Tricor PLC v The Commissioners for HM Revenue and Customs
| Jurisdiction | UK Non-devolved |
| Judge | Mr Justice Morgan,Judge Bishopp |
| Neutral Citation | [2016] UKUT 0362 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Subject Matter | Tax,3 August 2016 |
| Date | 03 August 2016 |
| Published date | 16 February 2017 |
[2016] UKUT 0362 (TCC)
VALUE ADDED TAX — MTIC appeal — finding of actual knowledge of
connection of appellant’s transactions with fraud — whether HMRC’s case
adequately pleaded — yes — whether allegations fairly put to appellant’s witness —
yes — whether First-tier Tribunal’s conclusions open to it — yes — appeal dismissed
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER Appeal No: UT/2015/0009
BETWEEN:
TRICOR plc Appellant
and
THE COMMISSIONERS FOR HER MAJESTY’S
REVENUE AND CUSTOMS Respondents
Tribunal: Hon Mr Justice Morgan
Judge Colin Bishopp
Sitting in public in London on 8 & 9 June 2016
Mr Ian Bridge, counsel, instructed by Morgan Rose, for the appellant
Mr Jeremy Benson QC and Mr Christopher Foulkes, 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 against a decision of the First-tier Tribunal (‘the F-tT’) (Judge
Tildesley and Ms Myerscough) released on 3 March 2014, with neutral citation [2014]
UKFTT 241 (TC). The F-tT dismissed an appeal by Tricor plc (‘Tricor’), against the
refusal of H M Revenue and Customs (‘HMRC’) of credit for input tax of, in all, about
£1.85 million incurred by it in 16 purchases of mobile phones in the VAT accounting
periods 12/05, 03/06 and 06/06. The ground on which credit was refused was that
Tricor, or more precisely its controlling minds, Mr Joe Case, a shareholder and director,
and Mr Richard Andrews, neither a shareholder nor a director but a consultant who
dealt with the relevant transactions, knew or ought to have known that those
transactions were connected with fraud. It was what is commonly, if not always entirely
accurately, referred to as an MTIC, or missing trader intra-community fraud, appeal.
2. The hearing of the appeal began in January 2012, when Tricor was represented by
its accountant, Mr David Tunney. After the evidence had been heard, the F-tT adjourned
to May 2012, in order to hear closing submissions. However, in February Tricor
instructed solicitors in place of Mr Tunney, and in April it made an application for the
admission of additional evidence. The hearing which had been listed for May 2012 was
vacated and the application for the admission of additional evidence came before the F-
tT in December 2012, when it was partially successful. The feature which is of
importance now is that Tricor was given permission to serve further witness statements
of Mr Case and of Mr Andrews. Mr Case made two additional statements, of no
apparent significance for present purposes, while Mr Andrews, who had already made
four statements and had been subjected to cross-examination on them for 2½ days,
made another five. The direction permitting the admission of his additional evidence
was conditional on his offering himself again for cross-examination at the resumed
hearing. After some further procedural skirmishing the hearing resumed in September
2013, when Mr Andrews, as required, was present for cross-examination on his later
statements.
3. Although almost all of HMRC’s case was in contention at the first hearing, when
the resumed hearing began it was no longer in dispute that all of the chains of
transactions leading to Tricor’s acquisitions of the phones could be traced back to a
fraudulent tax loss. The only real issue therefore was whether HMRC were right in their
contention that Mr Case, Mr Andrews or both knew or should have known that the
acquisitions were so connected. It was common ground that the F-tT were required to
approach that issue by reference to the criteria set out in Axel Kittel v Belgium, Belgium
v Recolta Recycling SPRL (Joined Cases C-439/04 and C-440/04) [2008] STC 1537
(‘Kittel’), as explained by Moses LJ in Mobilx Ltd & others v Revenue and Customs
Commissioners [2010] EWCA Civ 517, [2010] STC 1436 (‘Mobilx’). In short, a trader
who knew or should have known that the transaction into which he entered was
connected with fraud forfeits the right to claim credit for the input tax incurred in his
purchase. The test was explained by Moses LJ in Mobilx at [59]:
‘The test in Kittel is simple and should not be over-refined. It embraces not only
those who know of the connection but those who “should have known”. Thus it
includes those who should have known from the circumstances which surround
their transactions that they were connected to fraudulent evasion. If a trader should
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