Atlantic Electronics Ltd v The Commissioners for HM Revenue and Customs
| Jurisdiction | England & Wales |
| Judge | Lord Justice Ryder,Lord Justice Beatson,Lady Justice Arden |
| Judgment Date | 12 June 2013 |
| Neutral Citation | [2013] EWCA Civ 651 |
| Docket Number | Case No: A3/2013/0081 |
| Court | Court of Appeal (Civil Division) |
| Date | 12 June 2013 |
[2013] EWCA Civ 651
Lady Justice Arden
Lord Justice Beatson
and
Lord Justice Ryder
Case No: A3/2013/0081
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL
Judge Colin Bishopp
FTC/69&70/2012
Royal Courts of Justice
Strand, London, WC2A 2LL
Abbas Lakha QC and Edmund Vickers (instructed by Jeffrey Green Russell) for the Appellant
Christopher Foulkes and Karen Robinson (instructed by Howes Percival) for the Respondent
Hearing dates: 14 March 2013
Approved Judgment
On the 26 November 2012 Judge Colin Bishopp sitting in the Upper Tribunal (UT) Tax and Chancery Chamber gave reasons for a decision made on 28 September 2012 to set aside a case management decision of Judge Theodore Wallace sitting in the First Tier Tribunal (FTT) Tax Chamber on 5 March 2012. The appeal before this court is brought by Atlantic Electronics Ltd (the Company) against the UT's decision. The respondents to the appeal are the Commissioners for Her Majesty's Revenue and Customs (HMRC). On 14 March 2013 we dismissed the Company's appeal with reasons to follow.
The Company is a long established family business trading in electronic goods. The proceedings arise out of decisions made by HMRC to deny input tax repayment claims in the sum of £1,128,137.50. The issue before the FTT is whether HMRC was right to disallow the Company's claim for input tax credit in the VAT periods 03/06, 04/06 and 05/06, in each case on the ground that the Company's transactions in respect of which the input tax had been incurred were connected with fraud and the Company knew or should have known of that connection. The decisions were made as long ago as 22 May 2007, 28 June 2007 and 28 May 2008, respectively and the procedural history is extraordinarily long.
The case management decision which is in question is whether a statement from an HMRC officer should be admitted into evidence before the FTT. The focus of this hearing has been on the fact that the statement annexes the note of the prosecution opening from a recently completed criminal trial at Southwark Crown Court where on 19 August 2011 the jury convicted Shabir Ahmed, a director of a company known as Morganrise Ltd (Morganrise) of two offences of conspiracy to cheat the public revenue for which on 5 September 2011 he received a total sentence of 48 months imprisonment. The statement also annexes the certificate of conviction and the indictment. The FTT decided that the statement should not be admitted and the UT decided that the FTT had made an error of law and re-made the decision admitting the statement.
The fraudulent scheme which is alleged is what is known as a 'missing trader intra-community' (MTIC) fraud. The scheme is succinctly described by Christopher Clarke J in Red 12 Trading Ltd v Commissioners for HMRC [2009] EWHC 2563 (Ch) at [2] to [10]. I need only repeat paragraph [10] in the context which I describe below:
"In a chain of transactions between traders all of whom are honest each trader will account to HMRC for the output tax received (in respect of which the trader acts, broadly speaking, as agent for HMRC: Elida Gibbs Ltd v Customs & Excise Comrs [1997] QB 499), less any output tax incurred, which he will claim from HMRC. He will, ordinarily, need most of the money received from his sales to pay his supplier and the VAT due. The full extent of any chain will be patent. Where there is dishonesty the position is different. It is in the interests of those who seek to defraud HMRC of VAT to hide the full extent of any chain by the use of buffer companies. Such persons lack any interest in seeing that they, or the companies through whom they operate, are able to account to HMRC for all the VAT that they should."
If one imagines one or more chains of traders which begin with an importer from the EU (the defaulter) and end with an exporter to the EU (the broker); the importation of goods from the EU and their subsequent exportation to the EU are VAT free. Each link in the chain between these two steps involves a transaction between traders in this jurisdiction often occurring rapidly and without any actual possession of the goods being involved. The transactions in this jurisdiction will each attract VAT which is levied as an output tax on the sale of the goods by one trader and re-claimed from the HMRC as an input tax credit by the trader who is the buyer. A fraud is perpetrated where a defaulting trader, usually the importer, goes missing without accounting to HMRC for the VAT levied. The missing trader may use wholly innocent companies in the chain or may be in league with others including the exporter. A version of the fraud (and there are a number of permutations) occurs where an exporter sets off another transaction which has occurred through another chain by re-importing goods leaving the Revenue to discover whether the apparently reconciled figures are genuine or the result of fraudulent contra-trading.
