CEP4600 - Civil evasion penalties for Customs, Excise and VAT: apportioning penalties to directors and managing officers: legislation

Customs

The power to recover a proportion or all of a Section 25 penalty from directors, managing officers or members is contained in Section 28 of the Finance Act 2003.

Section 28(1) says

Where it appears to the Commissioners:

• that a body corporate is liable to a penalty under Section 25, and
• that the conduct giving rise to that penalty is, in whole or in part, attributable to the dishonesty of a person who is, or at the material time was, a director or managing officer of the body corporate (a ‘relevant officer’),
• the Commissioners may serve a notice under this section on the body corporate and on the named officer.

Subsection (2) goes on to state:

A notice under this section shall state -

• the amount of the penalty referred to in subsection (1)(a) above (‘the basic penalty’), and
• that the Commissioners propose, in accordance with this section, to recover from the relevant officer such portion (which may be the whole) of the basic penalty as is specified in the notice.

Subsection (3) follows:

If a notice is served under this section, this Part shall apply in relation to the relevant officer as if he were personally liable under Section 25 to a penalty which corresponds to that portion of the basic penalty specified in the notice.

A ‘managing officer’ is defined in Section 28(5) of the Finance Act 2003:

In this section a ‘managing officer’, in relation to a body corporate, means any manager, secretary or other similar officer of the body corporate or any person purporting to act in any such capacity or as a director; and where the affairs of a body corporate are managed by its members, this section shall apply in relation to the conduct of a member in connection with his functions of management as if he were a director of the body corporate.

VAT

The power to recover a proportion or all of a S60 penalty from directors, managing officers or members is contained in Section 61 of the VAT Act 1994.

Section 61 says:

• Where it appears to the Commissioners -
  • that a body corporate is liable to a penalty under Section 60, and
  • that the conduct giving rise to that penalty is, in whole or in part, attributable to the dishonesty of a person who is, or at the material time was, a director or managing officer of the body corporate (a ‘named officer’),
  • the Commissioners may serve a notice under this section on the body corporate and on the named officer.
• A notice under this section shall state -
  • the amount of the penalty referred to in subsection (1)(a) above (‘the basic penalty’), and

  • that the Commissioners propose, in accordance with this section, to recover from the named officer such portion (which may be the whole) of the basic penalty as is specified in the notice.

Where a notice is served under this section, the portion of the basic penalty specified in the notice shall be recoverable from the named officer as if he were personally liable under Section 60 to a penalty which corresponds to that portion; and the amount of that penalty may be assessed and notified to him accordingly under Section 76.

A ‘managing officer’ is defined in Section 61(6) of the VAT Act 1994:

In this section a ‘managing officer’, in relation to a body corporate, means any manager, secretary or other similar officer of the body corporate or any person purporting to act in any such capacity or as a director; and where the affairs of a body corporate are managed by its members, this section shall apply in relation to the conduct of a member in connection with his functions of management as if he were a director of the body corporate.