Ronald Hull Junior Ltd v Revenue & Customs (Recovery of input VAT - scrap metal trade) [2020] UKFTT 76 (TC) (04 February 2020)

Ronald Hull Junior Ltd v Revenue & Customs (Recovery of input VAT - scrap metal trade) [2020] UKFTT 76 (TC) (04 February 2020)

The Tribunal found that HMRC failed to prove GPSE was a fraudulent defaulting trader and thus the Kittel test was not satisfied for the CCL transactions. For BMC, while BMC was a defaulting trader, HMRC did not prove that RHJ Ltd knew or should have known its transactions were connected with fraudulent evasion of VAT. RHJ Ltd’s due diligence, though not perfect, was sufficient in the context and in line with HMRC guidance. Therefore, the denial of input VAT was not justified.

Citation
[2020] UKFTT 76 (TC)
Parties
Appellant: Ronald Hull Junior Limited; Respondents: The Commissioners for Her Majesty’s Revenue and Customs
Jurisdiction
United Kingdom
Judgment Date
04 February 2020
Procedural Posture
VAT Input Tax Appeal / First Tier Tribunal (tax) Decision
Outcome
Appeal allowed
Legal Topics
Input VAT Recovery, Kittel Test, Fraudulent Evasion of VAT, Due Diligence in Supply Chains, Scrap Metal Trade, MTIC Fraud
Tax Law VAT Law Input VAT Recovery Kittel Test Fraudulent Evasion of VAT Due Diligence in Supply Chains Scrap Metal Trade MTIC Fraud

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Parties

Ronald Hull Junior Limited

Appellant

The Commissioners for Her Majesty’s Revenue and Customs

Respondents

Procedural Posture

VAT Input Tax Appeal / First Tier Tribunal (tax) Decision

Legal Issues

  1. 1 Whether HMRC lawfully denied RHJ Ltd input VAT credit under the Kittel principle
  2. 2 Whether BMC and GPSE were fraudulent defaulting traders
  3. 3 Whether RHJ Ltd knew or should have known its transactions were connected to VAT fraud

Ratio Decidendi

The Tribunal found that HMRC failed to prove GPSE was a fraudulent defaulting trader and thus the Kittel test was not satisfied for the CCL transactions. For BMC, while BMC was a defaulting trader, HMRC did not prove that RHJ Ltd knew or should have known its transactions were connected with fraudulent evasion of VAT. RHJ Ltd’s due diligence, though not perfect, was sufficient in the context and in line with HMRC guidance. Therefore, the denial of input VAT was not justified.

Court Disposition

Appeal allowed

Orders

  • HMRC’s decision to deny input VAT to Ronald Hull Junior Ltd is set aside.
  • Input VAT credit in the sum of £597,172.00 is to be allowed to Ronald Hull Junior Ltd.