Crucial Components Ltd v Revenue & Customs [2011] UKFTT 690 (TC) (31 October 2011)

Crucial Components Ltd v Revenue & Customs [2011] UKFTT 690 (TC) (31 October 2011)

The Tribunal found that although the Appellant's transactions were connected to fraudulent VAT defaults, there was insufficient evidence that the Appellant knew or should have known of the fraud. The Appellant's due diligence, while imperfect, was not a sham, and Customs had not previously warned the Appellant of fraud or inadequacy. The Kittel and Mobilx principles were applied, but the knowledge threshold was not met. Accordingly, the denial of input tax was not justified.

Citation
[2011] UKFTT 690
Parties
Appellant: Crucial Components Ltd; Respondents: The Commissioners for Her Majesty’s Revenue and Customs
Jurisdiction
United Kingdom
Judgment Date
31 October 2011
Procedural Posture
VAT Appeal (mtic Fraud) / First Tier Tribunal (tax), Final Judgment
Outcome
Appeal allowed
Legal Topics
VAT Fraud, MTIC (missing Trader Intra Community) Fraud, Input Tax Denial, Abuse of Rights, Knowledge Test (kittel)
Tax Law European Union Law VAT Fraud MTIC (missing Trader Intra Community) Fraud Input Tax Denial Abuse of Rights Knowledge Test (kittel)

Case Brief

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Parties

Crucial Components Ltd

Appellant

The Commissioners for Her Majesty’s Revenue and Customs

Respondents

Procedural Posture

VAT Appeal (mtic Fraud) / First Tier Tribunal (tax), Final Judgment

Legal Issues

  1. 1 Whether the Appellant knew or should have known its transactions were connected with fraudulent evasion of VAT
  2. 2 Whether Customs lawfully denied input tax under the Kittel principle

Ratio Decidendi

The Tribunal found that although the Appellant's transactions were connected to fraudulent VAT defaults, there was insufficient evidence that the Appellant knew or should have known of the fraud. The Appellant's due diligence, while imperfect, was not a sham, and Customs had not previously warned the Appellant of fraud or inadequacy. The Kittel and Mobilx principles were applied, but the knowledge threshold was not met. Accordingly, the denial of input tax was not justified.

Court Disposition

Appeal allowed

Orders

  • Customs' decision to deny input tax in the sum of £113,665.55 is set aside.
  • Input tax claim for the relevant period is to be repaid to the Appellant.