Freeths win landmark £25m tax fraud case against HMRC

Law firm Freeths has won a historical tax fraud case, Sintra Global and Malde v HMRC [2022] UKFTT, the largest tribunal case of its kind.

The Tax Tribunal ruled HMRC’s use of its best judgement analysis in arriving at the value of assessments and penalties levied against the claimant was a serious failure by HMRC to “consider or even evaluate the material” that was before them.

The court agreed with Freeths’ client, Parul Malde, who had campaigned for over seven years, assisted by his tax adviser, Steve Simmonite of SKS (GB) Limited, to clear his name, that HMRC’s approach to the case was “myopic”.

In the judge’s view, the officer who raised the assessments and penalties allowed his suspicions to generate a fixed view of the case, which led to critical evidence being ignored.

A series of assessments and associated personal penalty notices of up to £25m were raised by HMRC in 2015 against Malde. They concerned alcohol allegedly smuggled into the UK between 2004 and 2014 by two companies, Sintra SA and Sintra Global, who were registered in Belize and Panama respectively.

The penalties were raised against Malde based on the allegation he was a director of both businesses and had imported and sold alcohol into the UK without accounting for VAT and duty. As a result, his assets were frozen for over seven years, one of the longest injunctions in history, resulting in severe reputational damage.

Malde appealed against the assessments and penalties on the grounds he was neither a director or a shadow director of the companies and that there was no evidence the companies had ever traded in the UK and therefore could not be liable to UK VAT and Excise Duty.

Judge Brooks upheld all appeals, finding the evidence from HMRC “frequently evasive, often obstructive and on occasions inconsistent, contradictory and misleading”.

Simon Ellis, Freeths commercial dispute resolution director, commented: “This case is of critical importance in highlighting the necessity for very detailed forensic preparation by SKS (GB) Limited and the Freeths team representing Appellants.

“In this appeal, HMRC relied on over 100,000 documents in support of their allegations produced by 51 witnesses. In July 2015, HMRC applied for and obtained a worldwide Freezing Order against the Appellant which has now been in place for over seven years and is one of the longest running Freezing Orders on record. This has caused significant harm to the Appellant both in his personal and business life. The Freezing Order was made on the basis of an affidavit, made by a senior officer, of over 350 pages in length. On its face the evidence against the Appellant seemed overwhelming.

“However, through a painstaking analysis of the evidence a picture emerged of HMRC’s officers being highly selective in their use of evidence to support their version of the case and ignoring and, in some circumstances, resisting disclosure of evidence that undermined their case. Through a combined team effort we were able to seriously undermine HMRC’s version of events and to challenge its credibility at trial. Recognising this, Judge Brooks adopted the Appellants’ closing submissions in his judgement to the effect that:

“The problem is that much of the above demonstrates – and clearly demonstrates, in our submission – that suspicion generated a fixed view as to the involvement of Mr Malde and a determination to make him pay which blinded the officers to the defects in their analysis. A fixed view was arrived at, despite the difficulties with the evidence, and has been persisted with from relatively early in the investigation".

“Appellants should therefore not be afraid to challenge HMRC’s officers’ version of events and be prepared to put them to strict proof. It is also to be hoped that HMRC will accept in future appeals that the public interest is not always best served by pursuing its desired result with tunnel vision, but by pursuing cases in a fair and reasonable manner.”