“… traders who take every precaution which could reasonably be required of them to ensure that their transactions are not connected with fraud, be it the fraudulent evasion of VAT or other fraud, must be able to rely on the legality of those transactions without the risk of losing their right to deduct the input VAT …”
“I just wanted to confirm to you both that my commitment to this will be total. I have always loved the phone business, and my desire to get back what I lost is paramount to giving this 100%”
“I wanted Mike Fisher to act as a regulator and not to have any direct financial incentive for transactions to happen.”
“Although I had no concerns (at this stage) about any involvement with VAT fraud, I knew that Colin Thompson was a typical salesman and would not be concerned at all with dotting the ‘i’s or crossing the ‘t’s. He was also not particularly commercially sophisticated and it was quite possible, in my view, for him to do a deal where we ended up losing money or doing deals for which we didn’t have the cash flow available. All he was concerned about was selling something for more than he bought it for. He didn’t consider any other expenses of a transaction, such as carriage or insurance or custom charges and that’s why I wanted Mike Fisher to vet every deal and me to approve it.”
“Currently they (Unique) owe£98,900 plus VAT of which£19,500 plus VAT should be paid by Monday with a further£30,500 plus VAT due three days later.”
“Even before there was any question of anything to do with MTIC, I would never let Mr Thompson close deals, and didn’t”
“Colin has today agreed a further five deals with Unique for 1,200 phones totalling£123,400 plus VAT…”
“I thought that this was an excuse as we had supplied them with phones of this specification in the past and they had not complained.”
“I didn’t think for traders of this sort we were ever going to get good credit ratings and we weren’t extending them credit, so…”
“We are going to restrict ourselves to buying from major companies or importers, and that, if the CMRs were genuine, Option would be happy continuing trading with Prizeflex.”
“Mike Fisher thinks that all his customers are above board. He thinks some may come in legitimately or be brought in by someone further down the chain from the actual customer. Ian Henderson pointed out that some of the phones dispatched that have come back are ‘two pin’ and therefore not suitable for the UK market.”
“Owl Import & Export failed to record or obtain IMEI numbers for stock in which they dealt (something that would have been prudent for any business with a genuine intent to protect themselves and the Revenue from involvement in fraud and ensure that stock had not been previously traded by themselves or others).”
“Option crap that landed on my fax over the weekend for your information. I notice that Owl quoted Curacao bank account on their invoice. Did we pay to that account or a UK one (please tell me it was a UK one….)”
“so HMRC will be able to check it and we can’t be accused of taking money offshore. Phew!”
“… was not particularly concerned about a supplier’s credit rating as we weren’t going to be extending any credit to them.”
“My only concern in our due diligence process was that we shouldn’t deal with people where we might lose money or deal with a missing trader. Nothing in these reports (referring to the reports on Owl, Owl I&E and Evolution) would have concerned me from that point of view. It is true that when you establish a check list for people to tick off, they start to switch off as long as the boxes get ticked. My concern in agreeing to deal with any new supplier or customer was very clear.”
“All I really would have been concerned about was that they made sure that they (Option) were selling the same specification that they were buying.”
“My understanding was they did not want to lose these goods, they wanted to trade in these goods. What they were doing is wherever they were getting these goods from, they could have shipped them direct to Trading Point, and what they wanted to do instead was to ship them to the UK so that we would then bear the net cost of shipping and they would get additional cash flow that they could use.”
“109. … in determining what it was that the taxpayer knew or ought to have known the Tribunal is entitled to look at the totality of the deals effected by the taxpayer (and their characteristics), and at what the taxpayer did or omitted to do, and what it could have done, together with the surrounding circumstances in respect of all of them.”
“It seems to us that the same principle must apply in a case of this kind, and for the same reasons. It cannot be open to the directors of a trading company to avoid the consequences of the Court of Justice’s judgment in Kittel by delegating the day-to-day operation of the company to a non-director employee and closing their eyes to the employee’s activities.”
“The cases demonstrate some confusion as to the precise nature and scope of the Hampshire Land principle and doubt has even been expressed as to whether it exists.”
