“Article 167 A right of deduction shall arise at the time the deductible tax becomes chargeable. Article 168 In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT, which he is liable to pay: (a) the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person…”
“13 Obligation to provide a VAT invoice (1) Save as otherwise provided in these Regulations, where a registered person— (a) makes a taxable supply in the United Kingdom to a taxable person… he shall provide such persons as are mentioned above with a VAT invoice.” he shall provide such persons as are mentioned above with a VAT invoice.”
“29 Claims for input tax (1) …save as the Commissioners may otherwise allow or direct either generally or specially, a person claiming deduction of input tax under section 25(2) of the Act shall do so on a return made by him for the prescribed accounting period in which the VAT became chargeable… (2) At the time of claiming deduction of input tax in accordance with paragraph (1) above, a person shall, if the claim is in respect of- (a) a supply from another taxable person, hold the document, which is required to be provided under regulation 13;… provided that where the Commissioners so direct, either generally or in relation to particular cases or classes of cases, a claimant shall hold or provide such other documentary evidence of the charge to VAT as the Commissioners may direct.”
“Member States shall exempt the supply of goods dispatched or transported to a destination outside their respective territory but within the Community, by or on behalf of the vendor or the person acquiring the goods, for another taxable person, or for a non-taxable legal person acting as such in a Member State other than that in which dispatch or transport of the goods began.”
“Where the Commissioners are satisfied that – (a) A supply of goods by a taxable person involves their removal from the United Kingdom; (b) The supplies are to a person taxable in another member state; (c) The goods have been removed to another member state… the supply, subject to such conditions as they may impose shall be zero rated.” the supply, subject to such conditions as they may impose shall be zero rated.”
“a taxable person who knew or should have known that, by his purchase, he was taking part in a transaction connected with fraudulent evasion of VAT must, for the purposes of the Sixth Directive, be regarded as a participant in that fraud, irrespective of whether or not he profited by the resale of the goods.”
“That is because in such a situation the taxable person aids the perpetrators of the fraud and becomes their accomplice. In addition, such an interpretation, by making it more difficult to carry out fraudulent transactions, is apt to prevent them.”
“it is for the referring court to refuse entitlement to the right to deduct where it is ascertained, having regard to objective factors, that the taxable person knew or should have known that, by his purchase, he was participating in a transaction connected with fraudulent evasion of VAT, and to do so even where the transaction in question meets the objective criteria which form the basis of the concepts of ‘supply of goods effected by a taxable person acting as such’ and ‘economic activity’.”
“If a taxpayer has the means at his disposal of knowing that by his purchase he is participating in a transaction connected with fraudulent evasion of VAT he loses his right to deduct, not as a penalty for negligence, but because the objective criteria for the scope of that right are not met. It profits nothing to contend that, in domestic law, complicity in fraud denotes a more culpable state of mind than carelessness, in the light of the principle in Kittel. A trader who fails to deploy means of knowledge available to him does not satisfy the objective criteria which must be met before his right to deduct arises.” “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”
“…is far from saying that the surrounding circumstances cannot establish sufficient knowledge to treat the trader as a participant ...Tribunals should not unduly focus on the question whether a trader has acted with due diligence. Even if a trader has asked appropriate questions, he is not entitled to ignore the circumstances in which his transactions take place if the only reasonable explanation for them is that his transactions have been or will be connected to fraud.”
“109. Examining individual transactions on their merits does not, however, require them to be regarded in isolation without regard to their attendant circumstances and context. Nor does it require the tribunal to ignore compelling similarities between one transaction and another or preclude the drawing of inferences, where appropriate, from a pattern of transactions of which the individual transaction in question forms part, as to its true nature e.g. that it is part of a fraudulent scheme. The character of an individual transaction may be discerned from material other than the bare facts of the transaction itself, including circumstantial and “similar fact” evidence. That is not to alter its character by reference to earlier or later transactions but to discern it. 110. To look only at the purchase in respect of which input tax was sought to be deducted would be wholly artificial. A sale of 1,000 mobile telephones may be entirely regular, or entirely regular so far as the taxpayer is (or ought to be) aware. If so, the fact that there is fraud somewhere else in the chain cannot disentitle the taxpayer to a return of input tax. The same transaction may be viewed differently if it is the fourth in line of a chain of transactions all of which have identical percentage mark ups, made by a trader who has practically no capital as part of a huge and unexplained turnover with no left over stock, and mirrored by over 40 other similar chains in all of which the taxpayer has participated and in each of which there has been a defaulting trader. A tribunal could legitimately think it unlikely that the fact that all 46 of the transactions in issue can be traced to tax losses to HMRC is a result of innocent coincidence. Similarly, three suspicious involvements may pale into insignificance if the trader has been obviously honest in thousands. 111. Further 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.”
“However, in my judgment, the holding of Moses LJ does not mean that the trader has to have the means of knowing how the fraud that actually took place occurred. He has simply to know, or have the means of knowing, that fraud has occurred, or will occur, at some point in some transaction to which his transaction is connected. The participant does not need to know how the fraud was carried out in order to have this knowledge. This is apparent from [56] and [61] of Kittel cited above. Paragraph 61 of Kittel formulates the requirement of knowledge as knowledge on the part of the trader that “by his purchase he was participating in a transaction connected with fraudulent evasion of VAT”
“The FTT also had the benefit of the judgment of the Upper Tribunal in Edgeskill Ltd v Revenue and Customs Commissioners[2014] STC 1174 where Hildyard J considered the relationship between an overall scheme to defraud and actual knowledge that transactions were connected to fraud. At [55], under the heading “Issue (4): was there (a) an overall scheme to defraud (b) to which the appellant was knowingly party?”, Hildyard J said: “The two parts of the fourth, final and most important question are inter-related; but they were, quite correctly, dealt with in turn by the FTT in its decision, since the question whether the appellant participated in an overall scheme to defraud informs, but does not answer, the question whether the appellant knew or should have known that it was participating in such a scheme.”
