Anandpreet Singh Powar v The Commissioners for HMRC

HMRC bear the burden of proof in respect of all of the issues in this appeal, namely:

For these reasons we consider that Mr Powar, and therefore the Company, not only should have known the transactions were connected to fraud but that it is more likely than not that Mr Powar actually knew of that connection.

Whether inaccuracies deliberate

Given our conclusion that Mr Powar knew that the VAT returns submitted to HMRC were inaccurate, it follows that the inaccuracies in those VAT were deliberate.

…the FTT erred in law under Edwards v Bairstow, in that no reasonable tribunal properly directed could have reached the conclusion on the evidence available to it that Mr Powar should have known or did know of the fraudulent VAT transactions.

The Edwards v Bairstow principle is well known and has been summarised in a number of authorities. Briggs J (as he then was) summarised the position in Megtian Ltd (In Administration) v HMRC [2010] STC 840 at [11]:

“The question is not whether the finding was right or wrong, whether it was against the weight of the evidence, or whether the appeal court would itself have come to a different view. An error of law may be disclosed by a finding based upon no evidence at all, a finding which, on the evidence, is not capable of being rationally or reasonably justified, a finding which is contradicted by all the evidence, or an inference which is not capable of being reasonably drawn from the findings of primary fact”.

We are also referred to the well-known decision of the Court of Appeal in Georgiou v Customs and Excise Commissioners [1996] STC 463 (“Georgiou”), in relation to appeals said to involve points of law of the kind identified in Edwards v Bairstow. Evans LJ (with whom Saville and Morritt LJJ agreed) said at 476-478:

“ It is right, in my judgment, to strike two cautionary notes at this stage. There is a well-recognised need for caution in permitting challenges to findings of fact on the ground that they raise this kind of question of law. That is well seen in arbitration cases and in many others. It is all too easy for a so-called question of law to become no more than a disguised attack on findings of fact which must be accepted by the courts. As this case demonstrates, it is all too easy for the appeals procedure to the High Court to be misused in this way. Secondly, the nature of the factual inquiry which an appellate court can and does undertake in a proper case is essentially different from the decision-making process which is undertaken by the tribunal of fact. The question is not, has the party upon whom rests the burden of proof established on the balance of probabilities the facts upon which he relies, but, was there evidence before the tribunal which was sufficient to support the finding which it made? In other words, was the finding one which the tribunal was entitled to make? Clearly, if there was no evidence, or the evidence was to the contrary effect, the tribunal was not so entitled. It follows, in my judgment, that for a question of law to arise in the circumstances, the appellant must first identify the finding which is challenged; secondly, show that it is significant in relation to the conclusion; thirdly, identify the evidence, if any, which was relevant to that finding; and, fourthly, show that that finding, on the basis of that evidence, was one which the tribunal was not entitled to make. What is not permitted, in my view, is a roving selection of evidence coupled with a general assertion that the tribunal's conclusion was against the weight of the evidence and was therefore wrong. A failure to appreciate what is the correct approach accounts for much of the time and expense that was occasioned by this appeal to the High Court”.

In addition to two bundles comprising 10,799 and 2,153 pages respectively, we heard from HMRC Officer Jennifer Howse and Mr Powar.

…

35.Mr Powar, by contrast, was not a wholly reliable witness. Although we very much appreciate the difficulties he faced in representing himself and have taken this into account wherever possible, this does not explain inconsistencies in his evidence and how he was able to provide detailed explanations in relation to some matters, particularly where it supported his case, but could not recall other matters which occurred around the same time that did not. For example, at the hearing he was able to recall discussions, not previously mentioned, that he had had regarding one of his suppliers and the change of its name and trade classification but could not remember why he had told HMRC during a VAT visit that the Company had a 15% mark up when in fact it was around 2% or less.

