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The issues for the Tribunal
The issues for the Tribunal
In respect of the input tax denial, there were, in principle, four issues:
was there a VAT loss?
if so, was it occasioned by fraud?
if so, were the purchases connected with such a fraudulent VAT loss?
if so, did Deos know, or should it have known, of such a connection?
In its response to the Tribunal’s Fairford directions in June 2024, Deos accepted that limbs (1)-(3) above were satisfied. This left a single issue for the Tribunal - whether Deos knew, or should have known, that the purchases were connected with the fraudulent evasion of VAT.
As for the penalty, it was agreed that it was contingent upon the validity of the input tax denial.
- 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