“Turning to whether CFB knew or should have known its transactions, other than those with BMC, were connected to the fraudulent evasion of VAT, we find that the only inference that can be drawn, having come to the conclusion that there was an orchestrated or contrived scheme to defraud the revenue, is that CFB did know of the connection to fraud. In our judgment, it is not feasible that an established and experienced business such as CFB could be placed in such a pivotal position, at the top of the transaction chains, without such knowledge. First, there is the real danger that, with its knowledge of the trade, CFB would have reported the fraud to the authorities resulting in the collapse of the scheme. Secondly, we were not provided with any account of how CFB became involved in the scheme, something that might have been expected had it been argued that CFB had been manipulated or manoeuvred by others into participating in the scheme. Thirdly, the connection with Jonathan France and companies with which he has been associated, which we have found to be fraudulent defaulting traders, to the transactions entered into by CFB.”
“As the Tribunal has concluded that all of the Appellant’s transactions that are subject to this appeal were part of such an overall scheme to defraud the Revenue, the Tribunal is also entitled to ask – why is it that the orchestrators of this scheme chose CFE to be involved? Why were so many different suppliers who were engaged in the fraud attracted to CFE? One answer is: because CFE knew the purpose of the transactions. However, the Tribunal has not been satisfied of this. The Tribunal finds the more likely answer to be: the fraudsters knew that CFE would trade with anyone with a certificate of incorporation, not investigate or conduct effective enhanced due diligence into transactions that appeared extraordinary, make insufficient enquiries if any of the companies they were using to facilitate the fraud and would be unlikely to report any suspicions to the authorities. Again, the existence of an overall scheme is of relevance to whether the Appellant should have known that the transactions were connected with fraud. These were not one-off deals or small sums of money being dealt with. Another way of looking at it is this: if the existence of the overall scheme to defraud the Revenue was obvious from its cumulative features by15 June 2009 , how and why is it that CFE failed to understand what it was part of? Again, the existence and features of an overall scheme to defraud the Revenue go to the question of whether the Appellant should have known that the transactions were connected with the fraudulent evasion of VAT.”
“54. If the referring court were to reach the conclusion that the taxable person concerned knew or should have known that the transaction which it had carried out was part of a tax fraud committed by the purchaser and that the taxable person had not taken every step which could reasonably be asked of it to prevent that fraud from being committed, there would be no entitlement to exemption from VAT. 55. In light of all the foregoing considerations, the answer to Questions 1 and 2 is that art 138(1) of Directive 2006/112 is to be interpreted as not precluding, in circumstances such as those of the case before the referring court, refusal to grant a vendor the right to the VAT exemption for an intra-Community supply, provided that it has been established, in the light of objective evidence, that the vendor has failed to fulfil its obligations as regards evidence, or that it knew or should have known that the transaction which it carried out was part of a tax fraud committed by the purchaser, and that it had not taken every reasonable step within its power to prevent its own participation in that fraud.”
“49. In the light of the foregoing considerations, it is, in principle, the responsibility of the national authorities and courts to refuse the benefit of the rights laid down by the Sixth Directive when they are claimed fraudulently or abusively, irrespective of whether those rights are rights to a deduction, to an exemption or to a VAT refund in respect of intra-Community supplies, as at issue in the case in the main proceedings. 50. It must further be noted that, according to settled case-law, that is the position not only where tax evasion has been carried out by the taxable person itself but also where a taxable person knew, or should have known, that, by the transaction concerned, it was participating in a transaction involving evasion of VAT carried out by the supplier or by another trader acting upstream or downstream in the supply chain (see to that effect, inter alia, judgments in Kittel… paragraphs 45, 46, 56 and 60, and Bonik… paragraphs 38 to 40). … 69… the Sixth Directive must be interpreted as meaning that a taxable person who knew, or should have known, that, by the transaction relied on as a basis for rights to deduction of, exemption from or refund of VAT, that person was participating in evasion of VAT committed in the context of a chain of supplies, may be refused the benefit of those rights, notwithstanding the fact that the evasion was carried out in a Member State other than that in which the benefit of those rights has been sought and that taxable person has, in the latter Member State, complied with the formal requirements laid down by national legislation for the purpose of benefitting from those rights”
“…First, it is clear from the decision of the CJEU in Mecsek-Gabona Kft v Memzeti Ado Foigazgatosaga (Case C-273/11 [2013] STC 171 ) that an entitlement to zero-rating can be denied on the basis of the doctrine in Kittel, with the burden of establishing such a denial resting on the taxing authorities. Second, Teleos is relevant only to a situation where the evidentiary requirements for zero-rating are apparently satisfied within the applicable time limits but it subsequently transpires that those requirements were not met. The burden of proving that the relevant requirements are satisfied within the applicable time limits rests, in the usual way, on the taxpayer.”
“(1) In certain circumstances a court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action. (2) If a court is willing to draw such inferences, they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call the witness. (3) There must, however, have been some evidence, however weak, adduced by the former on the matter in question before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue. (4) If the reason for the witness's absence or silence satisfies the court then no such adverse inference may be drawn. If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effect of his/her absence or silence may be reduced or nullified.”
“We only began to carry out detailed due diligence on UK suppliers and customers in February 2015 following your advice at the visit of late January 2015. As you are aware since this visit we have improved processes in line with your advice.”
“always been and remains a small part of our business, and that any apparent VAT risk would be minimal and does not justify the additional hoops that we are jumping through each month.”
“With the benefit of hindsight, the contract looks very questionable, the rate appears extremely high, the team composition is contradictory and the contract looks dubious.”
