of tax was, therefore, deliberate." (Milligan v. HMRC [2025] UKFTT 498 (TC), Judge Fairpo)
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Deliberateness distinguished
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- Query whether it includes recklessness
"[112] As a matter of the ordinary use of language, the adjectives “deliberate” and “reckless” have different meanings. As one would expect, their ordinary meanings are reflected in dictionary definitions. For example, the Concise Oxford Dictionary defines “deliberate” as meaning “done consciously and intentionally”, and “reckless” as meaning “without thought or care for the consequences of an action”. Those definitions capture the distinction between the two words in ordinary speech."
[...]
[153] For all these reasons, the reasoning of the Court of Appeal in relation to section 32(2) cannot be accepted. “Deliberate”, in section 32(2), does not include “reckless”. Nor does it include awareness that the defendant is exposed to a claim. As Lord Scott said in Cave at para 58, the words “deliberate commission of a breach of duty” are clear words of English. They mean, as he added at para 61, that the defendant “knows he is committing a breach of duty”." (Canada Square Operations Ltd v. Potter [2023] UKSC 41)
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"[47] It may be convenient to encapsulate this conclusion by stating that, for there to be a deliberate inaccuracy in a document within the meaning of section 118(7) there will have to be demonstrated an intention to mislead the Revenue on the part of the taxpayer as to the truth of the relevant statement or, perhaps, (although it need not be decided on this appeal) recklessness as to whether it would do so." (HMRC v. Tooth [2021] UKSC 17)
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"[52] First, the starting point is the natural meaning of “deliberate” acts. This connotes consciously performing an act intending its consequences. It involves a different state of mind to recklessness. For reasons already stated, the relevant act in this case is that of causing injury, so its natural meaning in the present context is carrying out an act intending to cause injury.
...
[55] Fourthly, Mr McBrearty has not been able to show us any case in which “deliberate” has been held to include recklessness.
[56] Fifthly, if, exceptionally if not uniquely, deliberate was intended to include recklessness, one would expect it to be made clear what that means in this context. As is well known, and the cases we have been referred to illustrate, recklessness may be defined in various different ways and the policy provides no clue as to what it should be taken to mean in relation to “deliberate acts”." (Burnett v. International Insurance Company of Hanover Limited [2021] UKSC 12)
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"[7] In summary, HMRC submitted that, properly analysed, the findings of fact were findings that CPR had actual or, at the very least, blind-eye knowledge that the returns submitted contained inaccuracies. Ms Robinson, who appeared for HMRC, was very clear that HMRC had not advanced any case on recklessness before the FTT and did not invite us to consider whether recklessness on the part of a taxpayer might satisfy the 'deliberate inaccuracy' test. (We record that HMRC's acceptance that this is the test goes no further than this particular case)." (CPR Commercials Limited v. HMRC [2023] UKUT 61 (TCC), Miles J and Judge Sinfield)
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[82] There is no direct or definitive authority that the Tribunal has been able to find as to whether reckless behaviour can be equated with deliberate behaviour in the context of Schedule 24. The Tribunal does consider that AS’s failure to actively engage with his responsibilities as a director of a limited company and his blind and unequivocal reliance on his accountants was reckless. Prior to incorporation AS and MS were liable personally for the debts of the business. Incorporation bought the benefit of limited liability. Becoming a director of a limited company brings with it a range of fiduciary duties which it is important to understand. Those fiduciary duties are part of what underpin the benefits of corporate status. AS made no effort to understand what incorporation meant for the business or for him. Significant and material errors were made in the accounts and the letters of representation he signed and for which, as a matter of law, he is responsible. To absolve that responsibility, which rests with him, because he relied on Doshi & Co would create a loophole for unscrupulousness because no one would then ever be responsible to taxpayers generally for gross and obvious mistakes made in accounts.
