Key Facts
- •YBA Limited appealed against VAT assessments and deregistration for VAT purposes.
- •HMRC alleged YBA facilitated VAT fraud by engaging in transactions connected to missing trader intra-community (MTIC) fraud.
- •YBA denied knowledge or means of knowledge of the fraudulent connections.
- •The appeals concerned general assessments, input tax deductions (Kittel assessment), and zero-rating of sales (Mecsek assessment).
- •YBA's director, Mr. Asghar, had a history of involvement in businesses connected to VAT fraud.
- •YBA conducted transactions with several companies subsequently identified as missing traders.
- •HMRC's investigation involved witness statements from multiple officers and an examination of YBA's transactions.
Legal Principles
Deregistration is permitted if a VAT registration was used for fraudulent purposes and the registrant knew or should have known.
CJEU case of Valsts ieņēmumu dienests v Ablessio SIA Case C-527/11 (‘Ablessio’)
Input tax disallowance for unpaid consideration after 6 months.
Value Added Tax Act 1994, section 26A
HMRC's power to raise assessments for incomplete or incorrect returns.
Value Added Tax Act 1994, section 73
Traders knowing or should have known of MTIC fraud connection cannot reclaim input tax.
CJEU case Axel Kittel v Belgium; Belgium v Recolta Recycling SPRL (C-439/04 and C-440/04) [2006] ECR I-6161 (‘Kittel’)
VAT exemption conditional on good faith; no exemption if trader knew or should have known of purchaser's fraud.
CJEU decision in Mecsek-Gabona Kft v Nemzeti Ado Foigazgatosaga (Case C-273/11) [2013] STC 171 (‘Mecsek’)
"Should have known" test: only reasonable explanation for transaction is connection to fraud.
Court of Appeal in Mobilx and others v HMRC [2010] STC 1436 (‘Mobilx’)
Consider totality of evidence, not individual factors in isolation when determining knowledge.
Red 12 Trading Ltd v Revenue and Customs Comrs [2009] EWHC 2563 (Ch)
Outcomes
Appeal against deregistration dismissed.
YBA facilitated VAT fraud and should have known.
Appeal against general assessment dismissed.
Assessment validly made, in time, and correct amount.
Appeal against Kittel assessment mostly dismissed; partially successful.
Purchases from Wrottesley, Farris, Cygnet, Auto Vanguard, and 2YD linked to fraud and YBA should have known; purchases from Charnwood and Bebe not linked to fraud.
Appeal against Mecsek assessment mostly dismissed; partially successful.
Sales to Northside Motorpark and Keith Morris linked to fraud and YBA should have known; sales to Prestige Motor Vehicles BV and Shakk GmbH not linked to fraud.