UK drinks company to be liquidated after selling wine ‘off the books’
A London wholesaler was snared by tax authority HMRC after buying more than 9,700 cases of wine “off the books”, sparking a legal debate over whether a “deliberate” omission is the same as a “dishonest” one.
New Claire Wine in south London appointed liquidators on 19 May to dissolve the company following a tax probe that revealed “severe discrepancies” in the company’s stock.
His Majesty’s Revenue and Customs (HMRC), the UK government department responsible for collecting taxes, discovered that more than 9,700 cases of wine had been bought off the books, with major omissions in record-keeping and “significant off-record sales” diverted to New Claire Wine’s two directors as “advances”.
The discrepancies first came to light in 2024, at which time HMRC slapped the wine supplier with a back tax claim of £427,310. New Claire Wine then appealed the decision, but its appeal has now been rebuffed, with a tribunal ruling that the firm’s book-keeping inaccuracies were deliberate, and more than just poor record-keeping.
However, the case gives rise to a more complex argument about ‘intent’.
Deliberate Vs dishonest
Initially, HMRC treated the omitted company sales as “funds misappropriated by the director”. According to Companies House there are two directors listed for New Claire Wine – Bhim Bhattachan and Kul Bahadur Paudel.
Crucially, the tax penalties issued were based on “deliberate but not concealed behaviour” by New Claire Wine.
An informative report by tax writer James Johnson explains that New Claire Wine had been allowed to appeal the decision on the grounds that the initial tribunal hearing had erred in finding that the company had acted deliberately, tantamount to dishonesty, which HMRC had not accused them of at the time.
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“In law, the accusation of dishonesty would allow New Claire Wine the safeguards available as outlined by the supreme court in TUI vs Griffiths [2023] UKSC 48,” wrote Johnson.” This would have required HMRC to plead dishonesty and give New Claire Wine the opportunity to rebuff those accusations and cross-examine witnesses”, a chance the wholesaler did not get.
Terminology matters
“Deliberate conduct” involves at least an intention to mislead HMRC. This may involve dishonesty, but not necessarily.
And here lies the crux of the matter.
In the initial hearing, HMRC outlined to the court that New Claire Wine’s directors knew that their tax returns were inaccurate and that there was no need to allege dishonesty. However, New Claire Wine batted back that the tribunal could not have reached the conclusion it did without an implicit admission that the directors’ behaviour was dishonest. The wine company said that the tribunal should have explained this.
This week, a second court dismissed New Claire Wine’s appeal, ruling that the issue at hand was whether inaccuracies were “deliberate or careless”, not whether New Claire Wine had been “dishonest”. No explanation, therefore, had been required of HMRC.
As Johnson summarised: “New Claire Wine profited from off-book sales, and HMRC viewed that as deliberately misleading. New Claire Wine, on the other hand, believed that was the same as dishonesty, requiring HMRC to plead that at the tribunal.”
Ultimately, the case highlights the increasing importance of semantics within tax prosecution and reveals the potential language-based loopholes that businesses can exploit.
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