Judgment summary
This appeal concerned a Personal Liability Notice (PLN) issued to Aqsa Khan, sole director of Best Buy Scot Limited ("Best Buy"), making her personally liable for 100% of a penalty of £1,492,869 issued to Best Buy under Schedule 24 to the Finance Act 2007 (para 2).
The penalty was 70% of VAT that HMRC considered Best Buy had failed to declare in its VAT returns for periods 11/20, 02/21 and the final period to 27 April 2021, relating to alleged metal trading of £12,790,032 with Merchant Trader Limited ("MTL") (para 2, 147).
HMRC's case was that the omissions were too large to be careless, so must have been deliberate, and were attributable to the Appellant as sole director and shareholder (para 3). The Appellant's case was that her identity had been stolen and used to "hijack" Best Buy, and that she had no knowledge of or responsibility for the metal trading (para 4).
The Tribunal made extensive findings that Best Buy had no credible trading history as a clothing retailer, that its accounts and VAT registration were not credible, and that the Appellant was not a reliable witness (paras 11-12, 31, 54-55, 74-75, 80, 87). The Tribunal found that the Appellant had not established, on the balance of probabilities, that Best Buy had been hijacked (paras 225-226). The appeal was dismissed (para 229).
Background
Best Buy was incorporated on 7 February 2018, with the Appellant as sole director and shareholder, despite her being in full-time employment at the time (para 26). The Appellant's husband, Mr Sayeed Beg, had traded as a sole trader selling clothing from a unit in Market Village, Forge Shopping Centre, Glasgow, before and after Best Buy's incorporation (paras 15-21, 122).
Best Buy applied for VAT registration on 12 March 2019 on the basis it had passed the compulsory registration threshold, with anticipated turnover of £100,000 (para 78). The Tribunal found no credible evidence that Best Buy ever traded as a clothing retailer at Market Village (para 55) and found Best Buy's filed financial statements for the years ended 28 February 2019 and 29 February 2020 to be inconsistent with the Appellant's own description of the business's finances (paras 74, 86-87).
During the Covid-19 pandemic, Best Buy opened a bank account with Tide Bank on 1 May 2020 in order to apply for a Bounce Back Loan, and received Coronavirus Job Retention Scheme (CJRS) grants that continued to be paid until September 2021, despite the Appellant's evidence that trading had ceased by December 2020 at the latest (paras 97, 117, 126-127).
From 1 November 2020, HMRC identified invoices submitted by MTL as having been issued by Best Buy in respect of metal sales, including one bearing Best Buy's VAT number and a photocopy of what was found to be the Appellant's driving licence, provided by MTL as part of its due diligence (paras 145-149, 154). HMRC issued VAT assessments to Best Buy on 12 January 2022 totalling £2,132,670, and a penalty of £1,492,869 on 16 May 2022, followed by a PLN to the Appellant on the same date (paras 162, 165-166). Best Buy did not appeal against the VAT assessments, and those assessments became final (paras 177, 204).
Core dispute
The core issue was whether the Appellant was liable, under paragraph 19 of Schedule 24 to the Finance Act 2007, to pay 100% of the penalty issued to Best Buy for deliberate inaccuracies in its final three VAT returns (para 212-216).
This required the Tribunal to determine whether those returns contained an inaccuracy amounting to an understatement of liability to tax, whether that inaccuracy was deliberate, and whether it was attributable to the Appellant as an officer of the company (paras 198-216).
The central factual dispute was whether Best Buy's identity had been "hijacked" by an unknown third party who conducted metal trading in its name without the Appellant's knowledge, as she contended, or whether the deliberate inaccuracies were properly attributable to her (paras 4, 217).
Court findings
The Tribunal found that Best Buy filed nine VAT returns, all as nil returns, and that HMRC had established Condition 1 (an inaccuracy amounting to an understatement of liability) because the metal trading underlying the final VAT assessments was established as final due to the absence of any appeal by Best Buy against those assessments (paras 201-206).
The Tribunal found that the omission of £12,790,032 of metal trading sales from the final three VAT returns was too large to be the result of a lack of care, satisfying Condition 2 (deliberate inaccuracy), subject to the Appellant's hijacking defence (paras 209-210).
The Tribunal found that the Appellant was the sole director of Best Buy and the only person entitled to give instructions on the filing of its VAT returns, and that she instructed the filing of the final VAT return, with the first eight returns filed by her, Mr Beg, or both (paras 141, 144, 213).
On the hijacking defence, the Tribunal accepted that it was theoretically possible for a fraudster to have used the Appellant's driving licence and Best Buy's details to trade with MTL, but rejected the Appellant's evidence about how KM (a family friend) came to use her driving licence, finding neither version of her account credible (paras 106, 219, 223).
The Tribunal concluded that there was no credible reason for Best Buy's incorporation, no credible reason for its VAT registration, that its financial statements were not credible, and that the Appellant had shown she was capable of dishonest behaviour, including continuing to claim CJRS payments after she said trading had ceased, and giving an incredible account regarding the Bounce Back Loan application (para 225).
The Tribunal found, on the balance of probabilities, that the Appellant had not established that Best Buy was hijacked (para 226).
Outcome
The Tribunal held that HMRC were entitled to issue the PLN to the Appellant for the deliberate inaccuracies in Best Buy's final three VAT returns, as those inaccuracies were attributable to her as sole director (paras 214-215, 227).
The PLN issued to the Appellant, making her liable for 100% of the £1,492,869 penalty, was confirmed (para 228). The appeal was dismissed (para 229).
Major issues / areas of contention
- Whether Best Buy's final three VAT returns, all filed as nil returns, contained an inaccuracy amounting to an understatement of a liability to tax, given final VAT assessments totalling £2,132,670 (paras 202-206).
- Whether the inaccuracy in those returns was deliberate rather than careless, given the scale of the unreported metal trading of £12,790,032 (paras 207-210).
- Whether the deliberate inaccuracy was attributable to the Appellant as sole director of Best Buy for the purposes of paragraph 19 of Schedule 24 to the Finance Act 2007 (paras 212-216).
- Whether the Appellant discharged the burden of proving, on the balance of probabilities, that Best Buy's identity had been hijacked by a third party (KM or another fraudster) who conducted the metal trading without her knowledge (paras 217-226).
- The effect of the finality of Best Buy's VAT assessments, in the absence of any appeal against them, on the burden of proof in the penalty and PLN proceedings, applying HMRC v Sintra Global and Malde [2025] EWCA Civ 1661 (paras 190-195, 204-206).
- The credibility of the Appellant's and Mr Beg's evidence regarding Best Buy's trading history, VAT registration, financial statements, banking arrangements, and continued receipt of CJRS payments after the business was said to have ceased trading (paras 11-12, 74-75, 127-132, 225).