The Company's appeal to the FTT from the decision of HMRC relates to eight wholesale mobile telephone transactions undertaken by the Company who acted as the exporter or broker. Six of those transactions are said to have been connected with a fraudulent trader. Two transactions, each dated 29 April 2006 led to one particular fraudulent contra trader, Morganrise. It is this contra trader to which the evidence relates and which forms the subject of the appeal to this court.
HMRC describe its case in the FTT as follows: In acting as a dishonest contra trader, Morganrise acted as a knowing party to a fraudulent, contrived series of transactions. It deliberately conducted acquirer transactions with broadly comparable overall values to its broker transactions in the relevant VAT accounting periods, in order to conceal what would otherwise have been a large repayment claim in respect of broker transactions which led to a defaulting trader. The repayment chain was passed up the 'clean' transaction chains to various brokers, one of whom was the Company.
The procedural history is not without note. All that needs to be said for the purpose of this appeal is that recorded by the UT, at paragraphs 7 and 8 of the Decision:
"7. I should also record that it was initially envisaged that exchange of witness statements would be completed as long ago as 2008 but, as is often the case in MTIC appeals, that timescale proved overly optimistic since additional evidence has emerged as time has passed, and there have been repeated applications by HMRC for permission to adduce that additional evidence, of which the application before the judge was only one example. It seems that almost all of the applications have been strongly resisted, and they have met with mixed success.
8. I should add for completeness that over the course of the appeal HMRC applied for, and were granted, several extensions of time for complying with a number of requirements. The Company, too, sought and obtained some indulgence. I do not consider that past conduct offers much assistance in deciding the matter before me, and I have left it out of account."
I agree with Judge Bishopp's approach but caution the reader who may fall into the error of assuming that indulgence will or should be given in case management. The Tribunal is in its very nature a specialist forum with a process that reflects in its Rules a broad discretion to get to the heart of a dispute by the use of robust case management. That is not to be subverted by non compliance or over elaborate procedural arguments that have the effect of avoiding the principles set out in the overriding objective. The broad question in this appeal is whether the case management decision is just, fair and proportionate.
The appeal before this court has been strongly argued. Mr Abbas Lakha QC appeared with Mr Edmund Vickers for the Company and Mr Foulkes appeared with Ms Karen Robinson for HMRC.
There are two questions to be answered on the appeal: a) did the UT identify an error in law entitling it to interfere with the FTT's decision and b) was the admission of the material by the UT just, fair and proportionate?
The HMRC officer's statement is dated 18 October 2011 and sets out that the director of Morganrise, Shabir Ahmed, was convicted of the two offences. Annexed to the statement are three documents: the certificate of conviction, the indictment and a note of the prosecution opening. The indictment and the certificate of conviction are evidence of the fact of the conviction itself, the dates of the offending behaviour, namely between September 2004 and October 2006, and that the convictions relate to the use of companies in MTIC fraud.
The background to the convictions is that between December 2005 and May 2006 Morganrise acted as a dishonest contra trader, offsetting its transactions as an importer and as broker / exporter to hide its fraudulent activity from the HMRC. The asserted relevance is that the contra trading encompassed by two the convictions occurred during the period(s) in which Morganrise allegedly featured in the deal chains involving the Company. HMRC wish to have the annexe to the Officer's statement admitted so that they can explain to the FTT the detailed background rather than merely the technical relevance of the convictions to their case.
It has been held that the knowing involvement of the contra trader has to be established if it is asserted that a broker in a clean chain connected to the contra trader either knew or should have known of the...
To continue reading
Request your trial
-
HM Revenue and Customs v IA Associates Ltd
...by Lord Justice Ryder in the Court of Appeal (which I have already read but will repeat) in paragraph [31] of his judgment in the Atlantic Electronics case where Lord Justice Ryder said: "The UT adopted the correct approach to the admission of the materials in question. It assessed whether ......
-
AM (Afghanistan) v Secretary of State for the Home Department
...the United Kingdom". Accordingly, strict rules of evidence do not apply (see, by analogy with the FtT Tax Chamber: Revenue and Customs Commissioners v Atlantic Electronics Ltd [2013] EWCA Civ 651, [2013] CP Rep 14 per Ryder LJ at [30] to [31] as applied by the UT in Belgravia Trading Co Lt......
-
Butt
...entrusted to the FTT: Walbrook Trustee (Jersey) Ltd v Fattal [2008] EWCA Civ 427, [33]; Atlantic Electronics Ltd v R & C Commrs [2013] BVC 228, [18]. The Upper Tribunal should exercise extreme caution before allowing appeals from the FTT on case management decisions: Goldman Sachs Internati......
-
Whyte
...Services Ltd v R & C Commrs [2011] BVC 1,513 R & C Commrs v Tower MCashback LLP 1 [2011] BTC 294 Atlantic Electronics Ltd v R & C Commrs [2013] BVC 228 Fountain [2015] TC 04596 R (on the application of Aozora GMAC Investment Ltd) v R & C Commrs [2019] BTC 26 Higgins v R & C Commrs [2019] BT......