UT/2022/000157 - [2024] UKUT 00346 (TCC)

In their written closing submissions Mr Webster and Mr Gurney say:

“Perhaps the clearest evidence of the destination of the alcohol supplied by Global are the payments received from its customers. Putting to one side the funds received from Adrena, which are alleged to relate to the cover loads and which supplies are accepted to have occurred in the EU, Global received substantial sums from the following UK incorporated companies: Ramstrad; Alexsis; Hobbs; Corkteck; Best Buys; Sea Inn Foods; and Universe.

It is the Respondents' case that those payments represent the flow of funds to Global in relation to the alcohol it had supplied, which had eventually been slaughtered in the United Kingdom. The Appellants do not challenge that suggestion, which seems likely, from the evidence before the Tribunal. However, the crucial issue is the location of the supplies of alcohol for which payment was made.”

We agree that that this is indeed the crucial issue given that, as described above, there were undisputed payments to Global from those companies.

At one point in his oral closing submissions Mr McGuinness appeared to suggest that if Global had made the decision to smuggle alcohol into the United Kingdom there could not be any commercial arm's length transaction between Global and any other company, either Adrena or a cash and carry in Calais, as any such transaction would be a sham as this would be the smuggling enterprise in operation. He says the Banjax convictions and the money flows that have been proven to have taken place are "potent evidence" that Global was a smuggler of alcohol that it supplied, not by some innocent intermediary, in the United Kingdom for which it received payments.

When asked by the Tribunal whether by his submission Mr McGuinness meant that, once a decision had been made to smuggle alcohol, any other sale with another company was a sham and should be ignored with the effect that we should find that the goods had been smuggled and sold by Global in the United Kingdom, Mr McGuinness said that there was no evidence of any sale by Global on the continent. He asked rhetorically – what evidence is there that Global sold the goods on the continent? Where is the evidence that Global sold to someone who then immediately themselves or via another intermediary smuggled the goods into the United Kingdom?

He did however, refer to evidence that he said corroborated that the Global was owner of the alcohol saying:

“… moving on now from the SA period to the Global period – when there were seizures during the Global period, the claim to ownership of the seized goods did not come from another entity, it came in each case from Adrena, which, as you know, it is HMRC's case is effectively a company that is controlled by Global, and hence by Mr Malde. So, the proof of the pudding is in the eating. If, as sometimes happens, goods smuggled do not make it in and they are intercepted and then seized, surely one would expect to see the owner of the goods come forward and seek their return? In the earlier period it was always SA, and in the later period it was always Adrena, for the simple reason that Adrena was being used for the purposes of the cover loads.”

However, as Mr Webster submits, even if Global was knowingly involved in illegality by selling alcohol in the European Union to United Kingdom traders, or to an OCG that Global knew intended to smuggle those goods, that is not enough. It is a too broad brush approach. Although HMRC contend that Mr Malde controlled SA and Global and through them Golden Apple, Galac and Adrena and made non-commercial arrangements, in that he is effectively selling to himself, as Mr Webster contends, the choice of SA and Global as the taxable entities is dependent upon a decision to ignore the involvement of the other corporate entities and the reality is that either Golden Apple, Galac and Adrena existed and played their role or, contrary to the evidence, they had no legal existence and can therefore be disregarded.

While there is no evidence before us as to the company law of any of the jurisdictions in which these various companies were established or operated, there is no suggestion that the theory of the effect of incorporation is different and no evidence to support that either. Therefore, it is necessary to treat the various corporate entities as having their own legal identity which cannot be disregarded. Accordingly, and applying the same process as we did with SA, it would appear that Adrena, not Global, owned the alcohol seized in the United Kingdom and that it supplied the alcohol that was sold.

As such, and in the absence of evidence that Global was the owner of the goods that were supplied in the United Kingdom we are unable to find that it was liable to be registered for VAT.