Microring Limited v The Commissioners For HMRC

Microring Limited v The Commissioners For HMRC

The Tribunal found that Micro’s transactions were back-to-back, risk-free, and generated a consistent 1% margin with no commercial justification, involving counterparties about whom Micro knew nothing substantive. Micro ignored explicit HMRC warnings about VAT fraud and failed to conduct meaningful due diligence. The only reasonable explanation for the circumstances was that the transactions were connected with fraudulent VAT evasion, and Micro should have known this. Therefore, input tax was properly denied.

Parties
Appellant: Microring Limited; Respondents: The Commissioners for His Majesty’s Revenue and Customs
Jurisdiction
England and Wales
Judgment Date
30 September 2024
Procedural Posture
Tax Appeal / First Tier Tribunal Judgment
Outcome
Appeal dismissed
Legal Topics
Value Added Tax, Input Tax Disallowance, Kittel Principle, Fraudulent VAT Evasion
Tax Law Value Added Tax Input Tax Disallowance Kittel Principle Fraudulent VAT Evasion

Case Brief

Summary, issues, holding and outcome

More case intelligence is available

Unlock the full research layer for this judgment.

Full judgment text Downloadable case file Legal principles 3 Authorities cited 7 Party arguments 2 Amounts and remedies 1
Sign in to unlock

Parties

Microring Limited

Appellant

The Commissioners for His Majesty’s Revenue and Customs

Respondents

Procedural Posture

Tax Appeal / First Tier Tribunal Judgment

Legal Issues

  1. 1 Whether the appellant knew or should have known that its purchases were connected with fraudulent VAT evasion, thereby disentitling it to input tax deduction under the Kittel principle.

Ratio Decidendi

The Tribunal found that Micro’s transactions were back-to-back, risk-free, and generated a consistent 1% margin with no commercial justification, involving counterparties about whom Micro knew nothing substantive. Micro ignored explicit HMRC warnings about VAT fraud and failed to conduct meaningful due diligence. The only reasonable explanation for the circumstances was that the transactions were connected with fraudulent VAT evasion, and Micro should have known this. Therefore, input tax was properly denied.

Court Disposition

Appeal dismissed

Orders

  • Input tax denial of £310,184 upheld
  • No further relief granted