TC09659 - [2025] UKFTT 01211 (TC)

Officer Borland started his investigation on 15 July 2021. He started it because HMRC had established that BTL had made sales of £509,594 in February 2021. This figure was calculated from the invoices HMRC Officers were given by SKM as part of their compliance check of SKM. While we did not have direct evidence from Officer Borland on the point, these invoices must have been the ones sent to HMRC on 7 April 2021 by SKM’s agent as a result of the engagements HMRC had with SKM in March 2021.

BTL submitted a nil return for the VAT periods 11/20 and 02/21, the return for 02/21 being submitted on 21 July 2021 (while Officer Borland did not say so, the normal return date would have been 7 April 2021 so this return was late). For the periods 05/21 and 07/21 VAT returns were not submitted.

Officer Borland attempted to contact BTL by phone and letter without success. In consequence HMRC cancelled BTL’s VAT registration on 29 July 2021.

From the records provided by SKM, Officer Borland determined that BTL traded in scrap metal. This was inconsistent with BTL’s VAT application where the description of the business was “wholesale furniture sales online”. The VAT application gave the main business activity of BTL as “Wholesale of a variety of goods without any particular specialisation (wholesale)” under SIC code 46900.

We found as a fact that there were many SIC codes and it would not be obvious other than to a specialist that the industry code was for one business rather than another (Officer Borland accepted this and indeed he did not know the code for a scrap metal business). Although it was not put to Officer Borland, BTL’s VAT certificate, which was obtained by SKM, stated its business activity was “non-specialist wholesale trade” and its trade classification code as 46900; that was quite a similar code to SKM’s own code of 46770 relevant its business of scrap metal trading.

Within the records provided to HMRC by SKM was an invoice showing that BTL had made a sale to Avon Metals Ltd. Officer Borland was of the view that SKM should not be holding this record, although he accepted in cross examination that there might be innocent explanations for why SKM came to be holding this invoice (e.g. it was sent to SKM in error).

Officer Borland carried out a direct tax check on LP, the sole director of BTL in July 2021, which showed that he was on Employment Support Allowance, with no live employments for a number of years and that he had no Self-Assessment record. There was no employment or self-employment history showing that LP had experience of running a scrap metal business. Together this caused Officer Borland to doubt that it was likely LP could fund a multimillion-pound business. In cross examination, Officer Borland accepted that SKM would not have had access to this information.

Officer Borland’s conclusion during his investigation was that BTL was carrying on a fraud as he could think of no reason other than fraud which would have led BTL not to respond to his inquiries. In the course of cross examination, on behalf of the Appellants it was accepted that the losses caused by BTL were connected with fraud.