TC09617 - [2025] UKFTT 01018 (TC)

Fecha: 13-Jun-2025

The break in Deos’ trading with Estanza in December 2021-February 2022

The break in Deos’ trading with Estanza in December 2021-February 2022

37.

A few days prior to Christmas 2021, Mr Smith wrote to Mr Javan as follows:

I have had a series of meetings with my accountant about missing traders which I am sure you are aware is rife in the electronics business, especially in Apple AirPods. To protect both of us he has requested that you send over to us at least the last two VAT returns that you have competed along with a redacted bank statement showing the money being returned to HMRC. Please don’t take offence at this request but this will go above and beyond normal due diligence should either of us get investigated and prove to HMRC that we take this type of trading seriously.

38.

Mr Smith chased Mr Javan on 23 December for a response; in the new year, on 10 January, Mr Javan forwarded Mr Smith’s email to Estanza’s (external) accountant, asking for their advice as to what to disclose; Mr Smith spoke directly to Estanza’s accountant on 12 January, again chasing for a response; on 14 January he wrote to Estanza’s accountant as follows, copying Estanza:

How very unprofessional of you not to deliver what you have promised on the phone yesterday morning. You or your client obviously has something to hide or you would have got this information to me in quick time. It takes 5 mins to log onto HMRC and download a copy of the VAT return and the same with your bank account to show a payment going out.

On that basis I am cancelling the order for all the gaming products plus the apple Airpods.

Thanks for bloody nothing and for me wasting several days chasing this and piecing together a deal to sell all these products to my customers.

Well done Estanza and [first name of accountant], give yourself a big round of applause …

39.

On 17 January 2022, just before noon, Estanza’s accountant sent Mr Smith a copy of a VAT return and a bank statement for Estanza showing payment to HMRC of the corresponding VAT (the accountant also gave reasons for the delay in her response, connected to confidentiality precautions around disclosing the information). The enclosed bank statement was for mid-October to mid-November 2021; it showed, unredacted, the name of one of Estanza’s suppliers, WBM Global Ltd; Mr Smith checked and found that WBM Global did not have a valid VAT number (it had in fact been deregistered for VAT with effect from 22 December 2021). Mr Smith then quickly emailed back the accountant as follows:

Thanks for sending this over; however it seems that Estanza’s supplier WBM Global Ltd, do not have a valid VAT number

I am sure you are aware of how missing traders work and I think that maybe you should be checking this for your client.

For these reasons I am cutting my ties with Estanza and I will not be proceeding with any further business.

40.

In a WhatsApp message to Mr Javan that day (17 January 2022) at 12:33 pm, Mr Smith said this:

“I am confident that your supplier is a missing trader as per my email … My advice to you is to get some good advice and get your ducks in a row …”

41.

Mr Javan responded at 12:35 pm that he would be sending Mr Smith an email. Mr Javan’s email, of 4:18 pm, said Estanza had “nothing to hide” and had sent Mr Smith the documents, despite its accountants advising against doing so; it said the payment to WBM Global was not recent; the payment had settled an “old” invoice; it said Estanza had only just found out - from Mr Smith - that WBM Global had been deregistered for VAT; it observed that the deregistration had been extremely recent, in the last few days; it said that Estanza had a commercial dispute with WBM Global and had last bought from them in September 2021 and had cut ties with them some time ago; it said Estanza had no intention to buy from WBM Global again and that decision had been taken “a long time ago”.

42.

Mr Javan’s email went on to say this:

(1)

Estanza spent a lot of time and effort on its due diligence checks, and took them seriously;

(2)

Estanza did regular VAT checks on active customers and suppliers; it validated the authenticity of documents, visited customers and suppliers (reduced due to covid cases and lockdowns), took credit reports and analysed the information, checked the details on its application and followed up with references; Mr Javan felt that Estanza went above and beyond to satisfy itself of the integrity of its supply and customer chain;

(3)

as Deos knew, Estanza started from retail and still had a retail presence in Glasgow; Mr Javan assured Mr Smith that it was here to stay and invited him to visit if he had time;

(4)

Estanza thanked Mr Smith for requesting the documents and information; as Deos had requested that Estanza ask the same of its suppliers, Estanza had done so and implemented the same process for all suppliers going forward.

43.

As a result of these developments, Mr Smith saw to it that Does did not buy from Estanza from 17 December 2021 to 28 February 2022; this was because, in Mr Smith’s words, he wanted “two months of checking [Estanza’s] VAT number” before Deos bought further goods from Estanza. Mr Smith was of the view that if Estanza continued to trade, this was an indication that it was not connected with VAT fraud (presumably because HMRC were not intervening to deregister Estanza).

44.

Deos checked Estanza’s VAT number in late December 2021, twice in January 2022, twice in February 2022, twice in March 2022, three times in April 2022, four times in May 2022, and four times in June 2022. In his witness statement, Mr Smith stated that he checked Estanza’s VAT number regularly “in accordance with HMRC’s own guidance, and also on the assumption that HMRC, as the policeman of the VAT system, would remove the VAT numbers from companies involved in fraud”.

