HM Revenue and Customs v Citibank NA & Anor

HM Revenue and Customs v Citibank NA & Anor

An allegation of actual knowledge under the first limb of the Kittel test does not require HMRC to plead, particularise, or prove dishonesty unless dishonesty is expressly alleged. The procedural safeguards for pleading dishonesty do not apply to classic Kittel allegations of knowledge. The UT and FTT erred in requiring HMRC to plead dishonesty and in ordering wider disclosure based on an incorrect assumption that dishonesty was alleged.

Parties
Claimant/respondent: THE COMMISSIONERS FOR HER MAJESTY’S REVENUE AND CUSTOMS; Defendant/appellant: CITIBANK NA; Defendant/appellant: E BUYER UK LIMITED
Jurisdiction
England and Wales
Judgment Date
29 September 2017
Procedural Posture
Civil Appeal / Court of Appeal Judgment
Outcome
Appeal allowed
Legal Topics
VAT Fraud, Pleading Requirements, Disclosure, Kittel Test, MTIC Fraud
Tax Law Civil Procedure VAT Fraud Pleading Requirements Disclosure Kittel Test MTIC Fraud

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Parties

THE COMMISSIONERS FOR HER MAJESTY’S REVENUE AND CUSTOMS

Claimant/respondent

CITIBANK NA

Defendant/appellant

E BUYER UK LIMITED

Defendant/appellant

Procedural Posture

Civil Appeal / Court of Appeal Judgment

Legal Issues

  1. 1 Does an allegation of actual knowledge under the first limb of the Kittel test require HMRC to plead and particularise dishonesty?
  2. 2 Are HMRC's statements of case against Citibank and E Buyer tantamount to allegations of dishonesty?
  3. 3 Is wider disclosure required in the FTT when dishonesty is not expressly pleaded?

Ratio Decidendi

An allegation of actual knowledge under the first limb of the Kittel test does not require HMRC to plead, particularise, or prove dishonesty unless dishonesty is expressly alleged. The procedural safeguards for pleading dishonesty do not apply to classic Kittel allegations of knowledge. The UT and FTT erred in requiring HMRC to plead dishonesty and in ordering wider disclosure based on an incorrect assumption that dishonesty was alleged.

Court Disposition

Appeal allowed

Orders

  • Citibank case remitted to the FTT for reconsideration of whether further particulars relevant to knowledge should be provided by HMRC.
  • Judge Walters’ orders in the E Buyer case reinstated; no wider disclosure required.