Prizeflex Limited v The Commissioners for HM Revenue and Customs
| Jurisdiction | UK Non-devolved |
| Judge | Mr Justice Morgan,Judge Sinfield |
| Neutral Citation | [2016] UKUT 0436 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Subject Matter | Tax,17 October 2016 |
| Date | 17 October 2016 |
| Published date | 14 February 2017 |
[2016] UKUT 0436 (TCC)
Appeal number: UT/2015/0017
VALUE ADDED TAX - MTIC – transactions connected with fraud – whether
appellant knew or ought to have known that transactions were connected with
fraud –whether HMRC’s allegations involved an allegation of dishonesty – whether
HMRC’s pleadings were adequate – whether FTT dealt appropriately with the
allegation – whether evidence of good character of director of appellant admissible
- appeal dismissed
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
BETWEEN:
PRIZEFLEX LIMITED Appellant
- and –
THE COMMISSIONERS FOR
HER MAJESTY’S REVENUE AND CUSTOMS Respondents
Tribunal:
The Hon Mr Justice Morgan
Judge Greg Sinfield
Sitting in public at Royal Courts of Justice, Rolls Building, Fetter Lane, London,
EC4A 1NL on 14 and 15 June 2016
David Scorey QC and Stuart Cribb, counsel, instructed by Neumans LLP, for
the Appellant
Jonathan Kinnear QC and Howard Watkinson, counsel, instructed by the
General Counsel and Solicitor to HM Revenue and Customs, for the
Respondents
© CROWN COPYRIGHT 2016
2
DECISION
Introduction
1. This is an appeal by Prizeflex Limited (‘Prizeflex’). Prizeflex traded in mobile
phones. In May and June 2006, Prizeflex entered into 16 deals whereby it purchased
mobile phones from suppliers in the UK and immediately sold them to customers
registered for VAT in other EU countries for delivery there. As the sales were zero-
rated supplies, Prizeflex did not charge any output VAT. In its VAT returns for the
monthly accounting periods of 05/06 and 06/06, Prizeflex claimed input tax of
£1,326,470.87 on the purchases of the mobile phones. Each deal traced back to a
defaulting trader who had charged VAT but then disappeared without accounting for it.
2. In a letter sent on 5 August 2008 (the date was wrongly typed as 5 August 2007),
the Respondents (‘HMRC’) ruled that Prizeflex was not entitled to deduct input tax
incurred on the purchase of the mobile phones on the grounds that the transactions were
part of a missing trader intra-Community (‘MTIC’) fraud and that Prizeflex, through its
director Mr Nishel Surana, knew or ought to have known that the transactions were
connected with the fraudulent evasion of VAT.
3. Prizeflex appealed to the First-tier Tribunal (Tax Chamber) (‘FTT’). The appeal
was heard over six days in July and August 2014. Prizeflex accepted that each of the 16
transactions had been traced back to a fraudulent trader. The only issue for the FTT was
whether Prizeflex, through Mr Surana, knew or should have known that the purchases
of mobile phones which it carried out as part of these 16 deals were connected with
fraud.
4. In a decision released on 15 October 2014, [2014] UKFTT 963 (TC), (‘the
Decision’), the FTT (Judge Rachel Short and Mr Richard Thomas) found that Prizeflex
should have known that deal 1 was connected with fraud and had actual knowledge that
all of deals 2 to 16 were connected with fraudulent transactions. Accordingly, the FTT
held that all of the disputed input tax claimed by Prizeflex should be disallowed and
dismissed the appeal.
5. Save as otherwise indicated, paragraph references in square brackets in this
decision are to the paragraphs in the Decision.
6. Prizeflex now appeals, with the permission of the Upper Tribunal, against the
Decision on seven grounds. Prizeflex had sought to appeal on eight grounds but was
refused permission on one ground (Ground 7). We keep the original numbering of the
grounds as that was used in argument before us.
7. For the reasons set out below, we have decided that the Decision does not reveal
any error of law by the FTT. Accordingly, Prizeflex’s appeal is dismissed.
Law
8. The Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of
the laws of Member States relating to turnover taxes - common system of value added
tax: uniform basis of assessment, (‘the Sixth VAT Directive’), was the Directive in
force at the time of the transactions that are the subject of this appeal. Article 17 of the
Sixth VAT Directive provided that a taxable person has a right to deduct VAT which
the taxable person has paid or is liable to pay in respect of goods and services supplied
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