AAMRL Ltd & Anor v The Commissioners for HMRC [2026] UKFTT 582 (TC)

[2026] UKFTT 00582 (TC)

Case No TC 09845

FIRST-TIER TRIBUNAL

TAX CHAMBER

Hearing Heard on: 2 March 2026 (reading day)

Date Judgment date: 14 April 2026

Sitting at Taylor House, London

Appeal reference: TC/2023/09231

TC/2024/01270

TC/2024/05142

TC/2024/05364

TC/2024/06111

VAT –Kittel– Missing Trader Fraud – section 69C VATA 1994 Penalty – Transactions Connected with VAT Fraud – section 69D VATA 1994 Penalty – Officers’ Liability – Discretion as to Officers’ Liability – Deregistration –Ablessio

to 6 March 2026

Before

TRIBUNAL JUDGE ALEXANDER WILSON

MEMBER CAROLINE SMALL

Between

AAMRL LTD (1)Appellant

MARIA ROSA LORIA (2)Appellant

THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondent

in person for Appellant

Ini Udom of counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs for Respondents

DECISION

Introduction

[1]These are consolidated appeals brought by AAMRL LTD (“AAMRL”) and its sole director, Maria Rosa Loria (“Ms Loria”), against a series of decisions made by the Commissioners for His Majesty’s Revenue and Customs (“HMRC”).

[2]The appeals concern five decisions:(a) the decision of HMRC, dated 16 May 2023, to deregister AAMRL from Value Added Tax (“VAT”) with immediate effect, on the basis that it had used its VAT registration number (“VRN”) solely or principally for fraudulent purposes pursuant to the principles set out in the case of Valsts ieņēmumu dienests v Ablessio EU:C:2013:168 (“Ablessio”) (“Appeal One”);

(b) the decision of HMRC, dated 2 October 2023, to deny the right to deduct input tax in the sum of £7,346,897 for the VAT periods of 02/22, 05/22, 08/22 and 11/22 pursuant to the principles set out in the case of Axel Kittel v Belgian State and Belgian State v Recolta Recycling SPRL EU:C:2006:446 (“Kittel”) (“Appeal Two”);

(c) the decision of HMRC, dated, 15 January 2024, to issue an assessment in the sum of £1,476,062, for the VAT period 11/22 (“Appeal Three”);

(d) the decision of HMRC, dated 4 July 2024, to issue AAMRL with a section 69C Value Added Tax Act 1994 (“VATA”) penalty in the sum of £2,204,069.10 (“the Company Penalty”) (“Appeal Four”); and

(e) the decision of HMRC, dated 6 September 2024, to issue Ms Loria, with a section 69D VATA penalty in the sum of £2,204,069.10 (“the Officer’s Penalty”) (“Appeal Five”).

[3]AAMRL Limited (“AAMRL”) was incorporated in January 2020 and registered for VAT with effect from July 2020. It was at all material times under the sole directorship and ownership of Ms Maria Rosa Loria. The company’s stated business activities included wholesale and retail of electronic goods, with earlier references to online retail activity.

[4]From late 2021 to early 2022, AAMRL’s trading profile changed. Reported turnover increased sharply from modest levels to multi‑million‑pound quarterly figures. By the VAT periods relevant to this appeal, the company’s activities were predominantly wholesale rather than retail.

[5]During the VAT periods 02/22, 05/22, 08/22 and 11/22, AAMRL purchased large quantities of consumer electronic goods, principally games consoles and accessories. The goods were purchased to order and sold on almost immediately, typically without AAMRL taking physical possession.

[6]The goods were commonly delivered directly from AAMRL’s supplier to its customer via third‑party freight forwarders, most notably Unicorn Shipping and Interken Freighters. AAMRL did not hold wholesale stock and did not materially alter, process or repackage the goods.

