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Examples showing commercial risks taken by Deos in its trading pattern with Estanza
Examples showing commercial risks taken by Deos in its trading pattern with Estanza
Deos’ practice of lining up on onward buyer before purchasing from Estanza, was not foolproof. In March 2022, a Spanish customer of Deos’ agreed to buy €324,000 worth of electronic goods from Deos, but, after Deos had acquired (and paid for) the goods from Estanza, the customer defaulted on payment, leaving Deos to find an alternative buyer and agree a price.
It was perfectly possible for Deos to sell on to someone other than the onward buyer it initially lined up, if necessary. This happened in the purchase labelled “6” in the table above, as follows:
Deos finalised the purchase of 246 cameras from Estanza on 9 April 2022;
the cameras were satisfactorily inspected by Unicorn on 19 April;
Deos paid Estanza €82,065 for the cameras on 19 April; the goods were then the property of Deos and held in Unicorn;
Deos’ intended customer for these cameras was Flashtech GmbH;
Flashtech was late in paying for the goods; despite numerous requests it wasn’t until 18 May 2022 that Flashtech paid for 50 cameras, a sum of €14,350; Deos arranged for the transport of those 50 cameras to Flashtech;
Following further negotiation, Deos sold the remainder of the cameras to Turan Trade SRO on 27 June 2022 for €52,920; Turan Trade paid Deos on 29 June;
the overall figures for the trade were:
net purchase price (from Estanza) - €68,388
amount Flashtech initially indicated it would pay - €70,848
actual realised sale price - €67,270
actual loss - €1,118
time to realise onward sale - 81 days.
- 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