Red 12 Trading Ltd v Revenue and Customs: ChD 20 Oct 2009

Appeal against refusal to allow reclaim of input tax in case of alleged ‘Missing Trader Intracommunity Fraud’.
Held: Christopher Clarke J said: ‘Examining individual transactions on their merits does not, however, require them to be regarded in isolation without regard to their attendant circumstances and context. Nor does it require the tribunal to ignore compelling similarities between one transaction and another or preclude the drawing of inferences, where appropriate, from a pattern of transactions of which the individual transaction in question forms part, as to its true nature e.g. that it is part of a fraudulent scheme. The character of an individual transaction may be discerned from material other than the bare facts of the transaction itself, including circumstantial and ‘similar fact’ evidence. That is not to alter its character by reference to earlier or later transactions but to discern it.
To look only at the purchase in respect of which input tax was sought to be deducted would be wholly artificial. A sale of 1,000 mobile telephones may be entirely regular, or entirely regular so far as the taxpayer is (or ought to be) aware. If so, the fact that there is fraud somewhere else in the chain cannot disentitle the taxpayer to a return of input tax. The same transaction may be viewed differently if it is the fourth in line of a chain of transactions all of which have identical percentage mark ups, made by a trader who has practically no capital as part of a huge and unexplained turnover with no left over stock, and mirrored by over 40 other similar chains in all of which the taxpayer has participated and in each of which there has been a defaulting trader. A tribunal could legitimately think it unlikely that the fact that all 46 of the transactions in issue can be traced to tax losses to HMRC is a result of innocent coincidence. Similarly, three suspicious involvements may pale into insignificance if the trader has been obviously honest in thousands.
Further in determining what it was that the taxpayer knew or ought to have known the tribunal is entitled to look at the totality of the deals effected by the taxpayer (and their characteristics), and at what the taxpayer did or omitted to do, and what it could have done, together with the surrounding circumstances in respect of all of them.’
Christopher Clarke J
[2009] EWHC 2563 (Ch), [2010] STI 622, [2010] STC 589, [2010] Lloyds Rep FC 145, [2010] BVC 166
Value Added Tax Act 1994
England and Wales
Appeal fromRed 12 Trading Ltd v Revenue and Customs VDT 16-Dec-2008
VDT VAT – Input Tax – Dealer in mobile phones – MTIC fraud – Whether defaulter has to be the importer – Whether fraudulent tax loss shown – Admissibility of evidence – Whether third party payments evidence of . .

Cited by:
ApprovedMobilx Ltd and Others v HM Revenue and Customs; Blue Sphere Global Ltd v Same and similar CA 12-May-2010
Each company sought repayment of input VAT. HMRC refused, saying that the transactions were the end-product of a fraud on it, and that even if the taxpayer did not know that a fraud was involved, it should have been aware that one was and acted . .
CitedRevenue and Customs v SED Essex Ltd ChD 14-Jun-2013
Liquidator confirmed despite VAT challege
The Revenue sought the winding up of the company for non-payment of substantial arrears of VAT. The revenue had declined to allow VAT input claims. The company said that the petition was wrong since the debt was genuinely disputed.
Held: The . .

These lists may be incomplete.
Updated: 02 April 2021; Ref: scu.377220