GMP Baird Ltd & Ors v Revenue and Customs (VAT - allegation of supply chain fraud in scrap deals - Kittel and Mobilx - knew or should have known - heightened awareness of fraud when trading in scrap metal - cavalier attitude towards due diligence - consideration of all of the circumstances of the purchases - no means of knowledge) [2025] UKFTT 1540 (TC) (11 December 2025)

GMP Baird Ltd & Ors v Revenue and Customs (VAT - allegation of supply chain fraud in scrap deals - Kittel and Mobilx - knew or should have known - heightened awareness of fraud when trading in scrap metal - cavalier attitude towards due diligence - consideration of all of the circumstances of the purchases - no means of knowledge) [2025] UKFTT 1540 (TC) (11 December 2025)

The Tribunal found that, although the appellants' due diligence was basic and at times inadequate, HMRC failed to prove that the appellants knew or should have known that their purchases were connected with fraudulent evasion of VAT. The evidence did not establish that the only reasonable explanation for the transactions was fraud, nor that the appellants deliberately ignored obvious signs of fraud. The appellants' conduct, while commercially naive, did not meet the threshold for input tax denial or penalties under the Kittel principle.

Citation
[2025] UKFTT 1540
Parties
First Appellant: G. M. P. Baird Limited; Second Appellant: David Baird; Third Appellant: Elizabeth Baird; Respondents: The Commissioners for His Majesty's Revenue and Customs
Jurisdiction
United Kingdom
Judgment Date
11 December 2025
Procedural Posture
VAT Appeal (first Tier Tribunal, Tax Chamber) / Final Judgment After Substantive Hearing
Outcome
Appeals allowed
Legal Topics
VAT Input Tax Denial, Supply Chain Fraud, Kittel Principle, Due Diligence, Penalties for VAT Fraud, Attribution of Company Conduct to Directors
Tax Law VAT Administrative Law VAT Input Tax Denial Supply Chain Fraud Kittel Principle Due Diligence Penalties for VAT Fraud +1 more

Case Brief

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Parties

G. M. P. Baird Limited

First Appellant

David Baird

Second Appellant

Elizabeth Baird

Third Appellant

The Commissioners for His Majesty's Revenue and Customs

Respondents

Procedural Posture

VAT Appeal (first Tier Tribunal, Tax Chamber) / Final Judgment After Substantive Hearing

Legal Issues

  1. 1 Whether the appellant company knew or should have known its purchases were connected with fraudulent evasion of VAT
  2. 2 Whether penalties on the company and directors were lawfully imposed under sections 69C and 69D VATA 1994

Ratio Decidendi

The Tribunal found that, although the appellants' due diligence was basic and at times inadequate, HMRC failed to prove that the appellants knew or should have known that their purchases were connected with fraudulent evasion of VAT. The evidence did not establish that the only reasonable explanation for the transactions was fraud, nor that the appellants deliberately ignored obvious signs of fraud. The appellants' conduct, while commercially naive, did not meet the threshold for input tax denial or penalties under the Kittel principle.

Court Disposition

Appeals allowed

Orders

  • The VAT assessments and penalties against G. M. P. Baird Limited are set aside.
  • The penalty assessments against David Baird and Elizabeth Baird are set aside.