Euro Stock Shop Limited
| Jurisdiction | UK Non-devolved |
| Judge | The Hon Mr Justice Arnold |
| Judgment Date | 23 July 2010 |
| Neutral Citation | [2010] UKUT 259 (TCC) |
| Respondent | |
| Appellant | whether |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Appeal Number | FTC/24/2009 |
[2010] UKUT 259 (TCC)
Neutral citation number
Appeal
number
[2010]
UKUT 259 (TCC)
FTC/24/2009
Value Added Tax
input tax
disallowance of input tax
MTIC fraud
whether
fraudulent evasion of VAT
whether Appellant knew or should have know
n that its
purchases were connected with fraud
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
EURO STOCK SHOP LIMI
TED
Appellant
-
and
THE COMMISSIONERS OF
HER MAJESTY S
REVENUE AND CUSTOMS
Respondent
Tribunal: The Hon Mr Justice Arnold
Sittin
g in public in London on 5
and
6 July 2010
Nicola Preston
c
ounsel, instructed by
Keystone Law,
for the Appellant
Christopher Foulkes
counsel
, instructed by
Howes Percival,
for the Respondent
© CROWN COPYRIGHT 2010
Approved decision
ESS v HMRC
[2010] UKUT 259 (TCC)
MR JUSTICE ARNOLD:
Introduction
1. This is an appeal from the F
irst
-T
ier
Tribunal (Tax) (T
ribunal
Judge Dr K. Khan and
Mr P. D. Davda
FCA
) dated 23 July 2009. By its decision the
First
-Tier T
ribunal
,
which hereinafter I will refer to for brevity simply as the Tribunal , dismissed the
appe
al of Euro Stock Shop Ltd ( ESS ) against three decisions of the Commissioners
of H
er
Majesty s Revenue and Customs ( HMRC ) to deny entitlement to the right to
deduct input tax in the total sum of £1,710,930.39 in respect of purchases of Intel P4
CPUs in the periods 04
/06
and 05/06. The ground for those decisions was that the
input tax incurred by ESS arose from transactions connected with the fraudulent
evasion of VAT and that ESS knew or should have known of that fact. The
Tribunal s
decision was given after a seven day hearing at which a number of witnesses
gave
evidence
, including Bhara
t Shaunak
,
a director of ESS.
The Tribunal s decision
2. The Tribunal s decision is a lengthy and detailed one running to 116 numbered
paragraphs and 39
single
-
spaced
pages.
It is structured as follows: in paragraphs 1-
3
there is an introduction;
in
paragraphs 3-6 there is an explanation of missing trader
intra
-Community ( MTIC ) fraud;
in
paragraphs 7-14 the Tribunal identifies the
relevant legislation and case law; in paragraph 15 the Tribunal summarises ESS s
arguments; at paragraph 16 the Tribunal summarises HMRC s arguments; in
paragraphs 17-29 the Tribunal summarises the applicable law; in paragraphs 31-
39
the
Tribunal summarises the history of ESS; in paragraph 40 the Tribunal summarises
the transactions in question; in paragraph 41 the Tribunal poses the questions that
need to be answered in order for HMRC s case to succeed; in the remainder of
paragraph 41 through to
paragraph
73 the Tribunal considers the first of tho
se
questions
, namely whether ESS s transactions were connected to a VAT loss;
in
paragraphs 74-84 the Tribunal considers the second question, namely whether the tax
loss was attributable to fraud;
and
in
paragraphs 85-115 the Tribunal considers the
third q
uestion
, namely whether ESS knew that the transactions were connected to
fraud. The Tribunal s answer to each of those questions was in the affirmative. So far
as the third question is concerned,
the
Tribunal found in paragraph 108 that ESS had
actual knowledge of the fraud, a finding which was repeated and elaborated in
paragraphs 114 and 115.
The l
aw
3.
In
J
oined
C
ases C439/04 and C440/04
Kittel v
Etat Belge [2006] ECR I
-616
the
C
ourt
of
J
ustice of the European Communities (
Third
Chamber) held as follows
:
54. As the Court has already observed, preventing tax evasion,
avoidance and abuse is an objective recognised and encouraged
by the Sixth Directive (see Joined Cases C-487/01 and C-
7/02
Gemeente Leusden and Holin Groep [2004] ECR I-5337,
paragraph 76). Community Law cannot be relied on for
abusive or fraudulent ends (see, inter alia, Case C-
367/96
Kefalas and Others [1998] ECR I-2843, paragraph 20; Case C-
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