[83] The Tribunal considers that, at least in the circumstances of this case, it is right that LLL be held responsible for the failures of its accountant and, if appropriate, to take action against Doshi & Co for those failures. Mr Davidson concluded that as regards the accounting treatment of Hazon Way expenditure the accounts was wholly inappropriate and gave rise to materially inaccurate accounts. In oral evidence Mr Davidson stated that, in his view, the accounts did not represent a true and fair view of the position of the company. The error was material. As of 31 July 2011, the debit to the sum shown as other debtors (which should have been debited to the director’s current account) was £178,739 in the context of capital and reserves as at that date of £189,379. It is wrong to expect the state to run the risk that loss of tax arises from gross and reckless incompetence and a failure to produce and sign off accounts which, in the view of the expert witness in this case, do not represent a true and fair view of a company’s trading or balance sheet." (La Luz Residential Home Ltd v. HMRC [2022] UKFTT 100 (TC), Judge Amanda Brown QC)
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"[52] Mrs Skipper also referred us to the First-tier Tribunal cases of Clynes v HMRC [2016] UKFTT 369 (TC) (to the effect that an inaccuracy may be deliberate where it is found that a person consciously or intentionally chose not to find out the correct position, particularly where the circumstances are such that the person knew that he should do so) and Miah v HMRC [2016] UKFTT 644 (TC) (to the effect that an action was deliberate if it had been “thought about”).
[53] It follows from these authorities that, for the purposes of penalties as distinct from the time limits, a deliberate inaccuracy occurs for the purposes of Schedule 24 when a taxpayer knowingly provides HMRC with a document that contains an error with an intention that HMRC rely upon it as an accurate document. Further, an inaccuracy can in some circumstances be held to be deliberate where it is found that the person consciously or intentionally chooses not to find out the correct position, in particular, where the person clearly knew that he should have taken steps to ascertain the position." (Baig v. HMRC [2020] UKFTT 318 (TC), Judge Richard Chapman QC)
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“We consider that deliberate in this contest means that the taxpayer made the deductions or omitted the income while knowing she was not entitled to do so or being reckless as to whether she was entitled to do so. We find that HMRC have not proved that the understatement of the property income was deliberate.” (Vowles v. HMRC [2017] UKFTT 704 (TC), §128, Judge Mosedale).
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- Difference between knowledge, wilful blindness and recklessness
Reckless not the same as blind-eye knowledge
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"As already explained, we do not express any view on whether an inaccuracy that is attributable to recklessness is deliberate for the purposes of the penalty regime because we were not addressed on that point. We determine this appeal on the basis that the deliberate inaccuracy penalty appeal only applies in this case if CPR provided VAT returns to HMRC knowing that they contained errors. In our view, the conclusion that CPR was "at least reckless" is not a finding that CPR had actual or blind eye knowledge of any error in the VAT returns and, accordingly, did not support a finding that CPR was liable to a penalty for deliberate inaccuracy." (CPR Commercials Limited v. HMRC [2023] UKUT 61 (TCC), Miles J and Judge Sinfield)
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Recklessness is taking an unjustified risk despite being aware of it. Wilful blindness involves the conscious decision to refrain from taking steps to confirm the existence of the suspected risk/fact
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"[41] For the reasons I have given I would allow this appeal and quash the appellants' convictions. I would answer the certified question obliquely, basing myself on clause 18(c) of the Criminal Code Bill annexed by the Law Commission to its Report “A Criminal Code for England and Wales Volume 1: Report and Draft Criminal Code Bill” (Law Com No 177, April 1989):
“A person acts recklessly within the meaning of section 1 of the Criminal Damage Act 1971 with respect to —
(i) a circumstance when he is aware of a risk that it exists or will exist;
(ii) a result when he is aware of a risk that it will occur;
and it is, in the circumstances known to him, unreasonable to take the risk.”" (R v. G [2003] UKHL 50, Lord Bingham)
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“But it is perhaps worth remarking, in the hope that it may further allay the anxiety of the council about the enforcement of licensing control of sex establishments, that it is always open to the tribunal of fact, when knowledge on the part of a defendant is required to be proved, to base a finding of knowledge on evidence that the defendant had deliberately shut his eyes to the obvious or refrained from inquiry because he suspected the truth but did not want to have his suspicion confirmed.” (Westminster CC v. Croyalgrange Ltd [1986] 2 All ER 353 at 359 per Lord Bridge - underlining added).