“33. If the tax authorities were to conclude that the right to deduct has been exercised fraudulently or abusively, they would be entitled to demand, with retrospective effect, repayment of the amounts deducted (see, inter alia, Rompelman, paragraph 24; INZO, paragraph 24; and Gabalfrisa, paragraph 46). 34. It is, in any event, a matter for the national court to refuse to allow the right to deduct where it is established, on the basis of objective evidence, that that right is being relied on for fraudulent or abusive ends.”
“49. In the light of the foregoing considerations, it is, in principle, the responsibility of the national authorities and courts to refuse the benefit of the rights laid down by the Sixth Directive when they are claimed fraudulently or abusively, irrespective of whether those rights are rights to a deduction, to an exemption or to a VAT refund in respect of intra-Community supplies, as at issue in the case in the main proceedings. 50. It must further be noted that, according to settled case-law, that is the position not only where tax evasion has been carried out by the taxable person itself but also where a taxable person knew, or should have known, that, by the transaction concerned, it was participating in a transaction involving evasion of VAT carried out by the supplier or by another trader acting upstream or downstream in the supply chain (see to that effect, inter alia, judgments in Kittel and Recolta Recycling, EU:C:2006:446, paragraphs 45, 46, 56 and 60, and Bonik, EU:C:2012: 774, paragraphs 38 to 40). … “69…the Sixth Directive must be interpreted as meaning that a taxable person who knew, or should have known, that, by the transaction relied on as a basis for rights to deduction of, exemption from or refund of VAT, that person was participating in evasion of VAT committed in the context of a chain of supplies, may be refused the benefit of those rights, notwithstanding the fact that the evasion was carried out in a Member State other than that in which the benefit of those rights has been sought and that taxable person has, in the latter Member State, complied with the formal requirements laid down by national legislation for the purpose of benefitting from those rights.”
“… is not a matter of fact but a matter of opinion. It is merely a view of a witness on a matter on which the tribunal itself must reach its own conclusion, and as such is of no value as evidence. Such evidence may rightly be excluded on that basis. In most cases, however, we would not see it as necessary, or indeed proportionate, for a forensic exercise to be undertaken, either by the parties or by the tribunal, to identify any such matters in each witness statement and for the tribunal formally to direct that they be excluded. Generally speaking, we think that the parties can rely upon the good sense of the tribunal to disregard purported evidence that represents conclusions that the tribunal itself must reach. That can usually conveniently be the matter of submission at the substantive hearing, rather than a formal application to exclude.”
“The problem you have with trying to get these cars out of a Land Rover main agent is if they know you are a reseller, they just won't sell to you, because they fear that the car will be exported. I think further on into my statement I talk about manufacturers territorising the world. There is a fear of that from Land Rover. Also they just don't like other agents selling their cars for over and above list price. They like to try to keep, I say their foot on the neck of the market. If they control all of the supply, then they are in the most powerful position.”
“Q. At what point did you conclude that the market in brand new vehicles was one that you wanted to enter into? A. The main driving force behind going into the -- it was predominantly Range Rovers is something that's -- a cycle that's come around again with the new launch of a new model Range Rover…Because there was waiting lists for these vehicles, because they were quite difficult to get hold of, we saw that there was a gap in the market to sell these vehicles above and over list price... … Q. But when you realised that there was this gap in the market, was this around the time Mr Mason joined the company? A. Yes. Q. Because Mr Mason is the gentleman, as I understand it, on his evidence and yours, he is the one with the real export experience, you had done some at BMW but he was the expert if you like? A. Yes. And it is probably quite key to say that Mr Mason had been in the motor trade for quite a lot longer than me. So he's seen these types of new model cycles and this sort of business before. So he was -- he spotted it alongside all of us. We make a decision as a team. Q. But he had already come on board at that point to join the sales team more broadly? A. Yes. Q. Then when this particular market was spotted, he was obviously a driving force in that respect, or a very useful source of information? A. Absolutely. Q. He is described at the time on your website as the person for exports? A. Yes. Q. Certainly we can see from the correspondence that that was very much his baby and he was the contact? A. Yes. Q. Thank you. Is it fair to say that you relied on at that experience of his, although you had some experience of your own? You relied on his greater experience in that way? A. That would be fair to say, yes.”
“Q. Again so we are clear, when you say – you talk about what Mr O'Kelly wanted, etc. Mr Mason was plainly essentially in charge of these transactions. That was his area or one of his areas? A. Yes. That's not to say that other people from the business didn't talk to Mr O'Kelly. He made a lot of the phone calls. So we did speak to him but yes, on a transactional basis it was Mr Mason that looked after that client. That was his customer, as it were. … Q. But in terms of understanding how you, Vanrooyen, the company knew that you were dealing with Mr O'Kelly as opposed to anyone else, would it be better to talk to Mr Mason about that presumably? A. As I said, Mr Mason dealt with Mr O'Kelly more than I did.”
“Mr Lee: It was a few pages, and it was really trying to establish the credentials of the other side of the transaction. So it was more about identification and (inaudible) status and that kind of thing really. Very similar to anti-money laundering type sort of requirements…so it was about establishing those credentials and making sure that they were bona fide. … It just seemed like a fairly complete document to me at the time. It seemed sensible. I guess that was the point I was trying to make. My advice at the time was because it was more of a technical matter, I did say that it was beyond my skillset, and that they should continue with their enquiries with the specialists that they had already engaged at the time.”
