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Schofield Sweeney’s Bradford based litigation team has been acting for a company director who has been prosecuted in the Manchester Magistrates’ Court under the VAT Act 1994 and the Customs & Excise Management Act 1979.
The company, of which he was the sole director, got into problems with its VAT payments as a result of trading and cash flow difficulties. HMRC served the company with a Notice under paragraph 4(2) of Schedule 11 to the VAT Act 1994 requiring it to lodge a security with HMRC of over £56,000. The company was not in a financial position to give the security. The legislation provides that it is a criminal offence to supply goods or services without giving the security required by HMRC; in effect the business should stop.
Proceedings were brought against the company because it had continued to trade and make supplies despite the failure to give the security. The director was also prosecuted personally because the legislation makes it an offence for a director to consent to, or connive at, or by his neglect, allow the offence being committed by the company.
The Crown Prosecution Service acting for HMRC initially argued that a fine of up to £5,000 for each supply was the penalty, but was persuaded not to argue that point as the correct penalty was a fine for the single charge brought against him, albeit an unlimited one.
The company went into administration which left only the director before the Court. The Magistrates took account of the fact that he had pleaded guilty and had cooperated with HMRC in its investigation. They also accepted that he had been trying to keep the company going to safeguard jobs and support his family. He was fined £500, with £50 victim surcharge, with no order for costs.
Whilst this power of HMRC is not widely known, the requirement to provide security is being more often deployed and a failure to do so can have severe consequences for a business and those that control it.
If you would like to speak to one of our litigation lawyers about any of the information above, they can be contacted on 01274 306000.