Tricell UK Limited v Her Majesty's Revenue & Customs, V 18127

JurisdictionUK Non-devolved
JudgeColin BISHOPP
Judgment Date17 April 2003
RespondentHer Majesty's Revenue & Customs
AppellantTricell UK Limited
ReferenceV 18127
CourtFirst-tier Tribunal (Tax Chamber)


VALUE ADDED TAX – input tax — “carousel” fraud alleged by Commissioners — appellant unwitting participant — appellant’s input tax claim “suspended” — subsequently part paid — whether appeals competent — whether “decision” to withhold balance — yes

TRIBUNAL — jurisdiction — VAT Tribunals Rules 1986 r 19(3) — whether apt to direct payment of withheld input tax claim — legitimate expectation — proportionality — interim relief — tribunal’s powers

HARDSHIP — whether established



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Tribunal: Colin Bishopp (Chairman)

Sitting in Manchester on 11 March 2003

Michael Patchett-Joyce and Piers Gardner of counsel, instructed by Deloitte & Touche, for the appellant

Andrew MacNab of counsel, instructed by their solicitor’s office, for the respondents


  1. This decision relates to a number of applications made at an interlocutory stage of an appeal. In the ordinary way the applications were heard in private but the parties, through their respective counsel – Michael Patchett-Joyce and Piers Gardner for the appellant, Andrew MacNab for the respondents – have agreed that, as the applications raise matters of general interest, the decision should be published, and I so direct.

  2. The appellant is a dealer in mobile telephones, buying and selling in bulk. For reasons immaterial to this application, it buys from an associated company which itself buys within the United Kingdom. The appellant’s sales are, almost exclusively, to traders in other European Union Member States. The appellant’s purchases are standard-rated and it thus pays VAT to its associated company supplier (the two companies, though associated, are not members of the same VAT group) and, in principle, acquires a right to claim input tax credit. Its sales to dealers in other Member States, however, are zero-rated and the amount of output tax for which the appellant must account is negligible, being limited to the tax charged on such sales as it makes within the United Kingdom. It makes monthly VAT returns, and claims a refund – that is, payment to it by the Commissioners of the excess of the input tax it has incurred over the output tax for which it must account – each month.

  3. The Commissioners “suspended” (their own word) the repayment claimed by the appellant in its November 2002 return, amounting to £3,737,702.48. The reason they gave was that it appeared to them that some of the appellant’s supplies had come from what they described as a “non-legitimate” source. In January 2003, however, they made a payment of £3,316,833.43, without prejudice to enquiries they were pursuing. They have, so far, refused to pay the remaining £420,869.05. That sum represents the input tax incurred by the appellant in obtaining the telephones it sold in November 2002 (by three separate transactions) to a Dutch company, Paramax BV. Though accepting that there is no evidence of wrongdoing by the appellant or its associated company, the Commissioners maintain that the transactions are devoid of economic substance and are outside the scope of the VAT regime; in essence, they suspect that the transactions are part of what is commonly termed a “carousel” fraud. They have taken the same stance in relation to the appellant’s returns for December 2002 and January 2003, for which periods they have hitherto refused to pay £166,934.40 and £345,142.68 respectively, although in each case the bulk of the claim has been met. The appellant now appeals, by separate notices of appeal, against those three refusals.

  4. The sequence of events relating to the appellant’s November 2002 claim was this: the return was submitted on or about 5 December; the Commissioners wrote to the appellant on 20 December saying that the entire repayment had been “suspended”; the appellant then instructed Deloitte & Touche, who made representations on its behalf; the Commissioners made a telephone call to Deloitte & Touche on 30 January 2003 but, in the absence of the person dealing with the matter, left a message that £3,316,833.43 was to be repaid and the balance withheld; there was a telephone conversation between those dealing with the matter for the appellant and the Commissioners respectively on the following day, when the figures were confirmed and reasons were given for the Commissioners’ decision to pay only part of the sum claimed at that stage; there was a meeting between the parties on 7 February when those reasons were debated at evident length; and there then followed further correspondence and exchanges of e-mails. Among the correspondence were two letters identified specifically in the grounds of appeal relating to the first appeal; the relevant parts of those letters are set out later in this decision.

  5. According to the grounds of appeal served with the appellant’s various notices, the first appeal (dated 25 February 2003) has been made against “a decision of the Commissioners dated 30 January 2003, which decision was communicated to it verbally, through its advisors on said date and confirmed by letters of 14 and 21 February 2003”. The second (dated 4 March 2003) is against “a decision of the Commissioners dated 4 February 2003, which decision was communicated to it verbally, through its advisors on said date. Written evidence of this decision is a bank statement showing partial repayment on 10 February 2003 of the appellant’s entitlement to credit for input tax”. The third appeal (also dated 4 March 2003) is in identical terms, save that the dates of communication and repayment differ. Each notice of appeal contains a second paragraph:

“2 The appellant contends that said decision is an assessment under section 73 of the Value Added Tax Act 1994, the Commissioners having decided that the appellant’s returns were incomplete or incorrect.”

The applications
  1. I am asked to make a number of directions. First, the appellant asks that the three appeals be consolidated (although the word used in the applications is “conjoined”). That application is, in itself, uncontroversial, though whether it is appropriate to make such a direction is dependent upon the outcome of the respondents’ applications. It also seeks a direction that each appeal be entertained without deposit or payment of the tax in dispute. The respondents seek a direction that each of the appeals be struck out. A further, formal, application, that the various applications be heard together, was not opposed. It is convenient to deal with the respondents’ application first.

The strike-out application
  1. Mr MacNab’s argument in support of the application that the appeals be struck out was, in essence, that the appellant could not identify its purported appeals with any of the different “matters” against which an appeal may be brought, set out in the various paragraphs of section 83 of the Value Added Tax Act 1994, the provision by which jurisdiction is conferred on these tribunals Superficially, the appeals appeared to come within paragraph (c) “the amount of any input tax which may be credited to a person”; if Mr Patchett-Joyce’s argument (advanced in the context of the appellant’s own applications) that the refusals to pay amounted to assessments, within section 73(1) of the Act, were right, the appellant might bring itself within paragraph (p): “an assessment – (i) under section 73(1) … in respect of a period for which the appellant has made a return under this Act … ”. However, he said, whether one argued in favour of...

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