BTS Specialised Equipment Ltd & Anor v Revenue & Customs [2015] UKFTT 136 (TC) (24 March 2015)

BTS Specialised Equipment Ltd & Anor v Revenue & Customs [2015] UKFTT 136 (TC) (24 March 2015)

The Appellants had actual knowledge that their transactions were connected with the fraudulent evasion of VAT. Their due diligence procedures were superficial and ineffective, serving only as window dressing. The trading patterns, profit margins, and orchestration of deals demonstrated that the Appellants were pivotal participants in both direct tax loss and contra-trading frauds. The denial of input tax deduction was lawful under the Kittel principle, as the Appellants knew or should have known of the connection to fraud.

Citation
[2015] UKFTT 136
Parties
Appellant: BTS; Appellant: NTS; Respondent: HMRC
Jurisdiction
United Kingdom
Judgment Date
24 March 2015
Procedural Posture
VAT Input Tax Appeal (mtic Fraud) / First Tier Tribunal (tax Chamber) Final Judgment
Outcome
Appeal dismissed
Legal Topics
VAT Fraud, MTIC (missing Trader Intra Community) Fraud, Input Tax Deduction, Contra Trading, Knowledge Requirement, Due Diligence, Kittel Principle
Tax Law European Union Law VAT Fraud MTIC (missing Trader Intra Community) Fraud Input Tax Deduction Contra Trading Knowledge Requirement Due Diligence +1 more

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Parties

BTS

Appellant

NTS

Appellant

HMRC

Respondent

Procedural Posture

VAT Input Tax Appeal (mtic Fraud) / First Tier Tribunal (tax Chamber) Final Judgment

Legal Issues

  1. 1 Whether the Appellants knew or should have known their transactions were connected with the fraudulent evasion of VAT
  2. 2 Whether the denial of input tax deduction was lawful under the Kittel principle
  3. 3 Whether the Appellants' due diligence was sufficient to avoid liability

Ratio Decidendi

The Appellants had actual knowledge that their transactions were connected with the fraudulent evasion of VAT. Their due diligence procedures were superficial and ineffective, serving only as window dressing. The trading patterns, profit margins, and orchestration of deals demonstrated that the Appellants were pivotal participants in both direct tax loss and contra-trading frauds. The denial of input tax deduction was lawful under the Kittel principle, as the Appellants knew or should have known of the connection to fraud.

Court Disposition

Appeal dismissed

Orders

  • Appellants are not entitled to recover any input tax claimed.
  • Appellants to pay HMRC's costs of and incidental to the appeal, to be calculated at the standard rate. If not agreed, costs to be assessed by a Taxing Master of the Supreme Court.