TC09590 - [2025] UKFTT 00878 (TC)

In respect of the Kittel denial there was, in the end, no issue between the parties that there has been a tax loss as a result of fraudulent evasion and that the Appellant’s relevant transactions were connected with that fraud. We are, accordingly, only required to determine the following two issues:

It was common ground that the relevant input tax was incurred by Appellant on purchases that it made from Red Rose Payroll (WM) Ltd (“WM”) and that the Respondent’s decision to deny RRP this input tax was made on the Kittel basis.

It is accepted that the Penalty decision is parasitic on the Kittel decision. If HMRC fail to prove their Kittel case, the Penalty appeal must also be allowed. If, however, the Respondents are able to prove their Kittel case, the Tribunal must still consider whether it should reduce the Penalty pursuant to s70 VATA 1994.

It is also accepted that the Ablessio de-registration decision is based on the same allegations as the Kittel decision. Therefore, if the Respondents fail to prove their Kittel case, the Ablessio appeal must also be allowed. However, if the Respondents are able to prove their Kittel case, the Tribunal must still consider whether (1) the Appellant was “using its VAT registration solely or principally for abusive or fraudulent purposes” and (2) the Appellant’s de-registration is proportionate.

It follows then that we need, first of all, to consider the two issues set out at paragraph 9 above in relation to the Kittel decision before turning, if necessary, to any other matters.