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Case Number: TC09617
Sitting at Taylor House, London EC1
Appeal reference: TC/2022/14040
TC/2023/00376
TC/2023/01175
VALUE ADDED TAX – input tax disallowance – Kittel – taxpayer was small business whose core business was selling and leasing office equipment – in spring 2021, it started trading in ‘grey market’ of wholesale consumer electronic goods – HMRC raised Kittel disallowance of input tax on 18 purchases from single supplier in April and May 2022, and section 69C VATA 1994 penalty – connection with VAT fraud admitted – did circumstances of the transactions give rise to inference that taxpayer knew, or should have known, of connection with fraudulent VAT evasion? – Held: No: transactions had reasonable explanation other than connection with VAT fraud – appeals allowed
Judgment date: 21 August 2025
Before
TRIBUNAL JUDGE ZACHARY CITRON
MR MOHAMMED FAROOQ
Between
DEOS GROUP.CO.UK LIMITED
Appellant
and
THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS
Respondents
Representation:
For the Appellant: David Bedenham KC, instructed by Keystone Law
For the Respondents: Christopher Foulkes of counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs
DECISION
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- 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