45.

Mr Smith phoned HMRC’s VAT helpline on 10 February 2022 in order, in his words, to “see if they could do any further checks for me”.

46.

The call last just under 13 minutes; the HMRC operator introduced himself as “Andy at the VAT helpline at HM Revenue and Customs”. Mr Smith told the operator that he bought goods from a UK supplier and exported them. He said he wanted to check that his supplier was paying VAT to HMRC, to ensure that he was not involved in a missing trader fraud. The operator’s first substantive response was as follows:

Uh yeah, so yeah this it what I was literally I was check a UK VAT number. If they’ve got a VAT number. Erm I’m just seeing what the other process would be because we could confirm that it is active. So that there’ll be... Normally if…we’ve got our own systems. If we find someone’s not administering VAT properly we can obviously refuse them to use it and stuff like that. So normally if its active – and you would be able to check it on the website - and if you’ve got all the information to satisfy yourself - and like the things you would say they’re not buying unusual amounts of stuff from you. They’re not…you’re aware of where the businesses are - you’re aware where - what they trade as. If you’ve been to their offices. Things like - things to satisfy yourself that it’s not inconsistent with a similar trader that would buy from you - and we do have our own fraud helpline as well that you can maybe speak to too - if you are a bit worried about that. But normally that if they are valid and you’re satisfied with yourself that they’re buying what you would could reason with basically, then as far as I’m aware it should be okay. But I can check and do a MTIC check myself with it.

47.

It is clear from the context that the HMRC operator’s reference to “a MTIC check” in the extract above, was in fact to a check of the validity of a VAT number (which is what the operator went on to do).

48.

When the operator asked whether it was because Mr Smith had reservations about Estanza, Mr Smith responded:

Yeah I’ve got a little bit - I just…I don’t know I’ve just got a gut feeling. My company has been around for 30 years and I don’t want to get, we’ve never been involved in any fraud whatsoever and I just don’t want to get involved in it - if that’s the case.

49.

As the HMRC operator was checking Estanza’s VAT number, Mr Smith said this;

Now I don’t know if this is true or not but I’ve talked to another supplier who does similar business to me - And he said that he’s got an email address or a fax number even, that he emails - you guys - every month to check his suppliers out. Well, if I can have something like that that’ll be brilliant, I could just say look - people - I’ve got cover from the boys from the top then haven’t I?

50.

The HMRC operator said this:

Look this is something I would do myself as a check - that if - if you are concerned that it’s MTIC. But basically, all we’ve checked the VAT number, we’ve checked the address that you’re confirming - and it is a valid number.

….

This is not to say, erm, we’re giving you the go ahead to go on and transact with this company [inaudible] a commercial transaction so that’s up to yourself personally.

51.

The gist of the conversation was that, based on the information he provided, Mr Smith was advised to do “normal” commercial checks on his supplier, and to regularly check the validity of its VAT number. The following extract (just after the HMRC operator told Mr Smith he could not reveal whether Estanza was under investigation by HMRC) illustrates this:

HMRC operator: …but the extent to which, all you need to know is by taking that VAT number, and it’s active - and the other checks that you would do as well, that you would normally do– that erm, you can argue yourself, if someone was to come back and say you’d bought - I’ll just make up a figure, £20,000,000 - and they’re consistently £500,000 did you satisfy yourself that there is a UK address, if it was in the UK. If it was abroad, did you satisfy yourself that it left the country? Just dependent on where their located in the world, and all the normal things you would check.

Mr Smith: But they’re all in - the directors are registered in Glasgow and I’ve even spoke to their accountants. And they’ve verified some stuff for me, and they sent me a copy of their VAT return. But I still got a funny - but I just thought you could say actually no, they’re under investigation - don’t call them. Don’t deal with them, you know but no…

HMRC operator: Yeah well, we will say if its invalid - if it’s not a valid UK VAT number - but it is a valid one. Erm, but where there is going to be a caveat, we’re not saying to go into transactions with them. But it’s a valid VAT number, it’s not like erm…I’ll just double check both systems actually. But I don’t get a lot of calls personally as an advisor about it but generally speaking just make… satisfy yourself as you would do with any other transaction especially if there’s not VAT on it but if it’s like an export or etc, and I’m just putting this as an example but just the normal checks you would do. I’ll just double check actually - and it’s just come up on both systems. I take it when you’ve done it online, it says that it’s a valid UK VAT number?

Mr Smith: Yeah.

HMRC operator: When you’ve done the checks okay so that’s good. So yeah, it’s - as far as I’m aware they’re valid. What I can do is if you’re a bit hesitant - I can give you a reference for the call - to say you called in to double check them on the helpline and you had some reservations about it?