Aleena Electronics Ltd v Revenue & Customs [2015] UKFTT 61 (TC) (11 December 2014)

Aleena Electronics Ltd v Revenue & Customs [2015] UKFTT 61 (TC) (11 December 2014)

The Tribunal held that HMRC was entitled to deny the Appellant's input tax claim because, on the balance of probabilities, the Appellant knew or should have known that its transactions were connected with fraudulent evasion of VAT as part of a contra-trading scheme. The Kittel principle applies to contra-trading, and the right to deduct input tax can be denied even where the tax loss occurs in a different supply chain. The Tribunal found no unfairness in the proceedings sufficient to warrant a decision in the Appellant's favour without a hearing.

Citation
[2015] UKFTT 61 (TC)
Parties
Appellant: Aleena Electronics Ltd; Respondents: The Commissioners for Her Majesty’s Revenue & Customs
Jurisdiction
United Kingdom
Judgment Date
11 December 2014
Procedural Posture
VAT Appeal / First Tier Tribunal (tax Chamber) Substantive Determination After Hearing
Outcome
Appeal dismissed
Legal Topics
Value Added Tax (vat), Input Tax Deduction, MTIC Fraud, Contra Trading, Right to Fair Trial, Due Diligence, Attribution of Knowledge
Tax Law European Union Law Value Added Tax (vat) Input Tax Deduction MTIC Fraud Contra Trading Right to Fair Trial Due Diligence +1 more

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Parties

Aleena Electronics Ltd

Appellant

The Commissioners for Her Majesty’s Revenue & Customs

Respondents

Procedural Posture

VAT Appeal / First Tier Tribunal (tax Chamber) Substantive Determination After Hearing

Legal Issues

  1. 1 Whether HMRC was entitled to deny input tax deduction to the Appellant on the basis that its transactions were connected with fraudulent evasion of VAT (MTIC fraud) and that the Appellant knew or should have known of such connection.
  2. 2 Whether the principle in Kittel applies to contra-trading chains where the tax loss occurs in a different supply chain.
  3. 3 Whether the proceedings were unfair due to the Appellant's lack of legal representation and alleged inequality of arms.

Ratio Decidendi

The Tribunal held that HMRC was entitled to deny the Appellant's input tax claim because, on the balance of probabilities, the Appellant knew or should have known that its transactions were connected with fraudulent evasion of VAT as part of a contra-trading scheme. The Kittel principle applies to contra-trading, and the right to deduct input tax can be denied even where the tax loss occurs in a different supply chain. The Tribunal found no unfairness in the proceedings sufficient to warrant a decision in the Appellant's favour without a hearing.

Court Disposition

Appeal dismissed

Orders

  • The Appellant's appeal against HMRC's decision to deny input tax deduction is dismissed.
  • No order for costs was made.