“In my judgement in a case of alleged contra-trading, where the taxable person claiming repayment of input tax is not himself a dishonest conspirator, there are two potential frauds: i) The dishonest failure to account for VAT by the defaulter or missing trader in the dirty chain; and ii) The dishonest cover-up of that fraud by the contra-trader. Thus it must be established that the taxable person knew or should have known of a connection between his own transaction and at least one of these frauds. I do not consider it is necessary that he knew or should have known of a connection between his own transaction and both of those frauds. If he knows or should have known that the contra-trader is engaging in fraudulent conduct and deals with him, he takes the risk of participating in a fraud, the precise details of which he does not and cannot know.”
“44. There is force in the argument of Counsel for BSG but I do not accept it. The nature of any particular necessary connection depends on its context, for example electrical, familial, physical or logical. The relevant context in this case is the scheme for charging and recovering VAT in the member states of the EU. The process of off-setting inputs against outputs in a particular period and accounting for the difference to the relevant revenue authority can connect two or more transactions or chains of transactions in which there is a common party whether or nor the commodity sold is the same. If there is a connection in that sense it matters not which transaction or chain came first. Such a connection is entirely consistent with the dicta in Optigen and Kittel because such connection does not alter the nature of the individual transactions. Nor does it offend against any principle of legal certainty, fiscal neutrality, proportionality or freedom of movement because, by itself, it has no effect. 45. Given that the clean and dirty chains can be regarded as connected with one another, by the same token the clean chain is connected with the fraudulent evasion of VAT in the dirty chain because, in a case of contra-trading, the right to reclaim enjoyed by C (Infinity) in the dirty chain, which is the counterpart of the obligation of A to account for input tax paid by B, is transferred to E (BSG) in the clean chain. Such a transfer is apt, for the reasons given by the Tribunal in Olympia to conceal the fraud committed by A in the dirty chain in its failure to account for the input tax received from B. 46. Not all persons involved in either chain, although connected, should be liable for any tax loss. The control mechanism lies in the need for either direct participation in the fraud or sufficient knowledge of it.”
“62. The principle of legal certainty provides no warrant for restricting the connection, which must be established, to a fraudulent evasion which immediately precedes a trader’s purchase. If the circumstances of that purchase are such that a person knows or could know that his purchase is or will be connected with fraudulent invasion, it cannot matter a jot that the evasion precedes or follows the purchase . That trader’s knowledge brings him within the category of participant. He is a participant whatever stage at which the evasion occurs.”
“In my judgment, it would be wrong to approach this case on any basis other than the balance of probability with appropriate respect paid to the need for cogent evidence to reflect the serious nature of the allegation and the inherent improbability that this 22 year old young lady of good character should involve herself in such conduct as that alleged. I simply do not accept that it is appropriate, as a matter of law, to require a higher standard of proof simply because of the nature of the allegation. If murder, why not allegations of rape or the most serious fraud.”
“The classification was changed because we were looking to wholesale pizza ovens. We knew nothing about software or software consulting.”
“ Kuldip worked for the Company (@tomic between April 2004 and February 2005.During this time, he learned how to source and sell stock. He decided that he wanted to set up by himself. I said that was fine so long as he did not approach the Company’s suppliers/customers. I agreed with Kuldip that he could source stock from the Company’s suppliers so long as he had sourced the suppliers himself while working for the Company. Kuldip would always offer stock to myself and, if I had stock available, I would offer it to Sygnet.”
“..plays a key role as a broker within the UK and International Markets. The Company’s clientele comprises of independent dealers, professional distributors, exporters and international groups trading in consumer electronics and goods. ..specializes in Pharmaceutical Products, Medical Equipment, Toys, Plasma TV’s, Computer products, Mobile Phones .. ..company also benefits from having immediate access to making funds payments on satisfied inspection of products”
“Warranty. Warranted written confirmation has been received of no claims or any possible claims for the period 1 May -11 July 2006 ”
“Date Any date in February. Post original back to us immediately Thanks.”
“The director of Primeline had received numerous warnings about the prevalence of fraud in the trade it was dealing in. The company obtained a credit check about a trader in February 2006 which recommended that it should only give that trader£4,000 credit but then traded to the tune of over£12 million in the month of April 2006 and in March 2006. It received a credit check on another trader recommending a£300 limit but traded with it to the tune of£5 million in April 2006. Primeline’s turnover grew from£13,851 in the year ending February 2005 to£40,773,840 in the year ending February 2006 and to£152,282,500 in the three months ending May 2006. There is evidence that the director of Primeline asserted that he had made enquiries of HMRC about another trader with which he wished to deal and had been given clearance when that was not the case. The company had falsely represented the nature of the intended trade to HMRC when it applied for registration. The Director had also failed to register for VAT as a sole proprietor despite having a liability to do so. That and the other evidence we have reviewed leads us to find that Primeline was dishonest in its dealings in the relevant chains and that it had used the two transactions with which Megtian was concerned to facilitate fraud by means of contra trading.”
“260. As a postscript, I note that my conclusion that the law is clear, settled and against the Appellant is confirmed by the recent decision in Fonecomp Limited v HMRC. That appeal from the FTT was heard and adjudicated by Sales J and H H J Roger Berner in the Upper Tribunal at the end of last year (2013); and I was sent a draft transcript after I had substantially completed my work on this decision. Essentially the same points in relation to contra trading and the case of Mahagaben were advanced….in Fonecomp ….Sales J and H H J Berner there stated at paragraphs 27 to 29…as follows: 27. ..despite the conclusion of the Court of Appeal in Mobilx, on this appeal Mr Patchett-Joyce submitted that we review the European authorities and conclude that the Court of Appeal had (at least arguably) misconstrued them so that a reference to the Court of Justice should be ordered for it to clarify the law. As a further and alternative submission, he submitted that the judgement in Mahageben and David involved a significant modification of the approach of the Court of Justice in Kittel, such that it is now clear that a narrow test of connection between a transaction in respect of which input VAT is claimed and VAT fraud applies, on the basis of which either it is acte clair that Fonecomp must be allowed to reclaim its input VAT or there is such doubt about whether it is entitled to do so that a reference to the Court of Justice should be ordered. 28. We regard both these submissions as misconceived. The Court of Appeal in Mobilx read and interpreted the judgment in Kittel with meticulous care. We do not consider that it is open to the Tribunal to second guess the Court of Appeal’s interpretation of that judgment, laid down in authoritative fashion in Mobilx. But even if it were open to do so, we should record our full agreement with the Court of Appeal’s interpretation. There is, in our view, no lack of clarity in the position. Accordingly, there is no proper basis on which it would be right to contemplate making a reference to Luxembourg to test whether the court of Appeal in Mobilx was correct in its interpretation. 29. Moreover, we do not consider that the judgment in Mahageben and David creates any doubt or uncertainty about the interpretation of the judgment in Kittel where there was none before”