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 found that HMRC was entitled to deny the Appellant's input tax claim because 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 legal principles in Kittel and Mobilx apply to contra-trading, and it is not necessary for the tax loss to occur in the Appellant's own supply chain. The Appellant's due diligence was insufficient to override the objective circumstances indicating connection to fraud. The proceedings were not rendered unfair by the Appellant's lack of representation or resources.

Citation
[2015] UKFTT 61
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) Final Decision
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, Proportionality, Principle of Neutrality, Human Rights
Tax Law European Union Law Value Added Tax (vat) Input Tax Deduction MTIC Fraud Contra Trading Right to Fair Trial Due Diligence +4 more

Case Brief

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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) Final Decision

Legal Issues

  1. 1 Whether HMRC was correct to deny the Appellant's right to deduct input VAT on the basis of alleged connection to MTIC fraud via contra-trading chains.
  2. 2 Whether the Appellant knew or should have known that its transactions were connected with fraudulent evasion of VAT.
  3. 3 Whether EU law and domestic law permit denial of input tax deduction in the absence of tax loss in the Appellant's own supply chain.

Ratio Decidendi

The Tribunal found that HMRC was entitled to deny the Appellant's input tax claim because 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 legal principles in Kittel and Mobilx apply to contra-trading, and it is not necessary for the tax loss to occur in the Appellant's own supply chain. The Appellant's due diligence was insufficient to override the objective circumstances indicating connection to fraud. The proceedings were not rendered unfair by the Appellant's lack of representation or resources.

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.