Mercy Global Consult Limited (in liquidation) v Abayomi Adegbuyi-Jackson & Ors
[2023] EWCA Civ 1073
Nourish Training Limited, R (on the application of) v The Commissioners for HMRC
20 February 2023
[2023] EWHC 350 (Admin)
High Court
A company's VAT registration was cancelled for suspected fraud. They appealed but also asked a court for a quick fix before the appeal. The court said no, because the company hadn't proven it would go bankrupt soon, and because it's important to stop tax fraud.
Key Facts
- •Nourish Training Limited (Nourish) had its VAT registration cancelled by HMRC due to alleged involvement in VAT fraud.
- •Nourish appealed to the First-Tier Tribunal (Tax) (FTT) but sought interim relief from the High Court to reinstate its VAT registration pending the FTT's decision, claiming insolvency.
- •HMRC's decision was based on evidence of low labour charge rates suggesting non-compliance with minimum wage laws, a pattern of replacing VAT-deregistered suppliers, significant input tax claimed linked to fraudulent evasion, uncommercial supply chains, and failure to heed HMRC warnings.
- •Nourish made a late application to submit further evidence.
- •The High Court considered the application for interim relief, focusing on whether denying the relief would breach Nourish's Article 6 ECHR rights.
- •Nourish's financial situation, including the potential loss of a key client and credit facility, was central to the arguments.
Legal Principles
A trader may be refused VAT registration if there's sound evidence suggesting fraudulent use of a VAT identification number.
Ablessio SIA (Case C-527/11)
The right to recover input tax can be denied if transactions are linked to VAT fraud and the trader knew or should have known.
Kittel (Case C-439/04)
The FTT has no jurisdiction to grant interim relief in VAT registration cancellation cases.
R (Tidechain Ltd) v HMRC [2015] EWHC 4031 (Admin)
In interim injunction applications in public law cases, the court considers the strength of the case, public interest, and broader legal framework. A 'strong prima facie case' isn't required.
American Cyanamid v Ethicon Ltd [1975] AC 396; R (S&S Consulting Services (UK) Ltd v Commissioners for Her Majesty’s Revenue and Customs) [2021] EWHC 3174 (Admin)
The High Court can grant injunctions to prevent violations of Article 6 ECHR rights even if the applicant has an alternative remedy.
R (ABC Ltd) v Revenue & Customs Commissioners [2018] 1 WLR 125; R (OWD Ltd trading as Birmingham Cash & Carry) v RCC [2019] 1 WLR 4020
To grant an injunction in this context requires compelling evidence that the appeal would be ineffective due to imminent insolvency and detailed evidence of attempts to secure expedition at the FTT.
R (ABC Ltd) v Revenue & Customs Commissioners [2018] 1 WLR 125
The “should have known” test in Kittel requires showing that the only reasonable explanation for the transaction was that it was connected with fraud.
Mobilx and others v HMRC [2010] EWCA Civ 2010
Outcomes
Both the application for an interim injunction and permission to seek judicial review were dismissed.
Nourish failed to demonstrate a high degree of probability that insolvency would render its FTT appeal illusory before a decision could be reached. The court also found that Nourish had not made sufficient efforts to expedite its FTT appeal and that the balance of convenience favored HMRC due to the significant public interest in preventing tax fraud.
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