PLN Analysis

PLN Analysis

Auxilium Project Management Limited v HMRC

This case provides important guidance on how the Tribunal approaches allegations of deliberate penalties. Five critical points emerge from the decision.

1. Definition of Deliberate Inaccuracy

A person commits a deliberate inaccuracy when they know that a document contains an error at the time of its completion. The inaccuracy must be intentional — an honest mistake, however careless, does not meet the threshold for deliberateness.

2. Burden of Proof

The burden of proving that an inaccuracy was deliberate falls on HMRC. It is not for the taxpayer to prove that the inaccuracy was innocent — HMRC must establish that it was intentional.

3. Balance of Probabilities

The standard of proof is the balance of probabilities. HMRC must show that it is more likely than not that the inaccuracy was deliberate.

4. Post-Event Conduct

The Tribunal may consider post-event conduct when assessing whether an inaccuracy was deliberate. How the taxpayer responded after the error came to light can be relevant to determining their state of mind at the time the document was completed.

5. Subjective Assessment

The assessment of deliberateness is subjective. The Tribunal considers the individual circumstances of the person concerned, not what a hypothetical reasonable person might have done.

The Case: Ms Gillian Edgar

Ms Gillian Edgar, director of Auxilium Project Management Limited, omitted output VAT from invoice payments. HMRC alleged the inaccuracy was deliberate and issued penalties accordingly.

The Tribunal found that this was an honest mistake and not a deliberate act. Full mitigation was applied, and the penalty was reduced to zero.

Contact

For further information, contact Liban Ahmed, Director (Serious Tax Disputes), on 07738 666548 or at liban@ctmlaw.co.uk.