An accountant has lost an Upper Tribunal case against a notice of requirement (NOR) to pay security for PAYE and national insurance contributions (NICs) totalling £78,000
The appellant, Charles Horder, appealed to the UT on the grounds that the First Tier Tribunal (FTT) had erred in law in its decision for permission to appeal out of time.
The NOR made Horder jointly liable to deposit money as security with a company, for whom he was a director, called Quadragina Ltd, which owed amounts in respect of PAYE and NICs arising from employment income paid to staff.
Horder had appealed to the FTT, but not until 14 months after the 30-day deadline. The FTT considered both the question of Horder’s application for a late appeal and the substantive appeal against the NOR.
It considered the principles set out by the UT in Martland v R & C Commrs and decided that the delay in appealing was ‘serious and significant’. Horder then appealed to the UT, which dismissed the appeal.
Horder, who was a qualified accountant, was asked by Yakub Yousef to set up a UK company and for him to carry on this business. Thus, Quadragina, a management consulatancy company, was incorporated on 4 September 2013.
He also asked Horder to be the director of the company, to which he agreed. He arranged for himself and his sister, Jane Horder, to become directors and shareholders of Quadragina.
Horder was not paid for his role as director of Quadragina. It took very little of his time. He opened and operated the company’s bank account, where he paid the staff their salaries and expenses, he also paid rent on the company’s premises and paid some tax to HMRC.
Quadragina’s accounts filed at Companies House showed that as of 31 December 2015, its debt to HMRC for VAT and PAYE and NICs was £16,982.
Draft accounts for the year to 31 December 2017 showed that at the end of 2016, its creditors amounted to £50,998 and at the end of 2017 amounted to £95,485 – comprised almost entirely of PAYE/NICs and VAT.
Quadragina’s outgoings were rent, salaries and expenses. Thus, from the outset, Quadragina accumulated liabilities to HMRC but did not pay them. It was paying its rent and salaries but not its tax.
Horder’s explanation for how he allowed this state of affairs to come to pass was that he was frequently assured by Yousuf that the company had ‘substantial work-in-progress’ and that Yousuf was in the process of collecting the money and the company would shortly have the funds to pay the tax.
HMRC issued a NOR for PAYE and NICs to Quadragina and Horder on 27 February 2018. The NOR required £78,593.47 to be paid to HMRC by 8 April 2018.
On 6 April 2018, HMRC wrote to Quadragina and reminded it of the obligation to make payment in respect of the NOR. It expressly observed that as no payment had been made, Quadragina was liable to prosecution because it had committed a criminal offence.
On 31 May 2018, Quadragina was lent money by a company called Notamvis Ltd, which was controlled by Yousef. The terms of the loan were that £100,000 would be lent.
The date of the loan and the amount of the first instalment were too late and too little to meet the NOR, which required over £78,000 to be paid by 27 May 2018.
Nevertheless, Horder on behalf of Quadragina and out of the funds loaned to it, paid £24,001 to HMRC on 06/18, a further £10,000 on 07/18 and £15,000 on 09/18.
HMRC’s position was that Horder had paid it to HMRC under the wrong reference number and so it had been applied to the company’s outstanding PAYE and NIC debt to HMRC and not in part payment of the security.
On 23 November 2018, the Crown Prosecution Service (CPS) issued a postal requisition to Horder and Quadragina.
The requisitions each contained two charges laid pursuant to section 684(4A) of the Income Tax Act 2003 for separate offences in respect of PAYE and NICs.
In the UT, the tribunal decided that there had been ‘no unfairness’ faced by Horder and that there was ‘no error of law in the FTT’s decision’ to hear the application for permission to appeal out of time.
It also rejected the submission that because the FTT had found that it was ‘very likely’ that Horder would succeed in his substantive appeal, it was in the interests of justice and the overriding objective of dealing with cases fairly and justly for the FTT to grant Horder’s application for permission.
The UT could not see how the FTT had erred in law in its decision concerning its consideration of the likelihood of criminal conviction. Again, the FTT had taken this into account as part of carrying out its balancing exercise in the third stage of the Martland analysis.
Judge Brannan said: ‘There was no unfairness to Mr Horder in the course of action proposed and adopted by the FTT. Indeed, it seemed to us that Judge Mosedale’s course of action of, so to speak, rolling up the issue of the application for permission to appeal out of time with the substantive appeal and hearing both together, was fair to Mr Horder.
‘It gave the FTT a better understanding of the substantive appeal and Mr Horder’s prospects of success when it came to considering whether to grant permission for a late appeal.
‘The FTT’s decision was meticulous in detail and logical in its structure. It discloses no error. We, therefore, dismiss the appeal.’