Sceptre Services v Revenue & Customs (includes ANNEX 1) [2011] UKFTT 265 (TC) (20 April 2011)

Sceptre Services v Revenue & Customs (includes ANNEX 1) [2011] UKFTT 265 (TC) (20 April 2011)

The Tribunal found that HMRC had established, on the balance of probabilities, that the relevant transactions were connected with fraudulent evasion of VAT and that Sceptre either knew or should have known of this connection. The right to deduct input tax was therefore denied under the Kittel principle. Sceptre's arguments regarding due diligence and legitimate expectation were rejected as insufficient to override the objective connection to fraud and the knowledge requirement.

Citation
[2011] UKFTT 265 (TC)
Parties
Appellant: Sceptre Services; Respondents: The Commissioners for Her Majesty’s Revenue and Customs (VAT)
Jurisdiction
United Kingdom
Judgment Date
20 April 2011
Procedural Posture
VAT Appeal / First Tier Tribunal (tax Chamber) Judgment
Outcome
Appeal dismissed
Legal Topics
VAT Input Tax Deduction, MTIC Fraud, Legitimate Expectation, Burden of Proof in Tax Appeals
Tax Law European Union Law VAT Input Tax Deduction MTIC Fraud Legitimate Expectation Burden of Proof in Tax Appeals

Case Brief

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Parties

Sceptre Services

Appellant

The Commissioners for Her Majesty’s Revenue and Customs (VAT)

Respondents

Procedural Posture

VAT Appeal / First Tier Tribunal (tax Chamber) Judgment

Legal Issues

  1. 1 Whether Sceptre Services is entitled to deduct input tax under VAT law for the relevant periods
  2. 2 Whether the transactions were connected with fraudulent evasion of VAT (MTIC fraud)
  3. 3 Whether Sceptre knew or should have known of the connection to fraud

Ratio Decidendi

The Tribunal found that HMRC had established, on the balance of probabilities, that the relevant transactions were connected with fraudulent evasion of VAT and that Sceptre either knew or should have known of this connection. The right to deduct input tax was therefore denied under the Kittel principle. Sceptre's arguments regarding due diligence and legitimate expectation were rejected as insufficient to override the objective connection to fraud and the knowledge requirement.

Court Disposition

Appeal dismissed

Orders

  • Input tax deduction for the relevant periods is disallowed.
  • No repayment of input tax to Sceptre Services for the periods 07/06 and 08/06.