Rashpal Singh Jabble v The Commissioners for HMRC

17 February 2023

[2023] UKFTT 213 (TC)

First-tier Tribunal

A company director was in trouble for his company claiming incorrect VAT. He knew most of the deals were dodgy, but the tax people couldn't quite prove he knew about three specific deals. So, he only had to pay for the rest.

Key Facts

•Appeal against a Personal Liability Notice (PLN) of £383,446.63 issued to the appellant, Mr. Rashpal Singh Jabble, a director of Drinks Enterprises Limited (DEL), for input tax claimed by DEL.
•The PLN was based on 123 transactions involving DEL's purchase of alcohol and connected to missing trader intra-community (MTIC) fraud.
•DEL is in liquidation.
•The appellant's father and uncle were directors of two of DEL's main suppliers, Just Beer and Gempost, respectively.
•HMRC denied input tax claimed by DEL on the basis that DEL knew or should have known the transactions were connected to fraudulent tax losses (Kittel principle).
•The appellant denied knowledge of the fraudulent activities.

Legal Principles

Input tax deduction is allowed unless the taxable person knew or should have known that their purchase was participating in a transaction connected with fraudulent evasion of VAT.

Axel Kittel v État belge (C-439/04), and État belge v Recolta Recycling SPRL (C-440/04), CJEU 6 July 2006

For a deliberate inaccuracy penalty under Schedule 24 of the Finance Act 2007, HMRC must prove the taxpayer knew of the inaccuracy, not merely that they should have known.

Commissioners for Her Majesty’s Revenue and Customs v Tooth [2021] UKSC 17

The Tribunal has full appellate jurisdiction to consider evidence and remake a decision on appeal, even if the original decision-maker applied the wrong legal test.

John Dee Limited v Commissioners of Customs and Excise [1995] EWCA Civ 62

Outcomes

Appeal allowed for three transactions (deal chains 84-86) where DEL bought directly from Beer Bhai.

HMRC failed to discharge the burden of proof to show the appellant knew these specific transactions were connected to fraud.

Appeal dismissed for the remaining 120 transactions.

The Tribunal found that the appellant, as DEL's controlling mind, knew the transactions were connected to MTIC fraud based on numerous factors including the orchestrated nature of the schemes, the appellant's awareness of MTIC fraud, continued dealings with family companies despite warnings, inadequate due diligence, and uncommercial trading practices.

Rashpal Singh Jabble v The Commissioners for HMRC

Key Facts

Legal Principles

Outcomes

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