Prizeflex Ltd v Revenue & Customs [2014] UKFTT 963 (TC) (15 October 2014)

Prizeflex Ltd v Revenue & Customs [2014] UKFTT 963 (TC) (15 October 2014)

Prizeflex Ltd, through its director, was a sophisticated and knowledgeable participant in the mobile phone market, was aware of the risks of VAT fraud, and entered into 16 deals that were traced to fraudulent traders. The Tribunal found that for deal 1, Prizeflex should have known of the connection to fraud, and for the remaining 15 deals, Prizeflex knew of the connection. The lack of commercial explanation, the pattern of trading, and the superficial due diligence led to the conclusion that Prizeflex was not an innocent participant. Therefore, HMRC was entitled to deny the input tax deductions.

Citation
[2014] UKFTT 963
Parties
Appellant: Prizeflex Ltd; Respondents: The Commissioners for Her Majesty’s Revenue & Customs
Jurisdiction
United Kingdom
Judgment Date
15 October 2014
Procedural Posture
VAT Input Tax Appeal / First Tier Tribunal (tax) Final Judgment
Outcome
Appeal dismissed
Legal Topics
VAT Fraud, Input Tax Deduction, Missing Trader Intra Community Fraud (mtic), Knowledge of Fraud, Due Diligence, Kittel Principle, Mobilx Test
Tax Law European Union Law VAT Fraud Input Tax Deduction Missing Trader Intra Community Fraud (mtic) Knowledge of Fraud Due Diligence Kittel Principle +1 more

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Parties

Prizeflex Ltd

Appellant

The Commissioners for Her Majesty’s Revenue & Customs

Respondents

Procedural Posture

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

Legal Issues

  1. 1 Whether Prizeflex Ltd knew or should have known that its transactions were connected with the fraudulent evasion of VAT, justifying denial of input tax deductions.

Ratio Decidendi

Prizeflex Ltd, through its director, was a sophisticated and knowledgeable participant in the mobile phone market, was aware of the risks of VAT fraud, and entered into 16 deals that were traced to fraudulent traders. The Tribunal found that for deal 1, Prizeflex should have known of the connection to fraud, and for the remaining 15 deals, Prizeflex knew of the connection. The lack of commercial explanation, the pattern of trading, and the superficial due diligence led to the conclusion that Prizeflex was not an innocent participant. Therefore, HMRC was entitled to deny the input tax deductions.

Court Disposition

Appeal dismissed

Orders

  • Input tax deductions of £1,326,470.87 for VAT periods 05/06 and 06/06 denied to Prizeflex Ltd.