UT/2023/000084 - [2024] UKUT 00382 (TCC)

Under this ground Beigebell argues that the FTT gave insufficient reasons for its finding that Mr Orton had an awareness of MTIC fraud because he had called HMRC’s enquiry line to ask about the reverse charge on SD cards.

The FTT Decision contained a section entitled “MTIC awareness and the reverse charge enquiry” ([265] to [268]). As explained above, the FTT rejected what it saw as Mr Orton’s attempt to dissociate his reverse charge enquiry from the goods in the fraudulent chains. In relation to awareness of MTIC fraud it said:

“267.

We do not find Mr Orton’s assertion of ignorance of MTIC fraud credible. The fact that Mr Orton had the foresight to make the reverse charge enquiry phone call on SD cards is indicative of awareness of MTIC fraud, although we do not equate an awareness of MTIC fraud as synonymous with actual knowledge that the transactions being undertaken were connected with MTIC fraud.

268.

What we find from the reverse charge enquiry specifically on SD cards is that Mr Orton had awareness of MTIC fraud. We also find that the enquiry phone call demonstrates Mr Orton’s acumen as a businessman, competent and with foresight, able to take timely, pre-emptive, and proactive measures as required by a situation if he so applies his mind to do so.”

Mr Brown criticised the FTT’s lack of reasoning. He submitted that the FTT had not explained why it followed from Mr Orton’s reverse charge enquiry that he was aware of MTIC fraud, saying that it was clear from the phone call transcripts that neither Mr Orton nor HMRC had mentioned MTIC fraud during those conversations.

The relevant legal principles concerning adequacy of reasoning were not in dispute. Mr Brown referred to the Court of Appeal’s decisions in English v Emery Reimbold & Strick Ltd [2002] EWCA 605 at [15]-[19] and Weymont v Place [2015] EWCA Civ 289 at [4]–[6]. He correctly points out there is a duty to give reasons, and that those reasons must be adequate and of sufficient detail to explain the decision that has been arrived at in the particular circumstances of the case.

Mr Puzey disagrees that there was any inadequacy in the circumstances of this case which amounted to an error of law. He pointed out the FTT had referred elsewhere in its Decision to other material regarding Mr Orton’s awareness of a public notice on VAT MTIC fraud, and said that this explained the FTT’s finding. However he rightly accepted that the FTT did not refer to that other material in the context of paragraphs [265]-[267].

Mr Puzey’s better point was that the FTT had decided the appeal against the appellant on the basis that Mr Orton had actual knowledge of connection to fraud, whereas the issue of Mr Orton’s awareness was primarily relevant to the “should have known” test, and/or whether there was blind-eye knowledge, and those were matters the FTT had addressed only in the alternative.

In both English v Emery and Weymont it is made clear the focus of adequacy is on the critical reasons which determined the parties’ substantive rights. In the former, the Court of Appeal explained that the judge was required to “identify and record those matters which were critical” to the judge’s decision. In Weymont, the Court of Appeal said at [6]:

“….The process of adjudication involves the identification and determination of relevant issues. But within those bounds the parties are entitled to have explained to them how the judge has determined their substantive rights and, for that purpose, the judge is required to produce a fully reasoned judgment which does so: see English v Emery Reimbold & Strick Ltd. [2002] EWCA Civ 605.” (emphasis added)

Viewed in this context, there is no inadequacy of reasoning which amounts to an error of law. The critical question in the case and the reason why Beigebell’s input tax was denied was a finding Beigebell had actual knowledge. This finding was adequately explained by the FTT. Beigebell was not left in any doubt why it lost on that fundamental point.

We therefore reject this ground of appeal.