Chaudhry v Revenue & Customs

A late appeal against a notice requiring security for VAT does not create a defence to criminal proceedings merely because the tribunal accepts and acts on the appeal. Any legitimate expectation generated by official guidance is confined to appeals lodged within the prescribed period.

Corporate criminal liability provisions may extend to a person who is not formally a director but purports to act in that capacity. A notice addressed to the company and directed to the attention of its directors may sufficiently notify such a person where he is running the company and has actual or constructive knowledge of the notice.

The appellant was prosecuted following taxable supplies made by a company after it failed to provide security required for VAT purposes. Although he had resigned as a formally appointed director, he admitted running the company and managing its accounts, bookkeeping, invoices and VAT affairs.

The case was stated by a district judge sitting at the magistrates’ court. The Divisional Court considered whether a late appeal against the security requirement suspended the possibility of prosecution, whether the appellant could be prosecuted as a person purporting to act as a director, and whether a reference to the European Court of Justice was required.

1. Appeal dismissed. The late notice of appeal did not provide a defence to either charge. There was no statutory provision giving an appeal against a notice requiring security a suspensory effect.

2. Official guidance, Notice 700/52, could ordinarily generate a legitimate expectation that Customs and Excise would not prosecute where an appeal was lodged within the 30-day period. That expectation did not extend to an appeal lodged outside the prescribed period, even though the VAT Tribunal accepted and acted upon it without objection. Customs and Excise remained free not to prosecute, but were not legally expected to refrain from doing so.

3. Section 171(4) of the Customs and Excise Management Act 1979 applies not only to a formal director, manager or similar officer, but also to a person purporting to act in such a capacity. The appellant was therefore capable of liability because he was acting as a de facto director or manager while the company made taxable supplies.

4. The notice requiring security was sufficiently addressed. A notice addressed to the company and marked for the attention of its directors was capable of notifying anyone running the company or purporting to act as a director. The appellant had, at minimum, constructive knowledge and, on the findings, actual knowledge. The district judge was therefore entitled to conclude that the notice bound him and that he was criminally liable if he continued trading in the relevant capacity.

5. The proposed European reference was not pursued. In any event, the court considered that no question of sufficient difficulty arose to justify a reference. Costs were awarded to the respondent, not to be enforced without further order.

• High Court (Administrative Court): On a case stated by District Judge Cadbury sitting at Sutton Coldfield Magistrates’ Court, the appeal was dismissed.
• Sutton Coldfield Magistrates’ Court: The district judge determined that the appellant could be prosecuted under section 171(4) and that the late appeal did not prevent prosecution.