JJ Wholesale Ltd v Revenue & Customs [2012] UKFTT 616 (TC) (19 September 2012)

JJ Wholesale Ltd v Revenue & Customs [2012] UKFTT 616 (TC) (19 September 2012)

The Tribunal found that the Appellant's transactions were part of a highly orchestrated scheme to defraud the Revenue, lacking commercial rationale and exhibiting features of contrived deal chains, circular money flows, and close relationships between parties. The Tribunal was satisfied, on the balance of probabilities, that the Appellant knew or should have known that its transactions were connected with fraudulent VAT evasion. The legal test for knowledge is the same in contra-trading and direct tax loss chains. The Appellant's trading did not exhibit characteristics of legitimate grey market activity.

Citation
[2012] UKFTT 616 (TC)
Parties
Appellant: Appellant; Respondent: HMRC
Jurisdiction
United Kingdom
Judgment Date
19 September 2012
Procedural Posture
VAT Appeal / Final Judgment
Outcome
Appeal dismissed
Legal Topics
VAT Fraud, MTIC Fraud, Input Tax Deduction, Contra Trading, State of Knowledge, Evidence Assessment
Tax Law European Union Law VAT Fraud MTIC Fraud Input Tax Deduction Contra Trading State of Knowledge Evidence Assessment

Case Brief

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Parties

Appellant

Appellant

HMRC

Respondent

Procedural Posture

VAT Appeal / Final Judgment

Legal Issues

  1. 1 Whether the Appellant's transactions were connected with fraudulent VAT evasion
  2. 2 Whether the Appellant knew or should have known of the connection to fraud
  3. 3 Whether the legal test for knowledge differs in contra-trading situations

Ratio Decidendi

The Tribunal found that the Appellant's transactions were part of a highly orchestrated scheme to defraud the Revenue, lacking commercial rationale and exhibiting features of contrived deal chains, circular money flows, and close relationships between parties. The Tribunal was satisfied, on the balance of probabilities, that the Appellant knew or should have known that its transactions were connected with fraudulent VAT evasion. The legal test for knowledge is the same in contra-trading and direct tax loss chains. The Appellant's trading did not exhibit characteristics of legitimate grey market activity.

Court Disposition

Appeal dismissed

Orders

  • The Appellant's appeal against HMRC's denial of input tax is dismissed.
  • The Appellant is not entitled to deduct input VAT on the disputed transactions.