Sandell
| Jurisdiction | UK Non-devolved |
| Judgment Date | 06 January 1993 |
| Date | 06 January 1993 |
| Court | Value Added Tax Tribunal |
VAT Tribunal
Assessment - Best of commissioners' judgment - Fraudulent gold supplies - Manufactured invoices produced to further conspiracy - Assessment raised to recover amount equal to input tax claimed - Whether commissioners entitled to assess amount claimed as due to taxpayer - Whether entitled to recover amount equal to that shown as tax - Value Added Tax Act 1983 schedule 7 subsec-or-para 4 schedule 7 subsec-or-para 4 schedule 7 subsec-or-para 6 schedule 7 subsec-or-para 6Value Added Tax Act 1983, Sch. 7, para. 4(1) and (2) and 6(2) and (3).
The issue was whether an assessment designed to recover input tax credited to the appellant and shown in sham invoices for fictitious gold purchases by him was effective.
The appellant was part of a criminal conspiracy to defraud Customs of VAT due on gold supplies. Mr H, the alleged central figure in the conspiracy, set up a chain of purported suppliers and caused a quantity of gold to be smuggled into the UK. The aim was that "missing traders" with false addresses issued invoices to the appellant who issued invoices to a Mr C who issued invoices to Mr H's company, Dollarleague Ltd, with bogus invoices issued with the purpose of claiming input tax down the chain. At the end of the chain, Dollarleague would reclaim input tax which had never been paid out and make an otherwise genuine sale of smuggled gold to legitimate traders, accounting for output tax thereon.
The fraudulent operation started in mid-1989 and the appellant's 8/89 quarterly return showed a small amount repayable to him. This alerted the computer at Southend and an investigation ensued. The 11/89 return showed £505,686 of output and £498,177 of input tax.
On 11 January 1990 the appellant was arrested and charged and was subsequently sentenced to imprisonment upon a guilty plea. Mr H, on the other hand, pleaded not guilty and was acquitted.
Customs assessed the appellant to the amount of input tax shown in the 11/89 return, although the form VAT 100 actually showed a net amount of tax for the period as being due to them. No assessment was raised in relation to Mr H. The commissioners contended that they were entitled to assess an amount equivalent to the input tax claimed in an assessment issued to the best of their judgment. Under Value Added Tax Act 1983 schedule 7 subsec-or-para 6para. 6(2) of Sch. 7 they were entitled to recover an amount shown as tax on an invoice as a debt due to the Crown whether or not the supply to which it related had taken place.
The appellant who did not appear at, nor was represented before, the tribunal simply stated in his grounds of appeal that the assessment was wrong because, while it was based on the disallowance of falsely stated input tax, it took no account of falsely stated output tax.
Held, allowing the taxpayer's appeal:
1. There was no statutory provision under the taxing legislation which deemed a sham supply to be a taxable supply and consequently none of the fictitious sales of gold by the appellant came within the charge to tax under Value Added Tax Act 1983 section 2sec. 2.
2. A sham invoice purporting to evidence the making of a taxable supply was a nullity and neither gave rise to a charge to output tax nor established a claim for input tax credit. Therefore both the inputs and the outputs in the return for period 11/89 were to be disregarded.
3. The amount of £472,120 shown in the assessment as being due to the commissioners could not be assessed as an amount due under any "best judgment"...
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