Hillhead Limited v The Commissioners for HMRC
[2023] UKFTT 215 (TC)
Vanrooyen (Elite Prestige Supercars) Limited v The Commissioners for HMRC
23 March 2023
[2023] UKFTT 338 (TC)
First-tier Tribunal
A car company tried to get back some VAT they'd paid and claim others hadn't paid. The tax office said the company should have known the sales were part of a big fraud because they didn't check properly. The judge agreed with the tax office and the car company didn't get their money back.
Key Facts
- •HMRC denied Vanrooyen (Elite Prestige Supercars) Ltd.'s input tax recovery and zero-rating for certain transactions.
- •The total value of the appeals was £825,877.89.
- •HMRC's denials were based on the principles in *Kittel* and *Mecsek*, alleging the Appellant knew or should have known the transactions were connected to fraudulent VAT evasion.
- •The transactions involved purchases from Adapt 4 Work (A4W) and sales to five ROI customers.
- •HMRC's alternative argument for some transactions was that the Appellant supplied unregistered EU customers.
- •The Appellant's due diligence was a key point of contention.
Legal Principles
A taxable person who knew or should have known their purchases were connected to fraudulent VAT evasion cannot claim input tax.
Axel Kittel v Belgian State and Belgian State v Recolta Recycling SPRL (C-439/04 and C440/04) ('Kittel')
A vendor may be denied VAT exemption for intra-Community supplies if they knew or should have known the transaction was part of a tax fraud and didn't take reasonable steps to prevent participation.
Mecsek-Gabona Kft v Nemzeti Adó- és Vámhivatal (C-273/11) ('Mecsek')
The taxing authority can deny zero-rating irrespective of whether tax loss is caused by a direct customer or later in the supply chain.
Staatssecretaris van Financien v Schoenimport ‘Italmoda’ ('Italmoda') (C-131/13, C-163/13, C-164/13)
Supplies to unregistered EU customers are treated as domestic supplies.
Paragraph 6.1 of PN 725
Outcomes
Appeal dismissed.
The Tribunal found the Appellant knew or should have known its transactions were connected to fraudulent VAT evasion due to inadequate due diligence and numerous red flags.
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