36. Additionally, his evidence was inconsistent with documentary evidence. For example, in his second witness statement Mr Powar had said that he was not aware of a company, Blueray Enterprises Limited (“Blueray”) even though he had exhibited to his third witness statement an invoice dated 10 June 2013 issued to the Company by Blueray for mixed alcohol at a net cost of £17,490.12. Similarly, in his second witness statement Mr Powar denied ever dealing with Mr Cash & Carry Limited (“Mr Cash & Carry”) despite exhibiting to his third witness statement an invoice that was issued to the Company on 1 April 2013 by Mr Cash & Carry for the sale of mixed alcohol with a net value of £6,586.35. Mr Powar, who at the commencement of his evidence had confirmed that, having checked them, his witness statements were true to the best of his knowledge and belief, was unable to explain these inconsistencies and blamed the solicitors that had previously been acting for him, claiming that although he had trusted them to prepare his witness statements for him he now felt that they had let him down.

Finally, having regard to all of the circumstances we have come to the conclusion, for the reasons explained below, that at the very least Mr Powar, and therefore the Company, should have known that the transactions in question in this case were connected to the fraudulent evasion of VAT.

There was no specific factor or “smoking gun” piece of evidence that led us to this conclusion. Rather, it was the overall circumstances surrounding the deals entered into by the Company and the comparative ease with which it was able to engage in transactions which, in our judgment, were “too good to be true” and bear features that we consider would concern a legitimate businessperson or trader but did not appear to have that effect on Mr Powar.

Firstly, it was not necessary for the Company to source its supplies. These were, on Mr Powar’s evidence, offered to the Company by its suppliers seemingly without much, if any, effort by Mr Powar (see paragraph 58, above). Secondly, Mr Powar appears more often than not to have been able to find customers whose requirements exactly matched the goods the Company had been offered by its supplier (see paragraph 61(4), above). Thirdly, the Company did not add any value to the transactions and there was no commercial reason for its place in the supply chain or any explanation why the suppliers did not deal directly with the customer to which Mr Powar sold the goods on, something Mr Powar could not explain. His only response was to claim that he was running a legitimate business.

Additional reasons include, but are not limited to, the following (and no weight should be attached to the order in which they are listed):

The absence of any commercial documentation, other than invoices, for the transactions (see paragraph 62, above);

The absence of insurance on goods in transit and Mr Powar’s statement that if goods were damaged he would simply tell the supplier, suggesting an improbably high level of trust in contradiction to his earlier evidence that no one trusts anyone in business;

The consistency in the Company’s 2% profit margin irrespective of the product sold (see paragraph 61(5), above);

The payment to suppliers for goods being delayed until funds were received from customers despite invoices containing retention of title clauses (see paragraph 63, above);

The absence of any documentary evidence of any due diligence before 2015 (see paragraph 70, above);

The failure by Mr Powar to engage with and/or take any action in relation to issues raised in the due diligence reports prepared, on his instructions, by a third party, eg the lack of trading accounts which the due diligence report had noted were late (see paragraph 73, above) and the signed indemnity for a different company (see paragraph 74, above) notwithstanding the warning in due diligence that it was the Company’s and therefore Mr Powar’s responsibility to ensure he acted in accordance with the Company’s due diligence policy and objectively consider any risks (see paragraph 76, above);

The fact that the Company traded with AK Suppliers several months before it received a due diligence report on the business (see paragraph 78, above);

The inconsistencies in evidence and new evidence given by Mr Powar at the hearing (see paragraphs 35 and 36, above);

For these reasons we consider that Mr Powar, and therefore the Company, not only should have known the transactions were connected to fraud but that it is more likely than not that Mr Powar actually knew of that connection.

In paragraph 94, the FTT relied on the fact that Mr Powar often found customers matching stock requirements, and that the business allegedly had limited commercial value.

The Appellant submits that his prior warehouse experience allowed him to build commercial connections, enabling him to act as a middleman.

The FTT failed to consider that records existed only for completed transactions, and not for those which did not proceed. This was not indicative of knowledge of fraud.