A tax agent who sought to challenge HMRC’s view that he had engaged in dishonest conduct by creating false invoices to reduce a client’s tax liabilities has lost his appeal at a tribunal
The case concerned Colin Rodgers who acted as tax agent for a Mr Ferguson [Colin Rodgers and the Commissioners for Her Majesty’s Revenue and Customs, [2018] UKFTT 415 TC06617].
A First Tier Tribunal (FTT) heard that in September 2015 HMRC officers met Rodgers and his client as part of investigations into Ferguson’s self-assessment and VAT returns. Rodgers told the officer he had tried to help Ferguson by reducing his VAT liability, so he put in invoices for suppliers which Ferguson had not, in reality, used.
Rodgers admitted that a number of the invoices were false, saying the falsification had begun in 2011 at his suggestion and using his computer.
During subsequent compliance meetings, Rodgers stated that he had created dummy invoices to allow Ferguson to reduce his VAT liability and income tax and class 4 National Insurance liabilities. He had used genuine invoices, kept the letterheads, blacked out the invoice details and photocopied the new details in the dummy document.
The effect of this was to understate Ferguson’s income tax liability by an estimated amount of £10,000 in his self-assessments returns submitted for the years ended 5 April 2012 to 5 April 2014 and to understate Ferguson’s VAT liability by an estimated amount of £12,000 from 2011/12 to February 2015.
Rodgers told HMRC officials that the responsibility would have been his as his client did not have sufficient knowledge to do this and he created the dummy invoices and gave them to his client who authorised submission of the returns knowing that dummy invoices were included.
HMRC issued a conduct notice under FA 2012, Sch. 38, para. 4 determining Rodgers had engaged in dishonest conduct.
Rodgers appealed against this on the grounds that although he assisted his client to understate his tax liabilities, he had not acted deliberately or dishonestly. He also claimed that in a meeting regarding his client’s tax affairs HMRC had given him categorial assurances that neither he nor his client would be a prosecution if he co-operated with their enquiry, and that covered not only criminal prosecution but also civil action such as the giving of a conduct notice. HMRC therefore breached a promise when issuing the conduct notice.
The FTT rejected both these assertions. It found Rodgers did not put forward any explanation as to how he believed his actions to be honest or how objectively they could be considered honest. And based on the evidence the only promise made by HMRC was that Rodger’s client would not be prosecuted (subject to certain exceptions) and therefore no promises were made with regard to Rodgers himself or to civil penalties.
The FTT was satisfied on the balance of probabilities that Rodgers engaged in dishonest conduct as a tax agent with a view to bringing about a loss of tax revenue in the course of assisting his client with his tax affairs. The FTT also found that HMRC acted within their lawful powers when giving the conduct notice based on the repeated admissions Rodgers made as to the creation of false invoices for his client to reduce his tax liabilities.
The FTT accordingly dismissed the appeal.
Colin Rodgers and the Commissioners for Her Majesty’s Revenue and Customs, [2018] UKFTT 415 TC06617 is here
Report by Pat Sweet
