Edgeskill Limited v The Commissioners for HM Revenue and Customs
| Jurisdiction | UK Non-devolved |
| Judge | Mr Justice Hildyard |
| Neutral Citation | [2014] UKUT 0038 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Subject Matter | Tax,27 January 2014 |
| Date | 27 January 2014 |
| Published date | 01 December 2016 |
[2014] UKUT 0038 (TCC)
Appeal number FTC/16/2012
VAT – MTIC fraud – (1) whether First-tier Tribunal erred in law in
applying the Kittel principle as interpreted by the Court of Appeal in Mobilx
– whether subsequent CJEU judgments cause that interpretation to be open
to doubt – Mahagében and Dávid; Tóth; Bonik – (2) whether findings of
fact or conclusions drawn by First-tier Tribunal from its findings of fact
were perverse or irrational – appeal dismissed and application for reference
to CJEU refused
UPPER TRIBUNAL (TAX AND CHANCERY CHAMBER)
EDGESKILL LIMITED Appellant
- and -
THE COMMISSIONERS FOR HER MAJESTY’S
REVENUE AND CUSTOMS Respondents
TRIBUNAL: THE HON. MR JUSTICE HILDYARD
Sitting in public at the Rolls Building, London EC4A 1NL on 20-22 March 2013
Further application on 26 April 2013 and further supplemental written submissions on
10, 11 and 19 June 2013
Andrew Trollope QC, Michael Patchett-Joyce and Leon Kazakos, instructed by P & Co
LLP, for the Appellant
John McGuinness QC and Howard Watkinson, instructed by the General Counsel and
Solicitor to HM Revenue and Customs, for the Respondents
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© CROWN COPYRIGHT 2014
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DECISION
The Hon. Mr Justice Hildyard :
Nature of the appeal
1. This is an appeal against a decision of the First Tier Tribunal (“FTT”) 5 dismissing the Appellant’s appeal against the refusal by the Respondents (“the
Commissioners”) to allow the Appellant to recover input Value Added Tax
(“VAT”) in the sum of £15,294,335 relating to 93 transactions for the
purchase and export by the Appellant of mobile telephones.
2. The Commissioners had denied recovery by the Appellant of input VAT on 10 the basis that the Appellant knew or should have known that the transactions
were all connected with fraudulent tax losses, some of which were generated
in the course of what is known to the Commissioners (and more generally,
though it is not a term of art) as “contra-trading fraud”.
3. Contra-trading fraud is a sophisticated stratagem calculated to disguise or 15 camouflage Missing Trader Inter-Community fraud (“MTIC fraud” or
“carousel fraud”). I elaborate on the nature of this type of fraud later: suffice
it for the present to take the following brief summary from a very recent
decision supplied to me whilst completing this judgment, namely Fonecomp
Limited v The Commissioners for Her Majesty’s Revenue and Customs 20 FTC/90/2012:
“it is a term used to describe a trader which (a) buys goods
from a defaulter [that is, a person who defaults on his
obligation to pay VAT] and exports them claiming, in what is
termed “the dirty chain”, the input VAT (“the dirty input 25 VAT”) on the purchase; and (b) in a “clean chain”, imports
goods and sells them to a third trader, and then offsets the dirty
input VAT against the clean output VAT on the sale to the third
trader. The dirty input VAT is by this means sought to be
transmuted into clean input VAT in the hands of the third 30 trader; or at any rate that the third trader is sought to be so
distanced from the default that he could not know of his
connection to it, or HMRC discover it.”
4. MTIC fraud is by no means uncommon, especially in the context of trades in
bulk mobile phones and computer chips, and causes huge losses of revenue to 35 the United Kingdom (estimated at some 12.6 billion Euros in 2006).
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