TC09617 - [2025] UKFTT 01018 (TC)

would not have found it particularly odd or un-commercial that Mr Smith had not visited Estanza’s premises or taken up its trade references; the reasonable businessperson would have recognised, and approved, Mr Smith’s observation that such things were unlikely to reveal more than had been picked up through regular contact with Mr Javan by telephone and Zoom, over the 9 months of their trading (with the 2 month break) preceding the purchases; in short, if Estanza was dissembling, it could equally have done so in the course of such further “checks”;

would have recognised that Mr Smith overestimated the significance of whether Estanza had been deregistered for VAT (as there are all sorts of reasons why it would take time for HMRC to investigate and then take that step); but the reasonable businessperson would also have recognised the cogency of Estanza’s 17 January 2022 written response to Deos’ concerns: the letter gave a logical and plausible explanation as to why Estanza’s dealings with WBM Global had ceased some months before and why it had not been aware of WBM Global’s VAT deregistration (namely, because it was no longer trading with it); equally, it gave a fluent description of the checks it did on its suppliers and customers; it was not a letter that, in our view, would support an inference that a reasonable businessperson receiving it would know that Estanza was connected with VAT fraud; the reasonable businessperson would also have recognised that, despite Mr Smith’s impatience, Estanza’s response to Deos’ pre-Christmas request had not been unduly slow, given the holiday period and the fact that Estanza’s accountant need to assure itself, reasonably, around the confidentiality of the information disclosed;

would accept that there had been a meaningful ‘break’ between Deos and Thames: suspicious though the initial introduction to the market by Thames had been, by the time of the purchases, Deos had not traded with Thames for nine months and had effectively sourced its own suppliers and customers; the suspiciousness of Thames, and the fact that it came under HMRC investigation in December 2021, were too ‘remote’, in our view, to support an inference on the part of a reasonable businessperson, on the basis of these circumstances, that the purchases were connected with VAT fraud;

would have recognised that the remaining general concerns about the ‘grey market’ in consumer electronic goods, including Deos’ haziness about its precise role in the value chain, and the small number of fakes in certain shipments to RCS, whilst giving rise to a risk of connection with VAT fraud (when participating in that market), were not specific or detailed enough to support an inference that the purchases were connected with VAT fraud.