PLN Analysis 2

PLN Analysis 2

Darren Cresswell v HMRC

Darren Cresswell challenged HMRC penalty liability notices (PLNs) totaling £208,207.02. The case illustrates the requirements HMRC must satisfy when issuing deliberate penalties and the consequences of failing to meet those requirements.

Requirements for Deliberate Penalties

For a PLN to be validly issued, HMRC must establish the following:

1. The return contained an inaccuracy — The relevant tax return must contain a material error.
2. The inaccuracy was deliberate — The error must have been intentional, not merely careless or accidental.
3. The appellant caused it — The person against whom the PLN is issued must have been responsible for the inaccuracy.
4. The PLN was validly issued — The notice must have been sent to the correct address and within 13 months of the relevant date.

The Companies

The case involved two companies: We Are Electricals Limited and WAE+ Limited. HMRC alleged that these companies had failed to declare approximately £2.9 million in purchases from Pix Mania, resulting in significant undeclared VAT liabilities.

HMRC’s Failures

The Tribunal identified multiple failures in HMRC’s case:

• No amended accounts produced — HMRC did not produce amended accounts to support their allegations.
• Incomplete VIES documentation — The VAT Information Exchange System documentation relied upon by HMRC was incomplete.
• No evidence the appellant personally prepared the returns — HMRC could not demonstrate that Mr Cresswell himself was responsible for the preparation of the inaccurate returns.
• Incorrect service address — The PLN notices were served to an incorrect address.
• Notices outside statutory timeframes — Some of the PLN notices were issued outside the 13-month statutory time limit.

Outcome

The appeal was allowed. HMRC’s multiple procedural and evidential failures meant that the PLNs could not stand, and the penalties totaling £208,207.02 were set aside.