“55. In my judgment the Tribunal correctly concluded that there should be no attribution in the present case, since MC could not sensibly be regarded as a victim of the fraud. They were right to hold that the fraud was ‘neutral’ from MC’s point of view. The circumstances in which the exception to the general rule that attribution will apply are where the person whose acts it is sought to impute to the company knows or believes that his acts are detrimental to the interests of the company in a material respect. … It follows that, in judging whether a company is to be regarded as the victim of the act of a person, one should consider the effect of the acts themselves, and not what the position would be if those acts eventually prove to be ineffective … 56. The Hampshire Land principle or exception is founded in common sense and justice. It is obvious good sense and justice that the act of an employee should not be attributed to the employer company if, in truth, the act is directed at, and harmful to, the interests of the company. In the present case, the fraud was not aimed at MC. It was not intended by the participants in the fraud that the interest of MC should be harmed by their conduct. In judging whether the fraud was in fact harmful to the interests of MC, one should not be too ready to find such harm …”
“… there are likely to be many cases in which a participant in a sophisticated fraud is seen to have actual or blind eye knowledge that the transaction in which he is participating is connected with that fraud, without knowing, for example, whether his chain is a clean or dirty chain, whether contra-trading is necessarily involved at all, or whether the fraud has at its heart merely a dishonest intention to abscond without paying tax, or that intention plus one or more multifarious means of achieving a cover-up while the absconding takes place. “38. Similarly, I consider that there are likely to be many cases in which facts about the transaction known to the broker are sufficient to enable it to be said that the broker ought to have known that his transaction was connected with a tax fraud, without it having to be, or even being possible for it to be, demonstrated precisely which aspects of a sophisticated multifaceted fraud he would have discovered, had he made reasonable enquiries. In my judgment, sophisticated frauds in the real world are not invariably susceptible, as a matter of law, to being carved up into self-contained boxes even though, on the facts of particular cases, including Livewire , that may be an appropriate basis for analysis.”
“… the question therefore for the Tribunal was not what a director of Olympia knew or ought to have known, but what the company itself knew or ought to have known. The knowledge of a director of the company may, to be sure, be attributed to a company, but there may be other knowledge (for example that of a senior employee) which, on the facts ought also to be attributed to the company: Meridian Global .”
“But their Lordships would wish to guard themselves against being understood to mean that whenever a servant of a company has authority to do an act on its behalf, knowledge of that act will for all purposes be attributed to the company. It is a question of construction in each case as to whether the particular rule requires that the knowledge that an act has been done, or the state of mind with which it was done, should be attributed to the company.”
“[28] … since the right to deduct is fundamental to the system of VAT because it ensures that the charge is limited to the value added at each stage of the supply and because it ensures fiscal neutrality, it may not, in principle, be limited; any derogation from the principle of the right to deduct tax must be interpreted strictly … moreover the right must be exercisable immediately in respect of all taxes charged on input transactions. Since the right arises immediately the taxable person pays tax (input tax) to his supplier, the principle of legal certainty demands that he knows when he enters into the transaction that it is within the scope of the tax and that his liability will be limited to the amount by which any output tax he may be liable to pay, on making a supply, exceeds the input tax he has paid. The objective criteria determine both the scope of the tax and the circumstances in which the right to deduct arises.”
“It follows from this that the Appellant was only properly to be regarded as imperilled by section 23 if, as the assistant general manager of the shop, he had “the management of the whole affairs of the company”, was “entrusted with power to transact the whole of the affairs of the company,” and was “managing in a governing role the affairs of the company itself.”
“However, the transactions will almost inevitably display different characteristics from both of the transactions which occur in the course of genuine ‘arm’s length’ trading. By an ‘arm’s length’ transaction, I mean one in which the buyer and seller act independently of each other and in their own commercial interests, with each business under separate management, ownership and control.”
“In my opinion, I have obtained key information that reconciles with Mr Fisher’s explanations of the commercial basis of Option’s involvement in the deals. I have not identified any information that would lead me to question Mr Fisher’s explanations in this regard.”
“Q. So I just want to make this clear. So if the plan which was put to you by Option was to only buy phones from the importer who is established – he has not hi-jacked a VAT number or not a defaulter – and then export the phones, it does not seem possible to become involved in a simple MTIC fraud or MTIC export fraud as Mr Stone calls them? A. That’s correct.”
“… clearly if we buy direct from the importer and the importer is not a missing trader then there can’t be a missing trader in the chain.”
“If they were in it together this e-mail would never have been sent.”
“Q. And in relation to Prizeflex, although that had occurred a month or two earlier, would it be fair to say that you tipped the wink to Mr Fisher, so I can use that expression, not to trade with Prizeflex? A. I think that reading between the lines, yes, probably.”