The role of a Company Director and a Company Officer
In the current case, Mr Malik stated that ‘owners/ managers come and go’ as a result of the business being run as a franchise. Evidence of a number of companies operating from the same address was provided. None had ever registered for VAT. Though dates and names sometimes failed to tally, there were three names that recurred with some persistence: those of Mr Munaim, Mr Malik and one other.
Mr Malik had additional business interests. During the period in question, he was the director of five other companies. One of these was also a pizza business.
Classification of a person’s role in a business
What was Mr Malik’s role within the business? And what evidence did the Tribunal look at to make a decision?
HMRC took the following as instancing a high degree of involvement in the business.
First of all, there was Mr Munaim’s initial oral evidence. When HMRC made their opening move, an unannounced inspection visit to the business, only Mr Munaim was present. Mr Munaim stated that his uncle, Mr Malik, dealt with financial responsibilities.
On being told that Mr Malik recorded sales and other business details, HMRC requested a second meeting with Mr Malik present. At this meeting, Mr Malik explained Mr Munaim’s comments as the result of a young man’s panic, prompting him to say ‘things which were not correct’.
Secondly, there was the existence of Mr Malik’s name on some business correspondence. HMRC spotted a letter starting ‘Dear Fahim/Malik’ from a packaging firm in the course of its inspection. In one case, a third party enquiry also showed him as listed as the contact for the business.
As another instance of a close connection between Mr Malik and Mr Munaim, HMRC cited the fact that HMRC’s PAYE records ‘listed Mr Malik’s National Insurance number against Mr Munaim’s name. There was no explanation as to how HMRC’s systems could allow this to happen but … this must reflect the information … provided to HMRC by the business.’
Thirdly, there was the meeting with HMRC. It was noted here that Mr Malik led in answering questions, despite the presence of a director, Mr Munaim, and his accountant. This created the impression, in HMRC’s eyes, that Mr Malik took a key role in running the business. Their notes of the meeting set out that Mr Malik:
• was usually responsible for cashing up at the end of the day;
• was responsible for administering PAYE;
• reconciled takings between card payments, cash payments and expenditure, and reconciled the order receipts with takings;
• had a detailed knowledge of the ordering system;
• was able to give fairly precise figures for weekly turnover, and could compare this with weekly turnover in the ‘early days’.
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