“A. Yes. Just to clarify, when we started to do this with the new Range Rovers, we had no idea that any of these were going to be exported. This was solely to sell to UK people. Q. Right. Can I ask you then why you had no idea that they were going to be exported, if you were, with your experience, knowledgeable about that lucrative market in Ireland? A. Well, we advertised the first vehicle that we had a build slot for on the Autotrader, which we knew wouldn't arrive for probably six to ten months. We placed an advert to test the water, to see the desirability. That one car, we could have sold it ten times. Q. Forgive me for asking the same question again. From what you say in your witness statement, you knew from your experience that there's a big market in crossing the borders because of the different list prices in different countries? A. Yes. Q. Was that not, therefore, an obvious target for you from the start? A. No, that's not what we set up to do. Q. Why not? A. We didn't feel we needed to at the time. Q. What changed? A. We had an enquiry from an overseas customer, asking would we export. Q. So, in short, you had more demand from Ireland than you did from elsewhere? A. Not initially, no.”
“Q. That is the beginning of a document with which I think we're probably all familiar, is that right, the notice 726? A. Yes. Q. And you accepted, we can see that this copy is published on2 April 2008 , when you indicated the particular goods of concern were not cars, mobile phones, CPUs and such matters, classified goods? A. Yes. Q. And that the guidance was developed at that stage, but please could you take us to chapter 6, or part 6, that you say was the one that you would be anxious to bring to the attention of traders in later years when you were doing the visits in question? A. Yes. We'd always direct them to section 6, because -- … Q. Just help us with what you were saying about that, and how that helps with the issue of supply chains and customer chains? A. Well it gives a, as the heading says, dealing with other businesses, how to ensure the integrity of your supply chain, and it spells out at paragraphs 6.1 what checks can I undertake to ensure the integrity of my supply chain. There's a whole raft of examples there. Nothing prescriptive as it were, but we ask our traders to read carefully and take cognisance of. We obviously can't tell them to perform each and every check, but it gives them an alert as to a reasonable idea of what checks they can do.”
“Prior to February 2015 our focus was on verifying the VAT registration numbers of customers located in other EC member states as this is where we considered a risk from a VAT point of view…We only began to carry out detailed due diligence on UK suppliers and customers in February 2015 following your advice at the visit of late January 2015…”
“Q. …There’s a lot of information there? A.There is, yes. But, if I may add, it is what Vanrooyen does with it. You know, that’s all fine and well on a piece of paper. Have they checked the principal place of business? Do they know what it is? Have they Google mapped it? Q. Do you expect every business to Google map where its suppliers and customers are, in 2014? A. If a business was going to supply over£3 million worth of high prestige vehicles to one small business, as it were, one Mr O’Kelly, yes, I would. I would be circumspect to ensure that he has got the history and the foundations of, you know, a secure and established business.”
“Q. But having told him that you would rather concentrate on UK sales, you through your business conducted a number of further transactions, didn't you, for some further months? A. Yes. Q. With the Republic of Ireland? A. Yes. Q. With other individuals. Did you not at that stage consider that there was some substance potentially to the concerns that the Revenue had and all the attention they had been paying you, your number one customer in the Republic of Ireland was no longer registered for VAT? A. Yes. Q. And maybe you, through a lack of understanding of the problem of the VAT fraud or for any other reason, were, in fact, operating in a way that was clearly dangerous, if you like, in terms of being tainted with fraud? A. I think, going forward from that point, Mr Lynch and Mr Burke were people we were still supplying cars to, which -- we had gone through the VAT verification process with HMRC to give ourselves the confidence that again they were bona fide traders. We were checking the VIES system constantly to make sure that they were still operating and again we'd send off the documentation of what we had been asked to do over to HMRC. … A. Again we didn't know they were fraudulent when we have sent over all of our due diligence to be checked over by HMRC for them to not tell us there was any issues with those clients. Q. They told you that they were VAT registered? A. Yes. Q. And that they couldn't give you any guarantees. It was a matter for you to assess, didn't they? A. Correct, which again they told me for Mr John Murphy. Exactly the same. I sent the same documentation and that deal was absolutely fine. Q. So you knew that although you had given this documentation to the Revenue all they could tell you was it was a valid number and couldn't give you any other help? A. Unfortunately, yes.” … Q. But the impression one gets is that you were told of certain checks you could do? A. Yes. Q. That you have described as due diligence. You have asked if there is anything particular more that you can do? A. Yes. Q. You have been told it is a matter for you to assess your chains, your market, your position? A. Yes. Q. And we will come to the notices that you were given in a moment, but you took away from that that if the customers weren't going to give you any more information as to what you could do, then you were going to do what they suggested and gather it in a file and that was your position covered. Is that fair or not? A. I wouldn't say covered. I didn't believe there was any other things we could do going forward. I genuinely didn't believe that at the time… Q. We will perhaps have a pause in a moment, but just before we do, the response that you got from the Revenue when you did send those documents through later was "Yes, it's a valid VAT registration number."? A. Yes. Q. "That doesn't mean we are giving you the all clear. It means that it is a valid VAT registration number and the onus is still on you to satisfy yourself."? A. Yes. … Q. I think you had agreed that the customs' position was always that ultimately you must make an assessment yourself. A. Yes.”
