Spearmint Blue Ltd v Revenue & Customs [2012] UKFTT 103 (TC) (07 February 2012)

Spearmint Blue Ltd v Revenue & Customs [2012] UKFTT 103 (TC) (07 February 2012)

The Tribunal found that fraud was established both in the dirty chain and by the contra trader. Although there was insufficient evidence to show that the Appellant had actual knowledge of the fraud, the Tribunal held that the Appellant should have known that its transactions were connected with fraudulent evasion of...

Source-derived case information.

Citation
[2012] UKFTT 103 (TC)
Parties
Appellant: Spearmint Blue Limited; Respondents: The Commissioners for Her Majesty’s Revenue and Customs
Jurisdiction
United Kingdom
Judgment Date
07 February 2012
Procedural Posture
VAT Appeal (mtic Fraud) / First Tier Tribunal (tax), Final Judgment
Outcome
Appeal dismissed
Legal Topics
VAT Fraud, MTIC Fraud, Contra Trading, Input Tax Deduction, Knowledge Requirement, Kittel Principle
Tax Law European Union Law VAT Fraud MTIC Fraud Contra Trading Input Tax Deduction Knowledge Requirement Kittel Principle

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Summary, issues, holding and outcome

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Parties

Spearmint Blue Limited

Appellant

The Commissioners for Her Majesty’s Revenue and Customs

Respondents

Procedural Posture

VAT Appeal (mtic Fraud) / First Tier Tribunal (tax), Final Judgment

Legal Issues

  1. 1 Whether the Appellant's input VAT claims were connected to fraudulent evasion of VAT
  2. 2 Whether the Appellant knew or should have known of the connection to fraud
  3. 3 Whether the Kittel test as interpreted by UK courts is correct in contra-trading cases

Ratio Decidendi

The Tribunal found that fraud was established both in the dirty chain and by the contra trader. Although there was insufficient evidence to show that the Appellant had actual knowledge of the fraud, the Tribunal held that the Appellant should have known that its transactions were connected with fraudulent evasion of VAT. The correct legal test is whether the trader knew or should have known of the connection, not whether the transaction was 'aimed at' evading VAT. Accordingly, the Appellant's claim for input VAT deduction was denied.

Court Disposition

Appeal dismissed

Orders

  • Input VAT repayment claim of £1,012,011.18 refused
  • No order as to costs specified