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“It is common ground that the judge's direction and the route to verdict contained a clear misdirection as to the law. 'Knowingly' is something different in law from 'recklessness'. Knowingly connotes something more than mere recklessness. In simple terms, one can be said to know something if one is absolutely sure that it is so. Being reckless, on the other hand, means merely taking unjustified risks (see [2003] UKHL 50; Blackstone para A2.6 and A2.14).” (R v. Godir [2018] EWCA Crim 2294)
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Dishonesty
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- Judge by reference to the standards of ordinary decent people
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"[17] I agree with HMRC's submission that the test to adopt in determining whether dishonesty is established is that set out by the Supreme Court in Ivey v Genting, Casinos (UK) Limited t/a Crockfords [2017] UKSC at [74]:
[...]
[18] I must therefore consider what was Mr Markos's genuinely held belief as to the facts and whether his conduct was dishonest according to normally accepted standards of behaviour." (Markos v. HMRC [2025] UKFTT 401 (TC), Judge Sukul)
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"[15] The tests required to show dishonesty were summarised in Byers v Revenue and Customs Commissioners [2019] UKFTT 310 (TC) ("Byers") as follows:
[142] .... Following Ivey v Genting, the test for dishonesty to be applied in both criminal and civil proceedings is Lord Nicholls' test in Royal Brunei v Tan, as clarified by Lord Hoffman in Barlow Clowes.
[143] Lord Nicholls' test was applied in determining "dishonest" in the context of a penalty under s 60 VATA by Judge Pelling QC (sitting as a High Court Judge) on Sahib Restaurant Ltd v HMRC (Case M7X 090,9 April 2009, unreported):
"in my view, in the context of the civil penalty regime [contained in what was then s 60 of the Value Added Tax Act 1994] at least the test for dishonesty is that identified by Lord Nicholls in Tan as reconsidered in Barlow Clowes. The knowledge of the person alleged to be dishonest that has to be established if such an allegation is to be proved is knowledge of the transaction sufficient to render his participation dishonest according to normally acceptable standards of honest conduct. In essence the test is objective - it does not require the person alleged to be dishonest to have known what normally acceptable standards of honest conduct were."
[144] That the civil test of dishonesty is essentially objective is confirmed by Lord Hoffman is Barlow Clowes, where it is stated at [10]:
"Although a dishonest state of mind is a subjective mental state, the standard by which the law determines whether it is dishonest is objective. If by ordinary standards a defendant's mental state would be characterised as dishonest, it is irrelevant that the defendant judges by different standards."
[145] While the test for dishonesty is primarily objective, Lord Nicholls has remarked on the subjective element that remains relevant to the test as follows:
"Honesty, indeed, does have a strong subjective element in that it is a description of a type of conduct assessed in the light of what a person actually knew at the time, as distinct from what a reasonable person would have known or appreciated. Further, honesty and its counterpart, dishonesty, are mostly concerned with advertent conduct, not inadvertent conduct."
[146] In respect of how this 'subjective element' is to be taken into account by the court, Lord Nicholls' guidance is:
"Likewise, when called upon to decide whether a person was acting honestly, a court will look at all the circumstances know to the third party at the time. The court will also have regard to the personal attributes of the third party such as his experience and intelligence, and the reason why he acted as he did."
[147] A s.61 penalty is predicated on a s.60 penalty being imposable on the body corporate in the first place. Section 60(1) of VAT provides:
"(1)(a) for the purpose of evading VAT, a person does any act or omit to take any action, and (b) his conduct involves dishonesty ..."
