Earthshine Limited v The Commissioners for HM Revenue and Customs
| Jurisdiction | UK Non-devolved |
| Judge | Judge Bishopp,Judge Sadler |
| Neutral Citation | [2014] UKUT 0271 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Subject Matter | Tax,20 June 2014 |
| Date | 20 June 2014 |
| Published date | 01 December 2016 |
[2014] UKUT 0271 (TCC)
VALUE ADDED TAX — input tax — denial of right to deduct on grounds of
knowledge of connection of appellant’s transactions to fraud — whether First-tier
Tribunal entitled to reach conclusion of knowledge or means of knowledge — yes —
appeal dismissed
Appeal number: FTC/22/2013
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
EARTHSHINE LIMITED Appellant
- and -
THE COMMISSIONERS FOR HER MAJESTY’S Respondents
REVENUE & CUSTOMS
Tribunal:
Judge Colin Bishopp
Judge Edward Sadler
Sitting in public in London on 17, 18, 19, and 20 September 2013
Mr Patrick Green QC, Mr James Rivett and Ms Abigail Cohen, instructed by
Maitland Walker, for the Appellant
Mr Ben Collins and Mr Jamie Sharma, instructed by the General Counsel and
Solicitor to HM Revenue and Customs, for the Respondents
© CROWN COPYRIGHT 2014
2
DECISION
Introduction
1. This an appeal against a decision of the First-tier Tribunal (Judge Barbara
Mosedale and Mrs Lynneth Salisbury) (“the F-tT”) released on 20 October 2011. 5 The F-tT dismissed an appeal by the appellant, Earthshine Limited (“Earthshine”),
against a decision of the respondents (“HMRC”) to refuse credit for input tax of
£303,646.35 incurred by Earthshine in July, October and November 2006. The
grounds on which HMRC refused that credit were that Earthshine, through its
directors, knew or ought to have known that the transactions in respect of which 10 the input tax had been incurred were connected with fraud elsewhere in the chains
of supply. It will be apparent from that short introduction that this was what is
commonly referred to as an MTIC appeal.
2. Earthshine disputed the allegation of connection, and argued that even if a
connection was established, its directors did not know and had no reason to think 15 that Earthshine’s transactions were so connected. The F-tT concluded that the
connection was established, that one of the two directors of Earthshine knew of
the connection to fraud, and that the other either knew, or chose to turn a blind eye
to material available to him which should have made it plain, that there was such a
connection. It accordingly dismissed the appeal in its entirety. 20
3. Permission to appeal to this tribunal was refused by the First-tier Tribunal
and again, on paper, by this tribunal. The application was, however, renewed and
at an oral hearing permission was granted on six out of the 18 grounds initially
advanced by Earthshine. The grounds on which permission has been granted are,
in summary, as follows: 25
(1) that the tribunal adopted an impermissibly selective approach to the
evidence and its effect;
(2) that the tribunal fundamentally misunderstood a letter of 3 June 2004
written by HMRC to Earthshine;
(3) that the tribunal misdirected itself as to the relevance of line checks; 30
(4) that the tribunal misunderstood and in consequence reached
impermissible conclusions from the evidence of HMRC’s expert
witness;
(5) that the tribunal, despite reciting the evidence it had heard and seen on
a number of topics, failed to reach any conclusions about those topics; 35
(6) that the tribunal misunderstood Earthshine’s position in respect of a
document which had not previously been disclosed by HMRC.
4. We should record, for better understanding of what follows, that permission
to appeal was refused on, among others, the grounds that it was not open to the F-
tT to find orchestration without also finding that Earthshine was party to a 40 conspiracy (a finding which would not have been open to the F-tT as conspiracy
was not pleaded or put); that the F-tT applied the wrong standard of proof; and
that it was not open to the F-tT to find that Earthshine’s transactions were
connected with fraud. The last of the permitted grounds we have set out does have
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