TC09617 - [2025] UKFTT 01018 (TC)

On the basis of the foregoing analysis, we conclude that Deos neither knew, nor should have known, of the purchases’ connection with fraudulent VAT evasion. This means that the appeals fall to be allowed.

Our substantive conclusion above means that Deos’ procedural points are, in the context of these appeals, academic; in other words, whichever way we rule on those points, these appeals fall to be allowed. We therefore deal with these points relatively briefly.

On the point, based on Ammanford, which would, if Deos’ application were allowed, result in HMRC being barred from arguing “actual knowledge” on the part of Deos, the position in this case is that statement of case states (simply) that Deos had actual knowledge; it does not go on to say either that “someone” at Deos had actual knowledge, or to name such a person. At the same time, the evidence cited in the statement of case is overwhelmingly that of Mr Smith (see paragraphs 11, 12, 13, 16, 19, 21, 23, 24, 155, 160, and 171-176); Ms Stoneman is mentioned, but paragraph 16 of the statement states that Mr Smith was responsible for the purchases. Furthermore, as HMRC point out in their submissions, paragraph 160 of Mr Smith’s first witness statement contains a statement that he rejects HMRC’s assertion that he, Mr Smith, knew of a connection with VAT fraud.

It is our view that, in the particular circumstances of this case, it was clear that HMRC’s case was that Mr Smith had actual knowledge; there was, realistically, no one else they could have had in mind. In that sense, it is distinguishable from Ammanford. Furthermore, we recall that we must exercise the Tribunal’s power to regulate its own procedure, in such a way as to give effect to the overriding objective of dealing with cases fairly and justly; and that an express element of this, in the Tribunal’s procedural rules, is avoiding unnecessary formality and seeking flexibility in the proceedings. There is, realistically, no unfairness or injustice in allowing HMRC to advance a case that Mr Smith was the individual at Deos who knew of the purchases’ connection to VAT fraud: in our view, this was clear to both parties, as is reflected in Mr Smith’s witness statement. It follows that it would be counter the overriding objective to rule, on grounds of lack of formality, that HMRC may not argue that Mr Smith had actual knowledge. We therefore refuse this procedural application on Deos’ part.

On Deos’ other procedural point, it seems to us that the evidence which Deos ask be excluded, to the extent it was evidence adduced by Deos itself in witness statements of Mr Smith (and, prior to that, was not available to HMRC), and HMRC consider that it supports the arguments made in their statement of case, it must be included. It seems to us that HMRC have provided the “properly informative particulars of the allegations” as required by E Buyer; to the extent new evidence provided by the appellant, in HMRC’s view, further supports the allegations, it would be “unnecessary formality” (in the words of the Tribunal’s procedural rules, as just cited) to require them to amend the statement of case – and unfair, in our view, if, without such amendment, the evidence was available to support the appellant’s case, but couldn’t be referred to in HMRC’s.

On the other hand, if the evidence in question was in fact adduced by HMRC, or was available to HMRC when they drew up their statement of case, then it seems to us fair and just to require HMRC to seek to amend their statement of case, if they wish to rely on it.

This means that we refuse Deos’ procedural application in relation to communications between Deos and its customers and/or suppliers, but allow it in relation to evidence about RC and HMRC’s 21 April 2022 letter to Deos.

Following our conclusion set out at [134] above, the appeals against the input tax denials are allowed; and, as a consequence, the appeal against the penalty is also allowed.

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.