[148] It is clear from the statutory wording under sub-s 60(1)(a) that the conduct involving dishonesty is not restricted to the commission of an action, but includes an omission to act. The statutory wording in this regard accords with case law authority on the meaning of dishonesty, as Lord Nicholls in Royal Brunei stated at p106;
'Nor does an honest person in such a case deliberately close his eyes and ears, or deliberately not ask questions, lest he learn something he would rather not know, and then proceed regardless"." (Hanlon v. HMRC [2024] UKFTT 175 (TC), Judge Tilakapala)
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"[134] However, both of those cases applied the test to determine dishonesty in R v Ghosh [1982] 1QB 1053 which has subsequently been superseded (as acknowledged by both parties) by the test set out in Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67 at para 74:
“When dishonesty is in question the fact-finding tribunal must first ascertain (subjectively) the actual state of the individual’s knowledge or belief as to the facts. The reasonableness or otherwise of his belief is a matter of evidence (often in practice determinative) going to whether he held the belief, but it is not an additional requirement that his belief must be reasonable; the question is whether it is genuinely held. When once his actual state of mind as to knowledge or belief as to facts is established, the question whether his conduct was honest or dishonest is to be determined by the fact-finder by applying the (objective) standards of ordinary decent people. There is no requirement that the defendant must appreciate that what he has done is, by those standards, dishonest.”
[135] Notably, Ivey makes clear that there is no requirement that the taxpayer in a case such as this must appreciate that what he has done is, by the standards of ordinary decent people, to be dishonest." (Grantham Ceilings & Interiors Limited v. HMRC [2022] UKFTT 99 (TC), Judge Bowler)
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- Deliberately not asking questions to avoid knowing
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"[12] In Royal Brunei Airlines Sdn Bhd v Tan [1995] 3 All ER 97, Lord Nicholls stated, at [106]:
"In most situations there is little difficulty in identifying how an honest person would behave. Honest people do not intentionally deceive others to their detriment. Honest people do not knowingly take others' property. Unless there is a very good and compelling reason, an honest person does not participate in a transaction if he knows it involves a misapplication of trust assets to the detriment of the beneficiaries. Nor does an honest person in such a case deliberately close his eyes and ears, or deliberately not ask questions, lest he learn something he would rather not know, and then proceed regardless."
...
[35] In applying the relevant test (see [11] and [12] above), we are satisfied that Mr Patel's actions were dishonest. We are satisfied that Mr Patel was aware of the limits and deliberately sought to evade the duties due, or at the very least closed his eyes to the fact." (Patel v. HMRC [2024] UKFTT 80 (TC), Judge Dean)
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- Knowing involvement in and facilitation of orchestrated fraud is dishonest
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"[76] The themes which emerge are: first, that Mr Trees was knowingly involved in facilitating the fraud; secondly, that he took part in orchestrated transactions that he knew were connected to fraud; and, thirdly, that he took steps to conceal the fraud. We find that each of these themes are dishonest by the objective standards of ordinary decent people. This is because each of these themes go beyond knowledge in that they involve active participation in the fraud. This is furthered by the fact that Mr Trees necessarily took the extra step of declaring the transactions and claiming input tax in respect of them, notwithstanding his knowledge about the connection to fraud." (Trees v. HMRC [2024] UKFTT 516 (TC), Judge Chapman KC)
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- Giving implausible evidence is dishonest
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"[101] We find that Mr Trees' conduct in this regard was dishonest by the objective standards of ordinary decent people. In saying that Mr Trees' evidence was "implausible", Judge Mosedale and Mrs Hunter went beyond simply saying that his evidence was unreliable or not accepted. Giving implausible evidence in a witness statement and in oral evidence is dishonest by the objective standards of ordinary decent people as it is an attempt to deceive the tribunal. This is perpetuated by it being inherent in the finding that Mr Trees knew that CCA's transactions were connected to fraud that he also knew that CCA was not entitled to reclaim the input tax. We note that although this was necessarily after the transactions, it is to be seen objectively as an attempt within the CCA Appeal to conceal the fraud." (Trees v. HMRC [2024] UKFTT 516 (TC), Judge Chapman KC)
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- Reclaiming VAT which taxpayer had not paid and knew supplier would not be able to pay is fraud/dishonest
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[158] We were repeatedly told that those involved thought that if the disputes were settled GC would pay Holdings, but that was a very significant caveat. We readily accept that if the disputed money had been received the outstanding amounts would have been paid by GC to Holdings. Furthermore, this is not a case of a pre-planned fraud or an MTIC arrangement. However, making the GC reclaims for VAT which had not been paid to Holdings and which GC knew Holdings would be unable to pay to HMRC given the deep-rooted financial problems was dishonest when the approach required by Ivey v Genting is applied of that of the ordinary decent person." (Grantham Ceilings & Interiors Limited v. HMRC [2022] UKFTT 99 (TC), Judge Bowler)
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- Wilful blindness as dishonesty
"[30] Here, the Appellant's position is, essentially, that he did not know that VAT evasion was taking place. This is, he says, because he entrusted the running of his Company to third parties and assumed and was, at times, told by those third parties, that they were taking the steps necessary to ensure the Company's compliance with its obligations including its VAT obligations. He asks us to believe that he was naive and overly trusting but not at any time dishonest.
