TC09617 - [2025] UKFTT 01018 (TC)

Fecha: 13-Jun-2025

Deos’ case on its state of knowledge

Deos’ case on its state of knowledge

110.

Deos submitted that HMRC had no credible basis for alleging that Deos knew the purchases were connected with fraudulent evasion of VAT; and that HMRC could not prove that the such evasion was the only reasonable explanation for the purchases. It submitted that the purchases looked like ordinary, legitimate supplies – there was nothing about them that was inconsistent with ordinary commercial trading

111.

Deos’ submissions included that:

(1)

its pattern of trading with Estanza (e.g. purchases matched with onward sales; goods held in Unicorn) was perfectly commercial;

(2)

its trading in the electronics good market was commercial and entrepreneurial and shared this characteristic with its core business;

(3)

the facts that Estanza started off life as an off-licence in Glasgow, and did not have premises to store large amount of electronic goods, were not un-commercial (and so “suspicious”), given that, from a business perspective, the electronics goods wholesale business (a) did not require the storage of goods, and (b) could be carried on alongside a retail business (as Deos’ own case illustrated);

(4)

there was nothing un-commercial (and so “suspicious”) about the onward sales of the goods being to customers outside the UK (in contrast to the customers of Does’ core business, who were in the UK);

(5)

there was genuine price negotiation as between Deos and its counterparties;

(6)

as regards Deos’ checks on Estanza, HMRC have not established what would have been discovered if Deos had conducted visits or obtained trade references;

(7)

it was Mr Smith’s unchallenged evidence that he had not seen or read HMRC’s “How to Spot Missing Trader Fraud” leaflet until shortly before the 22 June 2022 meeting between Deos and HMRC;

(8)

HMRC’s 21 April 2022 letter to Deos (likely received around 27 April) was a generic letter that did not say that Deos’ purchases were connected with fraud (speaking of not more than a “risk”), and did not mention Estanza;

(9)

RC’s role was very limited;

(10)

at their highest, Mr Smith’s messages with his contact at RCS show that he, at points, became excised in relation to VAT fraud related issues, but that does not mean that Deos should have known the purchases were connected with VAT fraud.