Upper Tribunal Tax and Chancery Chamber

UT/2024/000069 - [2025] UKUT 00236 (TCC)

Fecha: 23-May-2025

HMRC’s appeal on the application of the Ablessio principle

HMRC’s appeal on the application of the Ablessio principle

Preliminary observations

28.

We start with HMRC’s appeal in relation to the Ablessio principle. We do so because that is the necessary context for the determination of the pleading issue. If, as we consider is the case, it is sufficient for HMRC to establish that there has been a fraud without a need to establish that the person being de-registered for VAT knew, or should have known, of the fraud and without having to prove that any other, identified person was fraudulent, that legal test is plainly relevant to the sufficiency of the pleading in this case. Much of the case advanced by the Lead Appellants turned on the alleged need for HMRC to show that the MUCs knew of the fraud or that some other person knew of the fraud in circumstances where the knowledge of the fraud of that other person could be attributed to the MUCs. We do not accept either of those propositions.

29.

Moreover, it is only in relation to the Ablessio principle for which the existence of a VAT fraud is directly relevant to the legal question. By contrast, whether or not a taxpayer is entitled to use the FRS, or is entitled to use the employment allowance, does not depend on the existence of a fraud and, moreover, does not depend on the state of mind of the taxpayer concerned. The legal tests are addressed at very different matters:

(1)

in the case of the FRS, the entitlement rests on (so far as relevant to this appeal) whether or not the taxpayer using the FRS is associated with others by reference to the relationships which the taxpayer has with those others; and

(2)

in the case of the employment allowance, the entitlement rests on (so far as relevant to this appeal) whether there are arrangements the main purpose, or one of the main purposes, of which is to secure that a person benefits, or benefits further, from the application of the employment allowance provisions.

30.

Of course, it is open to HMRC to rely (as they did in this case) on the same facts, or the same inferences from the facts, alleged to support a finding of fraud for the Ablessio issue to justify the decisions made in relation to the FRS and the employment allowance. But if the pleading is sufficient for the Ablessio issue, it would, in our view, follow that it is also sufficient for the purposes of the FRS and the employment allowance.