“JUDGE DEAN. You were asked about the following being told that Mr O'Kelly had been deregistered -- I think it was put to you that did it not concern you at that point you might be in dangerous territory that there might be something going on? You said going forward you were dealing with Mr Lynch and Mr Burke and you had done various checks on them. A. Yes. Q. Which I think you said gave you confidence they were bona fide? A. Yes. Q. What I just want to clarify is you had done the same or similar checks to those which you had done for Mr O'Kelly? A. Yes. Q. But obviously he had been deregistered? A. Yes. Q. What gave you the confidence that the same was not going to happen to these two. Was there anything different about them? A. So in my mind we had obviously received details and documents from Mr O'Kelly but we had never put them through HMRC's verification check, because we weren't aware that was something you could do. Obviously we were talking with HMRC about how to bolster up our due diligence. We had had our new questionnaire suggested to us by Duff & Phelps. So we had got that. We had those filled out by both Mr Lynch and Mr Burke. We had sent those over to HMRC so although Mr O'Kelly had been deregistered for VAT, obviously we didn't know why that had happened, but we thought "There getting exported around the globe, especially Range Rovers, which are difficult to get hold of. We have done our relevant checks with HMRC". I don't think we thought there was that much of a risk. Q. Did you understand that when you say the document stage at HMRC, they weren't checking them? A. I think this is where the difficulty lies. HMRC -- you send documents off to HMRC and ask them for a VAT verification, which they then give you, but they wouldn't tell you if there was anything wrong with that client. I don't really know how we would be able to find out things that they know. That is the thing I have always found quite difficult. … Q. Perhaps just linked to that point what did you take from -- I just talk about due diligence generally on each of the various traders he did it on. What did he glean from it when he got a valid VAT registration number? What did that mean to you? What then did you think was the purpose of doing that? A. Again we were asked to -- we were advised the best way to protect our business was to perform these checks, which is what we went on to do. Q. Okay. So how it did protect you? A. Well, from what we were told regarding the notices that were issued, that if there was any denial of any zero rating or input tax or output tax, if there's any fraudulent activity, then we can rely on the zero rating. … Q. So is it fair to say as far as you were concerned -- and I completely accept and take on board the fact that I think you had quite a limited involvement, because Mr Mason dealt with quite a lot of the things -- A. Yes. Q. -- but in your word you were complying -- I think you used the word "compliance" quite a lot -- you were complying with HMRC's requests for documents. You had ticked the various boxes. You had got the documents. You had sent them to HMRC. In your mind that was protecting yourself as much as you felt you could with your understanding at that time? A. Yes. I mean, the only other body we deal with, which I would liken HMRC to, is the Financial Conduct Authority. They set out rules and regulations that we follow when it comes to financial conduct in the market. When they set their rules and regulations out, we follow them as we are told to do. Q. So in a similar vein you followed what you thought were the – A. Yes. We thought "That's how to protect yourself is to make sure that rules and regulations are followed". The same way that when Mr D'Rosario asked us for anything we have supplied it as quickly as we can do, because we thought, again maybe naively, that we were trying to help, but unfortunately we are sat here.”
“A. How the business runs, Martin and his team run the day-to-day accounts. Anything to do with things like this, I was not aware until probably way after the second visit that there was any enquiries from the HMRC. Q. You were only aware -- sorry. I missed that? A. I think it was probably several days – it might have been weeks -- after the first -- sorry -- after the second visit from HMRC that we had the discussion about this. Q. So Mr Rylands had a visit from the Revenue in August of 2014. They raised the question of something that you say no-one had heard of in your business? A. That's correct. Q. Which is fraud, and a particular kind of fraud relating to VAT, and a concern from the Revenue that this is an area of the market that you are trading in that may have fraud within it or does have fraud within it, and Mr Rylands did not talk to you about it for weeks? A. No, he didn't. Q. When he did talk to you about it, when was that? A. From my recollection, it was after the meeting with Mike Lee. Q. After the meeting with Mike Lee -- A. No, sorry. We talked about HMRC, but the actual fraud, MTIC fraud, was after the meeting with Mike Lee. … A. In the early conversations I had with Mr Rylands, I think there was a discussion about "Make sure that your paperwork is correct with whoever you are going to export to, and we are going to have to get some outside help". He shielded me from things like that so I could concentrate on doing the sales. Q. Okay. So your understanding was that you didn't need to know what was going on with Customs -- and if this is wrong, please say so. It is obvious, but it is important. A. Yes. Q. Mr Rylands was taking care of that side of it, and as long as you had your paperwork in order, then that was the extent of your need to worry? A. Yes. It was discussed a few times. "Just make sure you have got the due diligence on the customer correct". Q. All right. Well, I think in those early days when you say "due diligence", you have said in your witness statement that you wanted to make sure they had a VAT registration? A. Yes. Q. And that was essentially it, identity and VAT? A. We identified the customer, made sure that he was a bona fide trader, and got as many proofs, driving licences, passports, operator's licences, VAT references as possible. Q. Right at the beginning of these transactions? A. We did, yes. Q. Why was it in your mind important to get that information? A. Well, this is what I had been told to do when was at Boss. The owner of Boss, when we started to do the exports, he controlled that as well, and he gave me a directive of the things that we needed. Q. Right. Did he explain why you needed them? A. Because that was the law. Q. Because it was the law? A. It was the law. Q. But from your own perspective, as an experienced businessman in this trade, did you give any thought as to why it was important to understand whether someone was a car trader and did have a valid VAT number? A. Yes. Well, if you haven't got a VAT number, from my experience, and you are not a motor trader, you cannot export a car from the country. Q. Can't export it at all? A. Not within the EU. Q. That was your understanding? A. Yes. … Q. Right. So you were asked by Mr Rylands: "We are going to get an expert in to help us with this". At this point had he mentioned fraud? A. No, not at all. Q. Still hadn't mentioned fraud at the point that Mr Lee arrived? A. No. Q. "We are going to get an expert in to help us to make sure that we comply with the law"? What did he say? A. To make sure we are doing everything correctly. Q. "Can you, please, Glen, do us a list of what you think is appropriate for us to ask for"? A. No, he didn't say that. It was left to me to produce the form. Q. He asked you to produce a form? A. No, I don't think he asked me to do it. I did it on my own. Q. I see. Did you know at that stage you were going to have the meeting with Mr Lee? A. Yes. I did this in anticipation of the meeting coming up with Mr Lee.”