[31] Having taken into account the evidence made available to us, we find that HMRC has satisfied us that on the balance of probabilities, the Appellant either (a) was aware of the Company's excise duty and VAT evasion activities, or at the very least (b) chose not to investigate whether the Company was in compliance with its tax obligations (including its VAT obligations) in case he learned something that he would rather not and then proceeded regardless. In either event his behaviour was, we consider, dishonest by ordinary standards or the normally accepted standards of honest behaviour." (Hanlon v. HMRC [2024] UKFTT 175 (TC), Judge Tilakapala)
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- No dishonesty where T intended to declare goods, but prevented by mishandling of bags
"[34] It was always the Appellant's intention to declare the Cigarettes and pay the duty. He has been consistent on this point since his letter of 20 February 2020. Specifically, he intended to collect the Bag, enter the Red Channel, declare the Cigarettes and pay the duty. He had saved half of his money in order to pay the duty. We accept that this was the first time that he had brought cigarettes back from holiday and that he was simply mistaken as to amount of duty payable. The fact that he was mistaken as to the amount of the duty does not negate his intention.
[35] The Bag was mishandled and, consequently, was unavailable for collection on his arrival. He reported the Bag missing. He provided his details. He did not complete a BOR 1422. He did not make any dishonest declaration on a BOR 1422, for example he did not tick the 'No' box on a BOR 1422. He was not asked if he had goods to declare in the Bag. On exiting the Airport, he was entitled to use the Green Channel as he was not carrying any excise goods. HMRC did not provide any evidence of signs at Manchester Airport informing the Appellant of the steps to take to declare goods in mishandled bags. We find that there were no such signs. He left the Airport without the Cigarettes believing that he would declare the Cigarettes and pay the duty on their arrival. This is supported by his telephone call the day after receiving the Bag back, asking to pay the duty and collect the Cigarettes." (Murphy v. HMRC [2024] UKFTT 459 (TC), Judge Newstead Taylor)
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Proving fraud
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- Unlikely that trader would commit audacious fraud right under the noses of HMRC at exquisite risk of being detected
"[221] We stop short of finding that he actually knew because this would necessarily connote, in this case, a finding that Mr Crothers was a fraudster of an especially audacious kind: it would make him a person prepared to commit fraud, over the course of many months, right under the noses of HMRC (and knowing he was under intense scrutiny by HMRC - under extended verification), at exquisite risk of the fraud being uncovered at any moment; and then that he was a person prepared and equipped to brazen it out, even before the Tribunal, throughout the course of a lengthy and searching cross-examination.
[222] We simply do not think that Mr Crothers is that person. We consider him to be a clever and resourceful man, and, if he really were an actual fraudster who wished to cover his tracks, he would have done a better job." (Wholesale Distribution Limited v. HMRC [2024] UKFTT 514 (TC), Judge McNall)
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