Key Facts
- •Ammanford Recycling Limited (Ammanford) appealed a First-tier Tribunal (FTT) decision refusing its request for more information from HMRC regarding VAT repayment denial and penalties.
- •The dispute centered on HMRC's assertion that Ammanford (a company) had actual knowledge of fraudulent VAT evasion, based on the Kittel principles.
- •HMRC argued it didn't need to identify specific individuals with knowledge, only that someone within the company did.
- •Ammanford challenged this, arguing HMRC should identify individuals they intended to accuse of actual knowledge before cross-examining them.
- •The appeal also concerned whether HMRC needed to specify the type of fraud alleged and Ammanford's role in it.
Legal Principles
In Kittel cases, HMRC doesn't need to identify specific individuals with knowledge; it suffices if someone acting for the company had actual knowledge.
Tower Bridge GP Ltd v HMRC [2019] UKFTT 176 (TC), Citibank NA v Revenue & Customs [2014] UKFTT 1063 (TC), Ronald Hull Junior Limited v HMRC [2016] UKFTT 525 (TC)
Serious allegations, including actual knowledge of fraud, require clear pleading, though the level of particularity may not be equivalent to fraud or dishonesty allegations.
Lakatamia Shipping Co Ltd v Su & Ors [2021] EWHC 1907 (Comm), The Deposit Guarantee Fund for Individuals v Bank Frick & Co AG & Anor [2022] EWHC 2221 (Ch)
If HMRC intends to allege a specific individual had actual knowledge, this must be pleaded, even if they also run a 'someone knew' case.
Ronald Hull Junior Limited v HMRC [2016] UKFTT 525 (TC)
In Kittel cases, the trader only needs to know or have the means of knowing that fraud occurred or will occur in a connected transaction; specific details aren't required.
Fonecomp Ltd v HMRC [2015] EWCA Civ 39
Outcomes
Appeal partially allowed.
The FTT erred by allowing HMRC to allege actual knowledge against specific witnesses without prior pleading. HMRC must plead that a specific individual had actual knowledge before cross-examining them on that basis. However, the FTT was correct in other aspects regarding the disclosure of information on the type of fraud and Ammanford's role.