“Q. Sorry, so looking at -- you see an advert on Autotrader selling a car. Yes? It is a car you are interested in? A. Yes. Q. You decide: "Okay, they are not a main dealer on this occasion. Many of my suppliers are. So I need to make sure they are a reputable dealer". Q. How did you do it. You looked in Autotrader? A. We would do a VIES check, which made sure he could sell me a vehicle with the VAT, and just look at their history from the website. Q. From which website. Autotrader? A. Their own probably website or the Autotrader. Q. What would the Autotrader tell you about their history and whether or not they are a reputable dealer? A. Nothing really. Q. Checking the Autotrader is not going to help. So you look at their own website? A. Yes. Q. How does that tell you whether they are a reputable dealer? A. The volume of vehicles that they have got for sale, and usually they have some feedback with Google. I think there was probably only two or maybe three cars that was bought from outside the main dealer network. … A. I don't know what you are asking me to say. In the course of my business, I buy sometimes 100 cars a month from people all around the country. You go on to the Trade Mail system that we have. They are vetted by the people that allow them to put them on the Trade Mail. They have to be proper car dealers to put cars up there. Q. Do they? A. In all the deals that we have ever done, nothing has ever come wrong. Q. What do you mean by they have to be reputable dealers to be able to put an advert on -- A. There is a trade only site, not Autotrader. It is called Trade Mail, which is part of the Autotrader. Autotrader will not allow them to put vehicles on there if they didn't have a trading history with them. Q. How do you start then? How do you put your first advert on trade mail if you have not got a trade history with them? A. You might have to give trade references to these people. I don't know. … Q. I was asking you, how do you see that they are a reputable dealer. You said: "Well, the site they are advertising with would not have them unless they were, unless they had a trading history with them". Is that your evidence? A. Yes, and I think it is experience. You know if you are buying from someone that's okay. Q. You don't, do you, Mr Mason, because you got caught up in a huge volume of fraud during 2014 and 2015. A. Not from our suppliers, which we are talking about at the moment. Q. We will come to your suppliers in due course. Equally important that they are reputable, have a history in trade, etc. Did all of your customers have long histories in car trading? A. I wouldn't know. Q. No, you wouldn't, would you? A. No. Q. Because you didn't look. But on your own evidence, Mr Mason, this was something that you considered important, wasn't it? A. If you, as a private person, came into my showroom to buy a car today, I wouldn't do due diligence on you. Q. We are not talking about private end users. We are talking about motor dealers in Ireland, aren't we? A. But he was a customer. Q. Again, I put to you a moment ago, it is equally important for the customers and you agreed. A. Yes. Q. Did you do checks that would allow you to see whether this customer had a long and reputable history in car dealing? A. I did the best that I could with the information that was available.”
“A. Well, on the questionnaire it was no more different to the information that I had already got from Mr Kelly, except we were asking them to fill it out themselves, rather than just get a driving licence, to get a passport. So I wanted it coming back from them with the details on. So there was no more paragraphs on there from the difference that we already had. Q. Okay. A. It just looked more formal.”
“Q. Because, you see, it's been described as an enhanced due diligence questionnaire, but from what you tell us there was nothing to enhance. You had it all already? A. There was a difference of getting the customer to fill this out himself or just sending me via e-mail his driving licence, you know. We thought he would fill this out and return it to us, more like an official document rather than a driving licence here, you know, a pile of documents just coming as an e-mail. Q. So getting them to fill it in themselves, so admin? A. Yes”
“This all painted the picture that what he was doing was not only above board but also in high demand. We knew Mr O’Kelly bought many cars from around the UK to supply his trade, many of which are from British Car Auctions. Mr O’Kelly had a GOLD buying account…meaning he was buying circa 12 – 99 vehicles a year, also proving that he is a car dealer. … Q. Just dealing with the chronology here, are you talking about from the get-go when you dealt with Irish sales you were doing these enhanced business identity checks, etc? A. Yes. So when we enter into any transaction with any type of client, there is an element of making sure you know who your customer is…”
“Q. So you get the car out, but you obviously need proper accounts systems for all sorts of reasons? A. Our system is a system called Clickdealer which our admin system download each month with all the bank ins and outs which then goes into the system, which then goes into Sage. Again if I got the full -- if I was to get the full sort of breakdown of that on the bank statement, it will be probably about that long and it will have O'Kelly and a registration number. Like I say, in there it did say JP Capper which at the moment I can't explain. All I will say is it was missed because I have not checked the paper bank statement, because it is not common practice for me to do it. JUDGE DEAN: Did anybody check? A. I mean, I would need to ask my administration team but I wouldn't have thought so, no.”
“Q. Mr McNulty, did you meet him when he visited? It is at 22 of your witness statement, just one paragraph. A. Again I think very briefly, because again there's certain sections of the business that get looked after by certain people. I look after generally the high end vehicles, sports and supercars. Glen looked after the export vehicles and now looks after the deals that we do to the fleet business that we deal with. So whether I opened the door and said "Hello", which is probably something that I will have done. Aside from that, it would be very limited. Q. All right. You mention there that he -- you were aware he was sourcing cars for and selling cars on to an established car dealer in Ireland. Did that come from Mr Mason? A. Yes, it did, yes. Q. I will deal with it with him then.”
“Obviously he has to get paid for his work that he does as a middle man. I wasn’t aware of what the relationship they had regarding money for the car. So no, it didn’t worry me … Q. He is asking you to invoice him himself? A. Yes Q. Rather than the person you have actually done the deal with already? A. Yes Q. So what was the price agreed then with Mr McNulty? A. It was the same price Q. So Mr McNulty was going to be invoiced for the price that Mr Murphy had negotiated. It followed presumably in your head that Mr McNulty was going to sell on at cost? A. Well, he might receive a commission from Stephen Murphy. I wasn’t aware of that, but he did say to me Colm McNulty that I do a lot of buying and selling for Stephen Murphy. … Q. was this something you come across a lot? A. It is, yes. It happens a lot in the UK”
“…would not have done that transaction for no commission…I wasn’t privy to their relationship, so I can’t comment on it.”
