Just Fabulous (UK) Ltd, R (on the application of) v Revenue and Customs

Just Fabulous (UK) Ltd, R (on the application of) v Revenue and Customs

Where HMRC can establish, on objective evidence, that a claimant knew or should have known that their contra-trading transaction was connected with fraudulent evasion of VAT in a defaulter chain, HMRC is entitled to refuse repayment of input VAT claimed, even if the goods are different and the claimant is not a direct party to the defaulter chain. The principle in Kittel applies to contra-trading chains as a matter of law.

Parties
Claimant: Just Fabulous (UK) Ltd; Claimant: Brayfal Ltd; Claimant: Evolution Export Trading Ltd and Greystone Export Trading Ltd; Defendant: HM Revenue and Customs
Jurisdiction
England and Wales
Judgment Date
15 March 2007
Procedural Posture
Judicial Review / Judgment on Preliminary Legal Issue (strike Out Application)
Outcome
Application for strike-out refused; HMRC entitled in principle to refuse repayment of input VAT in contra-trading chains connected with fraud; application for reference to European Court refused.
Legal Topics
VAT Fraud, MTIC Fraud, Carousel Fraud, Contra Trading, Input Tax Deduction, Judicial Review, Legal Certainty, Penalty and Multiple Recovery, Reference to European Court
Tax Law European Union Law Administrative Law VAT Fraud MTIC Fraud Carousel Fraud Contra Trading Input Tax Deduction +4 more

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Parties

Just Fabulous (UK) Ltd

Claimant

Brayfal Ltd

Claimant

Evolution Export Trading Ltd and Greystone Export Trading Ltd

Claimant

HM Revenue and Customs

Defendant

Procedural Posture

Judicial Review / Judgment on Preliminary Legal Issue (strike Out Application)

Legal Issues

  1. 1 Whether HMRC can lawfully refuse to pay input VAT claimed in respect of contra-trading transactions connected with fraudulent defaulter chains, even if the goods are different and the claimant is not a party to the defaulter chain, provided the claimant knew or should have known of the fraud
  2. 2 Whether the principle in Kittel applies to contra-trading chains
  3. 3 Whether refusal to pay in such circumstances constitutes a penalty or multiple recovery

Ratio Decidendi

Where HMRC can establish, on objective evidence, that a claimant knew or should have known that their contra-trading transaction was connected with fraudulent evasion of VAT in a defaulter chain, HMRC is entitled to refuse repayment of input VAT claimed, even if the goods are different and the claimant is not a direct party to the defaulter chain. The principle in Kittel applies to contra-trading chains as a matter of law.

Court Disposition

Application for strike-out refused; HMRC entitled in principle to refuse repayment of input VAT in contra-trading chains connected with fraud; application for reference to European Court refused.

Orders

  • HMRC to reach a decision in all three cases by 30 April, save in the event of material unforeseen circumstances.
  • Provisional date fixed for possible emergency hearing on 3 May at 10:00am.