Scandico Ltd v The Commissioners for HM Revenue and Customs
| Jurisdiction | UK Non-devolved |
| Judge | Mrs Justice Rose,Judge Hellier |
| Neutral Citation | [2017] UKUT 0467 (TCC),[2017] UKUT 0467 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Subject Matter | Tax,7 December 2017 |
| Date | 07 December 2017 |
| Published date | 07 December 2017 |
[2017] UKUT 0467 (TCC)
Appeal number: UT/2015/0098
Value Added Tax - Purchase of Apple iPhones by Appellant without receiving VAT
invoice - Whether HMRC’s refusal to accept other evidence, in the absence of valid
VAT invoices, to constitute sufficient evidence of the supply of the phones to the
Appellant was reasonable – approach to be adopted by First-tier Tribunal in such
appeals – appeal dismissed
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
SCANDICO LTD Appellant
- and -
THE COMMISSIONERS FOR HER MAJESTY’S
REVENUE AND CUSTOMS
Respondents
TRIBUNAL:
MRS JUSTICE ROSE, CHAMBER PRESIDENT
JUDGE CHARLES HELLIER
Sitting in public at The Rolls Building, Fetter Lane, London EC4A 1NL on 13
October 2017
James Pickup QC instructed by Smith and Williamson, Solicitors for the
Appellant
Jessica Simor QC and Howard Watkinson, instructed by the General Counsel
and Solicitor to HM Revenue and Customs, for the Respondents
© CROWN COPYRIGHT 2017
DECISION
1. This is an appeal against the decision of the First-tier Tribunal (Tax Chamber)
(Judge Howard Nowlan and Mrs Sonia Gable) [2015] UKFTT 0036 (TC) dismissing
the challenge by the Appellant (‘Scandico’) to the decision of the Respondents, 5 HMRC, to disallow an input deduction of the VAT paid by Scandico on iPhones it
acquired in the United Kingdom and then sold on, mainly to customers elsewhere in
Europe.
2. Scandico is a phone trader specialising in acquiring newly issued iPhones in the
United Kingdom and selling them to customers in other countries where stocks of that 10 particular model of phone have not yet been released for sale in Apple’s retail stores.
The policy of Apple is to prevent the sale of phones to traders who might sell them on
in this way. Apple therefore generally refuses to sell phones through its ordinary retail
stores to phone traders and limits the number of phones that any single person can
purchase to two phones. Scandico engaged individuals referred to as “runners”, 15 provided them with cash and instructed each of them to buy two phones on as many
occasions as they could manage. The runners would hand the phones and the till
receipts from the Apple store to a ‘head’ runner who would then pass them to
Scandico. The runners were paid a small monthly stipend. The phones commanded a
considerable premium in the export markets among those keen to have that model of 20 phone before it was officially released in their territory. Sales of the phones to
customers outside the United Kingdom attracted no VAT. There were some sales of
phones by Scandico to other UK traders but these were also not subject to VAT
because of the operation of the reverse charge mechanism which imposed liability to
VAT on the purchaser. 25
3. Scandico sought to recover the VAT that had been charged on the retail sales by
Apple as recorded in the till receipts. Initially HMRC accepted the reclaims for VAT.
However, over the months of January and February 2011 approximately 7000 phones
were purchased and in the light of this increased turnover HMRC conducted an
extended verification. The outcome of the extended verification was recorded in the 30 three decisions challenged by Scandico, set out in three letters from the HMRC
Higher Officer, Ms Roberts:
(1) A letter dated 4 November 2011 in which HMRC informed Scandico that
the amount shown as input tax in its VAT return for 1 January 2011 to 31
January 2011 was being amended by being reduced by £292,078.13. 35
(2) A letter dated 18 May 2012 in which HMRC informed Scandico that the
amount shown as input tax in its VAT return for 1 February 2011 to 28
February 2011 was being reduced by £297,874.
(3) A letter dated 30 September 2014 in which HMRC confirmed those
reduced amounts. 40
4. The 4 November letter explained the reason for the amendment as follows. First it
explained that a taxable person has the right to deduct the VAT incurred on goods and
services if certain conditions are met. These include that there has been an actual
supply of goods or services taking place in the United Kingdom; that the supply was
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