“I don’t think he was bothered. He advertised the car on the Autotrade Mail at a price. We paid that price, invoiced Mr McNulty and then arranged delivery of the car. He would only have known when the car arrived. … It actually turns out Mr McNulty did business with Mr Stinson anyway.” (Transcript18 May 2022 page 17) It actually turns out Mr McNulty did business with Mr Stinson anyway.”
“It was just my job to obtain theinformation, hand it across to Mr Rylands and hewould deal with this side of it.”
“This vehicle was sold to Martin Burke. Unfortunately, as MB Motors was the reference displayed on our online banking system when the credit appeared, the actual source of payment did not become clear to us until the printed bank statements arrived to our business…”
“…At the time the vehicles were sold to Vanrooyen, Adapt 4 Work Limited and Flexible Vehicles Limited were acting under an Agency Agreement (with Adapt 4 Work being the principal and Flexible the agent). The vehicles were bought and sold under the terms of the Agreement…The payments made by Vanrooyen were received into one of the trading bank accounts of Adapt 4 Work (and) Adapt 4 Work had accounted for input VAT and output VAT in relation to the relevant transactions).”
“A. Yes. No, we were already holding the Mercedes and we probably had it six weeks. Mr O'Kelly bought another Range Rover off us, nothing to do with Ian Harrison. We agreed in the deal -- he said: "Do you want to take the part exchange of that Mercedes". We agreed, I think it was£34,000 for the Mercedes. Let's say it was 40,000, the new car, he paid us the difference, we kept the car. But I needed an invoice, the title for it. I asked for the invoice, and it came as an email. When it came it was exactly the same as Adapt 4 Work, which surprised us a little bit. When I queried it with Ian Harrison, he said "I do a little bit of business with Mr O'Kelly". Q. That was really the point. Forgive me. You have explained it much better than me. It is a bit of a coincidence, is it not? A. We thought that at the time, but in the circles that Ian Harrison mixes with, probably not. Colin O'Kelly did say later that he had bought a few cars from Ian Harrison. Q. If Colin O'Kelly is buying cars from Ian Harrison, you are buying cars from Ian Harrison to sell to Colin O'Kelly? A. Yes. Q. You are a bit of an unnecessary step in the chain, aren't you, if they know each other already? A. But at the time that I was buying cars from Ian Harrison to sell to Colin O'Kelly, Colin O'Kelly didn't know that I knew Ian Harrison. We only bought two cars off Ian Harrison in a short period.”
“Q. Can you just help us, and it may be this is more Mr Mason's area, but can you help us? How is it that you were able to control that? You sent these vehicles over by ferry? A. Yes. Q. Sometimes full payment hadn't been received at the point that you send them? A. Correct. Q. They are given to the custody of the ferry security people? A. Yes. Q. Who are experienced in this. There are lots of vehicles going over? A. Yes. Q. Then there is an instruction. You give an example I think of a note being left on the steering wheel? A. Yes. Q. Saying "Please don't release until you have our permission"? A. Yes. Q. But there's also reference to a reference number being given? A. Yes. Q. Can you just help us, because clearly these are very high value vehicles? A. Yes. Q. What is your safeguard? How do you know that they're not going to release the vehicle? What arrangement or contract do you have with either the security people or anyone else? A. So the cars are being sent as freight. So we've paid to send them over as freight, and when we've booked them, we've -- again this might be something more for Mr Mason, because he handled -- he dealt more with this side of the business, but there was a password that effectively needed to be given to the shippers at the other end. I wouldn't say it is unusual for people that ship other types of items, whatever they may be, the high value items, for the shipper to not release at the other end until they have had confirmation that all the payment and everything is in place.”
“Q. They were under your control -- and this is a big point that you make -- on the ferry? A. Yes. Q. Who insured them on the ferry? A. I would imagine Vanrooyen would have stood on the insurance on that until it was collected on the other side. It was our responsibility until it was collected. Q. You would imagine? A. I think that was the case. Q. Were you aware of the policy that the company had to insure on the ferry or not? A. No, I'm not.”
“The Commissioners may, on application by a person who is not taxable in another member State and who intends— (a) to purchase a new means of transport in the United Kingdom, and (b) to remove that new means of transport to another member State, permit that person to purchase a new means of transport without payment of VAT, for subsequent removal to another member State within 2 months of the date of supply and its supply, subject to such conditions as they may impose, shall be zero-rated.”
“1. The following transactions shall be subject to VAT: … (b) the intra-Community acquisition of goods for consideration within the territory of a Member State by: … (ii) in the case of new means of transport, a taxable person, or a non-taxable legal person, whose other acquisitions are not subject to VAT pursuant to Article 3(1), or any other non-taxable person; 2. … (b) These means of transport shall be regarded as ‘new’ in the cases: (i) of motorised land vehicles, where the supply takes place within six months of the date of first entry into service or where the vehicle has travelled for no more than 6 000 kilometres; (c) Member States shall lay down the conditions under which the facts referred to in point (b) may be regarded as established.” (b) the intra-Community acquisition of goods for consideration within the territory of a Member State by: (ii) in the case of new means of transport, a taxable person, or a non-taxable legal person, whose other acquisitions are not subject to VAT pursuant to Article 3(1), or any other non-taxable person; (b) These means of transport shall be regarded as ‘new’ in the cases: (i) of motorised land vehicles, where the supply takes place within six months of the date of first entry into service or where the vehicle has travelled for no more than 6 000 kilometres; (c) Member States shall lay down the conditions under which the facts referred to in point (b) may be regarded as established.”
