S & I Electronics Plc v Revenue & Customs [2009] UKFTT 108 (TC) (18 May 2009)

S & I Electronics Plc v Revenue & Customs [2009] UKFTT 108 (TC) (18 May 2009)

S&I Electronics Plc is denied input VAT credit on the relevant transactions because the tribunal found that S&I either knew or should have known, had it taken all reasonable precautions, that its transactions were connected with fraudulent evasion of VAT. The Kittel principle is part of UK law and applies to deny input tax in such circumstances. The denial is limited to the tax lost by the fraud, not the entire input tax, in line with the principle of proportionality and the ECHR decision in Bulves.

Citation
[2009] UKFTT 108
Parties
Appellant: S & I Electronics Plc; Respondents: The Commissioners for Her Majesty's Revenue & Customs
Jurisdiction
United Kingdom
Judgment Date
18 May 2009
Procedural Posture
VAT Input Tax Appeal (first Tier Tribunal Tax) / Final Judgment After Full Hearing
Outcome
Appeal dismissed in respect of the denied input tax; S&I Electronics Plc is not entitled to input VAT credit on the transactions found to be connected to fraud.
Legal Topics
VAT Input Tax Deduction, MTIC Fraud, Kittel Principle, Contra Trading, Knowledge Requirement, Burden of Proof, Human Rights Act and ECHR, Extent of Input Tax Denial
Tax Law European Union Law Human Rights Law VAT Input Tax Deduction MTIC Fraud Kittel Principle Contra Trading Knowledge Requirement +3 more

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Parties

S & I Electronics Plc

Appellant

The Commissioners for Her Majesty's Revenue & Customs

Respondents

Procedural Posture

VAT Input Tax Appeal (first Tier Tribunal Tax) / Final Judgment After Full Hearing

Legal Issues

  1. 1 Whether S&I Electronics Plc is entitled to input VAT credit where its transactions were connected to MTIC fraud
  2. 2 Whether the Kittel principle is incorporated into UK law and its proper application
  3. 3 Whether knowledge or means of knowledge of fraud is required to deny input tax

Ratio Decidendi

S&I Electronics Plc is denied input VAT credit on the relevant transactions because the tribunal found that S&I either knew or should have known, had it taken all reasonable precautions, that its transactions were connected with fraudulent evasion of VAT. The Kittel principle is part of UK law and applies to deny input tax in such circumstances. The denial is limited to the tax lost by the fraud, not the entire input tax, in line with the principle of proportionality and the ECHR decision in Bulves.

Court Disposition

Appeal dismissed in respect of the denied input tax; S&I Electronics Plc is not entitled to input VAT credit on the transactions found to be connected to fraud.

Orders

  • Input VAT credit denied to S&I Electronics Plc for the relevant transactions in the period April to July 2006, limited to the amount of tax lost by fraud.
  • Leave granted to parties to seek a reference on the interaction between the ECHR and the VAT Directive if desired.