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 that 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, the Tribunal found that RHJ Ltd did not know and could not reasonably have known that its transactions were connected with VAT fraud, given the due diligence performed and the lack of specific guidance from HMRC regarding phoenix companies or the Cooper family’s history. Therefore, HMRC’s denial of input VAT was not justified.

Citation
[2020] UKFTT 76
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 Chamber) Substantive 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 Commercial Law Input VAT Recovery Kittel Test Fraudulent Evasion of VAT Due Diligence in Supply Chains Scrap Metal Trade +1 more

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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 Chamber) Substantive Decision

Legal Issues

  1. 1 Whether HMRC lawfully denied input VAT to RHJ Ltd 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 that 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, the Tribunal found that RHJ Ltd did not know and could not reasonably have known that its transactions were connected with VAT fraud, given the due diligence performed and the lack of specific guidance from HMRC regarding phoenix companies or the Cooper family’s history. Therefore, HMRC’s 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 in the sum of £597,172.00 is recoverable by the Appellant.