Electrade 247 Ltd v Revenue and Customs (VAT - INPUT TAX : Other) [2015] UKFTT 637 (TC) (07 December 2015)

Electrade 247 Ltd v Revenue and Customs (VAT - INPUT TAX : Other) [2015] UKFTT 637 (TC) (07 December 2015)

The Tribunal found all 10 deals were connected to fraudulent VAT losses, but determined the frauds were acquisition frauds, not carousel frauds. The Appellant’s business model and trading pattern were not dictated by a mastermind, and its sales were to genuine non-EU customers or UK retailers. The Tribunal held HMRC failed to prove the Appellant knew or must have known of the connection to fraud. However, in deals involving Global Roaming, the Appellant ought to have known due to inadequate due diligence and lack of meaningful checks on a prolific contra-trader.

Citation
[2015] UKFTT 637 (TC)
Parties
Appellant: Electrade 247 Limited; Respondents: The Commissioners for Her Majesty’s Revenue and Customs
Jurisdiction
United Kingdom
Judgment Date
07 December 2015
Procedural Posture
VAT Input Tax Appeal (mtic/acquisition Fraud) / First Tier Tribunal (tax) Final Judgment
Outcome
Appeal allowed in part
Legal Topics
MTIC Fraud, VAT Input Tax Deduction, Acquisition Fraud, Due Diligence, Knowledge and Means of Knowledge, Contra Trading
Tax Law VAT Fraud MTIC Fraud VAT Input Tax Deduction Acquisition Fraud Due Diligence Knowledge and Means of Knowledge +1 more

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Parties

Electrade 247 Limited

Appellant

The Commissioners for Her Majesty’s Revenue and Customs

Respondents

Procedural Posture

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

Legal Issues

  1. 1 Were the 10 deals connected to fraudulent VAT losses?
  2. 2 Did the Appellant know or ought to have known of the connection to fraud?
  3. 3 Were the frauds acquisition frauds or carousel frauds?

Ratio Decidendi

The Tribunal found all 10 deals were connected to fraudulent VAT losses, but determined the frauds were acquisition frauds, not carousel frauds. The Appellant’s business model and trading pattern were not dictated by a mastermind, and its sales were to genuine non-EU customers or UK retailers. The Tribunal held HMRC failed to prove the Appellant knew or must have known of the connection to fraud. However, in deals involving Global Roaming, the Appellant ought to have known due to inadequate due diligence and lack of meaningful checks on a prolific contra-trader.

Court Disposition

Appeal allowed in part

Orders

  • Input tax credit allowed except for purchases from Global Roaming where Appellant ought to have known of connection to fraud.
  • HMRC to recalculate input tax disallowance accordingly.