TC09659 - [2025] UKFTT 01211 (TC)

Miss Brown urged upon us that there were numerous issues with invoices which called into question the validity and commercial legitimacy of the transactions. These include undated invoices; duplicate invoice numbers; invoices not in numerical order; invoices containing profanities; different bank account details on some invoices; and the presence of an invoice from BTL to its customer, Avon Metals Ltd in SKM’s records.

Miss Brown suggested that the issues with the invoices were indicative of actual knowledge; she suggested SKM knew that the transactions were connected to fraud or turned a blind eye, so that it did not matter to them that the invoices were littered with issues. If they were not sufficient to amount to actual knowledge, then they amounted to constructive knowledge.

In his oral evidence Officer Pathak gave his opinion that in his experience invoicing errors of the kind in these invoices indicated fraud. It was put to him that the errors simply showed informality not fraud, but he maintained that in his experience and looking at the wider picture the errors did show fraud and that SKM knew, or should have known, that they were participating in a fraud. We accepted that this was his experience, but treated this with caution given that he was not providing expert evidence.

SF’s evidence that his main interest was in the description of the goods and their value rather than other aspects of the invoices and that he was not suspicious about invoices which contained what he regarded as minor errors. SKM’s accountant raised with SF issues with some of the invoices, the issue being that they were not in numeric order. In turn this had been raised with BTL and thereafter the invoices were in numeric order. SF’s evidence was that there was nothing in the invoices that had caused SF to be concerned that BTL was engaged in a fraud.

On balance we agreed with Miss Sheldon that, while errors in invoices probably indicated a lax attitude to VAT compliance, they did not necessarily indicate fraud. Indeed, errors in invoices do not assist in carrying out fraud. We considered that a careful fraudster might issue perfect invoices (indeed it would be in their interests to do so), whereas an honest but chaotic business might issue invoices with errors. Having ourselves received invoices in error from legitimate businesses (including invoices addressed to third parties sent in error and invoices wrongly describing the goods or services provided) we did not consider this point on its own materially assisted HMRC’s case.