“6. Purchasing a NMT in the UK for removal to another member state 6.1 Buying a NMT in the UK for removal to another member state This section has the force of law If you buy a NMT in the UK to take to another member state, you will be liable for the VAT on the value of the NMT when you arrive there. To make sure that the purchase of the NMT is free of UK VAT, you must comply with certain conditions. These are: • the means of transport must be ‘new’ • you or your authorised chauffeur, pilot or skipper must personally take delivery of the new means of transport in the UK • you must remove it from the UK to the member state of destination within 2 months of the date of supply to you • you must complete and sign a declaration on a form VAT411, stating your intention to remove the NMT from the UK and pay any VAT due in the member state of destination, your supplier must complete their part of the form … 6.3 Form VAT411 Form VAT411 is your declaration that you’ll take the NMT to another member state within 2 months and pay the VAT there. It’s also your supplier’s declaration that they’ve supplied a NMT to you for removal from the UK. 6.4 Completion of form VAT411 The form is made up of an original (the top sheet) and 3 copies. When it has been properly completed, your supplier will send the original copy to us (see paragraph 9.5) and give the first copy to you. The supplier will keep the second copy of the form as part of their business records, and, if the NMT is a land vehicle, they’ll use the third copy to register it for road use if you’re going to drive it out of the UK. 6.5 Buying a NMT in the UK for removal if you’re VAT-registered in another member state If you’re registered for VAT in another EU member state and you buy a NMT from a VAT-registered person in the UK for removal to that state your supplier may zero rate the supply under the normal rules (see Notice 725: the single market). To benefit from zero rating you must remove the NMT from the UK within 2 months of the time of supply. You must account for any tax due on the acquisition in the member state of destination, under the laws of that state. 6.6 Using the land vehicle on UK roads before removal to another member state You must not use your land vehicle on UK roads unless it’s been licensed and registered, and is properly insured (see section 10). 6.7 Inability to remove the NMT due to circumstances beyond your control If you purchase a NMT and then find that because of circumstances beyond your control, you’re unable to remove it, you should inform us immediately by writing to the address given in paragraph 3.4 (see paragraph 6.8). When we receive your letter we’ll calculate the VAT due and send you a demand, which you must pay immediately. 6.8 Failure or inability to remove the NMT within the period allowed If you fail or are unable to remove your NMT from the UK within the 2-month period allowed, you should inform HMRC and pay the VAT which is due. Failure to do so may make your NMT liable to forfeiture. 6.9 Exemption of NMT from ‘type approval You can find more information on ‘type approval’ and how it affects NMT that are land vehicles from paragraph 10.7 onwards. 6.10 Insuring the NMT that you purchase in the UK for removal to another member state If you buy a NMT in the UK for removal to another member state you should consider insuring it for its full value including UK VAT. If for any reason (for example, an accident) it’s not removed from the UK, you’ll be liable for any UK VAT which was not charged at the time the NMT was supplied to you. It’s a legal requirement that you must be insured against third-party liabilities before you drive a land vehicle on UK roads. If your vehicle is registered in the UK, its use must be covered by a policy of insurance issued by an authorised insurer (a member of the Motor Insurers Bureau). 6.11 Next steps When a NMT (that is a vehicle) is finally removed from the UK, the DVLA require the tear-off portion of the VX302. In the case of a temporary removal to another EU member state, say for a holiday, the VX302 is not required to be completed. If it is, then it can cause problems on return to the UK as the licence is cancelled.” (Emphasis added)
“9. Supply of NMT by a VAT-registered person 9.3 Conditions you should meet if your customer is not VAT-registered in the member state of destination You must meet all the conditions in order to zero rate the supply to your customer who will be liable for any VAT in their member state: • the means of transport must qualify as ‘new’, see section 2 • you and your customer must make a joint declaration about the transaction on form VAT411, if this form is not completed properly, you will not be entitled to zero rate the supply - see paragraph 6.2 and paragraph 6.7 … 9.5 Where to send the completed form VAT411 You must send all originals to: HMRC Customs Belfast PTU Erskine House 20-32 Chichester Street Belfast BT1 4GF 9.6 Deadline for submitting form VAT411 You must submit this within 6 weeks of the end of the calendar quarter in which you’ve made the supply.”
“39. Accordingly, the principle of fiscal neutrality requires that an exemption from VAT be allowed if the substantive conditions are satisfied, even if the taxable person has failed to comply with some of the formal requirements (see, by analogy, judgment of27 September 2007 , Collée, C-146/05, EU:C:2007:549, paragraph 31). 40 In that regard, the Court has held, in connection with an intra-Community supply, that an obligation to communicate the VAT identification number of the person acquiring the goods constitutes a formal requirement with regard to the right to exemption from VAT (see, to that effect, judgment of27 September 2012 , VSTR, C-587/10, EU:C:2012:592, paragraph 51). 41 The same applies to an obligation to provide, in connection with an intra-Community transfer, the taxable person’s VAT identification number issued by the Member State of destination. While the provision of that number is proof that such a transfer has been effected for the purposes of that taxable person’s undertaking and, therefore, as is apparent from paragraph 31 of the present judgment, that that taxable person is acting as such in that Member State, proof of that capacity cannot, in every case, depend exclusively on the provision of that VAT identification number. Article 4(1) of the Sixth Directive, which defines ‘taxable person’, does not make that capacity subject to the possession by that person of a VAT identification number (see, to that effect, judgment of27 September 2012 , VSTR, C-587/10, EU:C:2012:592, paragraph 49). The provision of that number is not, therefore, a substantive condition for the exemption from VAT of an intra-Community transfer. 42 It follows from the foregoing that an authority of a Member State cannot, in principle, refuse to grant an exemption from VAT in respect of an intra-Community transfer on the sole ground that the taxable person has not provided the VAT identification number issued to him by the Member State of destination.”