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August 2021: Deos starts buying from Estanza
August 2021: Deos starts buying from Estanza
After a few months, in August 2021, Thames stopped selling to Deos. Mr Smith understood that this was because the “profit share” arrangement was not earning Thames a sufficient return. In the meantime, Mr Collins at Thames had introduced Deos to IPT/IGT (“IPT”) (international phone trader/international general trader), a subscription-only website for companies trading in the electronics goods industry; it had a trading portal detailing companies’ stock offers. Deos joined IPT in early August 2021; following this, Deos was approached by several companies seeking to trade with it; one of these was Estanza.
Mr Smith’s main contact at Estanza was Ali Javan, a director; he dealt with him via WhatsApp, telephone and Zoom. Mr Smith understood Mr Javan to have been trading in this area for a few years.
Estanza had been incorporated, and registered for VAT, in 2014. The VAT registration document it filed showed its main business as that of a retail off-licence. Mr Javan became a director in 2021.
Deos asked for, and received, various company documents from Estanza. It also carried out basic checks, via readily-available sources of information like ‘Creditsafe’ and Companies House, on Estanza.
The cover letter to Estanza’s ‘trading account application form’, signed by Mr Javan and on Estanza’s headed notepaper (which showed a “Scotland office” in Glasgow and a “London office” in Hemel Hempstead), read as follows:
Situated in Scotland we began our journey in 2014 within the retail industry. With focused effort on making a name for ourselves along with hard work and determination we grew in a short period of time and increased our customer base throughout UK and beyond.
By 2015 we expanded into wholesale and our product ranges to include electronics, medical equipment/products & business supplies which we incorporated into our day to day business. As traders we are experienced in finding the best deals in the market place and passing these savings onto our clients.
With a growing number of customers we were able to procure our products directly from branded suppliers at competitive rates, which we passed onto our customers. Our aim is to be the premier global trading partner of choice across a variety of industries and to have trade partners in every country of the world.
Deos signed Estanza’s terms and conditions of trade on 31 August 2021.
Between August 2021 and 20 May 2022 (Deos’ last purchase from Estanza), Deos bought 32 consignments of stock from Estanza; the purchases were, in effect, the last 18 of these.
- Heading
- These were appeals against HMRC’s
- The issues for the Tribunal
- Evidence
- FINDINGS OF FACT
- The supply chain in relation to the purchases
- Deos and its business
- Spring 2021: Deos starts buying and selling, wholesale, electronic consumer goods like Apple AirPods
- August 2021: Deos starts buying from Estanza
- Deos’ pattern of trading with Estanza
- Examples showing commercial risks taken by Deos in its trading pattern with Estanza
- The break in Deos’ trading with Estanza in December 2021-February 2022
- Things said about VAT fraud in Mr Smith’s WhatsApp messaging with his contact at RCS Holland BV
- Deos and RC
- Deos’ interactions with HMRC concerning VAT fraud
- Estanza’s VAT deregistration and reregistration
- SUMMARY OF RELEVANT LAW
- Mobilx
- Other authorities on Kittel principles
- HMRC’s pleadings
- THE PARTIES’ CASES
- Deos’ general awareness of MTIC fraud
- The suspiciousness of the market in which Deos was dealing
- Inadequacy of Deos’ due diligence and of its “break” in trading with Estanza in December 2021-February 2022
- The unlikelihood of coincidence that so many of Deos’ transactions should have traced to fraudulent tax losses
- Other points
- HMRC’s concluding submissions
- Deos’ case on its state of knowledge
- Deos’ procedural arguments (and HMRC’s response)
- were not mentioned in HMRC’s statement of case, and so should not be considered by the Tribunal, in keeping with the principle in E Buyer of HMRC having to give properly informative particulars of the
- DISCUSSION AND CONCLUSIONS
- Stage 1: persuasive direct evidence of knowledge on the part of Mr Smith?
- Stage 2: were the circumstances of the purchases sufficiently suspicious so as to draw an inference of knowledge (of connection with VAT fraud) on the part of Mr Smith/Deos?
- Stage 3: were the circumstances of the purchases sufficiently suspicious that a reasonable businessperson would have known that they were connected with fraudulent VAT evasion; put differently, was th
- Conclusions