Northside Fleet Limited v The Commissioners for HM Revenue and Customs
| Jurisdiction | UK Non-devolved |
| Judge | Judge Jonathan Richards,Judge Nicholas Aleksander |
| Neutral Citation | [2022] UKUT 00256 (TCC) |
| Subject Matter | 22 September 2022 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Published date | 23 September 2022 |
UT Neutral citation number: [2022] UKUT 00256 (TCC)
UT (Tax & Chancery) Case Number: UT/2021/000183
Upper Tribunal
(Tax and Chancery Chamber)
Hearing venue: Royal Courts of Justice, London
Heard on: 7 September 2022
Judgment date: 22 September
2022
VAT – Whether First-tier Tribunal followed correct approach when denying input tax
credit under Kittel principles – yes – whether decision perverse – no – appeal dismissed
Before
JUDGE JONATHAN RICHARDS
JUDGE NICHOLAS ALEKSANDER
Between
NORTHSIDE FLEET LIMITED
Appellant and
THE COMMISSIONERS FOR HM
REVENUE AND CUSTOMS
Respondents
Representation:
For the Appellant: Howard Watkinson, Counsel, instructed by ASW Legal Limited
For the Respondents: Joanna Vicary, Counsel, instructed by General Counsel and Solicitor for HM
Revenue & Customs
2
DECISION
The appellant company (“Northside”), at material times, carried on a business involving the sale
of used cars. Its sole director and shareholder was Mr Alan Harford. By a decision released on 11
August 2021 (the “Decision”) of the First-tier Tribunal (Tax Chamber) (the “FTT”), the FTT upheld
HMRC’s decision to refuse Northside’s claims to recover input tax on purchases of certain vehicles
in its VAT periods 01/17 to 07/17. Also, by the Decision the FTT allowed Northside’s appeal against
HMRC’s decisions that certain vehicles sold in those VAT periods should be standard-rated for VAT
purposes, rather than zero-rated as Northside had claimed. With the permission of the FTT, Northside
appeals against the Decision as relating to the denial of input tax credit. Neither party seeks to disturb
the FTT’s conclusions on the zero-rating issue.
In the remainder of this decision, references to numbers in square brackets are to paragraphs of
the Decision unless we specify otherwise.
The Decision
Background
HMRC justified their decision to deny Northside credit for input tax by reference to the judgment
of the Court of Justice of the European Union in Axel Kittel v Belgian State and Belgian State v
Recolta Recycling SPRL (C-439/04 and C-440/04) (“Kittel”). Under the Kittel principle, Northside’s
entitlement to input tax credit would be denied if all of the following conditions were met:
(1) HMRC had suffered a loss of VAT.
(2) That loss resulted from fraudulent evasion.
(3) Northside’s purchases of vehicles were connected with that fraudulent evasion.
(4) Northside knew, or should have known, that its purchases were so connected.
Northside’s relevant purchases of vehicles (the “disputed transactions”) were from four suppliers,
defined at [30] as “Mohawk”, “Instant”, “KWD” and “DLL”. The identity of these suppliers, and the
persons with whom Northside dealt when arranging purchases of vehicles from them was of some
significance in the proceedings and can be summarised as follows:
(1) Mohawk was the trading name of a business carried on by a Mr Joseph Murdock as
sole trader. Northside dealt with Mr Murdock in relation to vehicle purchases.
(2) Instant was a private limited company. Northside dealt with a Mr Maguire, who was
a director of Instant, in relation to vehicle purchases.
(3) KWD was a private limited company. The evidence of Mr Harford was that he could
not remember who he dealt with at KWD.
(4) DLL was a private limited company. Mr Harford’s evidence was that he dealt with a
Mr Paul Donnelly at DLL. However, the FTT concluded at [65(5)] and [112] that Mr
Donnelly had no authority to represent DLL at relevant times in 2017 since he had ceased
being a director of DLL and had sold all of his shares to a Ms Seanan McNulty in 2016.
HMRC invite us to read [65(5)] and [112] as finding that Mr Harford was lying when he
said that he had dealings with Mr Donnelly and that, in fact, he was dealing with someone
else. However, in our judgment, the FTT’s findings were more nuanced. It certainly found
that Mr Donnelly was not “representing” DLL in 2017. However, at [112] the FTT said
only that this conclusion admitted of two possibilities: either that Mr Harford did have
dealings with Mr Donnelly, but in those dealings Mr Donnelly had no authority to
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