[7]During the relevant periods, AAMRL’s wholesale purchases were predominantly from the following suppliers:(a) BAPS Services Ltd (VAT periods 02/22 and 05/22);

(b) 2LY Promotions Ltd (VAT periods 05/22 and 08/22);

(d) Purple Mobile Ltd (VAT period 11/22), which itself purchased goods from upstream defaulting traders including My World Eco Ltd.

[8]Each of these suppliers was subsequently identified by HMRC as a fraudulently defaulting trader or, in the case of Purple Mobile, as operating within tax‑loss supply chains. All were deregistered from VAT with retrospective effect.

[9]AAMRL’s principal wholesale customer during the relevant periods was Estanza Ltd, to which the vast majority of AAMRL’s wholesale sales were made. In some periods, Estanza accounted for almost all of AAMRL’s sales by value. Estanza itself was later deregistered under the Ablessio principle and subject to VAT denials.

[10]The goods sold by AAMRL were frequently onward‑sold by Estanza to further traders, including Deos Group, with no identified end‑user market. The transaction chains were therefore characterised by repeated wholesale movements of the same goods.

[11]Across the four VAT periods in issue, AAMRL claimed input tax totalling approximately £7.43 million. HMRC traced £7.35 million of that amount to purchases from the above suppliers and denied the right to deduct that input tax on the basis that the transactions were connected with fraudulent VAT losses upstream.

[12]The proportion of input tax denied ranged from approximately 95% to almost 100% of the total input tax claimed. Corresponding VAT assessments were raised, and repayment claims were refused or reversed.

[13]From July 2022 onwards, HMRC engaged with AAMRL. This included requests for records, site visits (on 28 July 2022 and 12 April 2023), provision of guidance materials (including VAT Notice 726 and MTIC fraud guidance), and the issuing of multiple VETO and tax‑loss letters in respect of AAMRL’s suppliers and customers.

[14]Despite these interventions, AAMRL continued to trade with successive suppliers who were later identified as connected to tax‑loss supply chains.

[15]HMRC deregistered AAMRL and denied AAMRL’s claims to input tax on the basis that the transactions were connected with the fraudulent evasion of VAT. The total input tax claimed for the four periods was £7,429,784.31, of which £7,346,897 (approximately 98.9% of input tax claimed) was denied.

[16]HMRC further concluded that AAMRL’s VAT registration had been used solely or principally for fraudulent or abusive purposes, and cancelled the registration with immediate effect under the principles derived from Ablessio. That decision was upheld on statutory review.

[17]Following the denial of input tax, HMRC imposed a penalty on AAMRL under section 69C VATA. HMRC then issued a personal liability notice to Ms Loria under section 69D VATA on the basis that AAMRL’s actions were attributable to her as sole director. Representations were invited and considered before the penalties were confirmed.

[18]AAMRL and Ms Loria appealed each of the decisions. AAMRL disputes the cancellation of its VAT registration, the denial of input tax, and the section 69C penalty. Ms Loria disputes her personal liability pursuant to section 69D. The Law Deregistration

The Law

[19]The power to deregister a taxpayer on the basis of abuse is based on jurisprudence of the Court of Justice of the European Union (“CJEU”). In the decisions of Valsts ieņēmumu dienests v Ablessio SIA

Case C-527/11

(“Ablessio”) and Halifax plc, Leeds Permanent Development Services Ltd and County Wide Property Investments Ltd -v- Commissioners of Customs and Excise

Case C-255/02

(“Halifax”) the CJEU, considered the ability to refuse registration to a taxpayer if it was using its VAT registration solely or principally for abusive purposes and the abuse principle more generally. The CJEU in Ablessio observed that what must be established is:

“ 34… sound evidence giving objective grounds for considering that it is probable that the VAT identification number assigned to that taxable person will be used fraudulently. Such a decision must be based on an overall assessment of all the circumstances of the case…”

[20]In Impact Contracting Solutions Ltd v HMRC

[2025] EWCA Civ 623

(“Impact”) the Court of Appeal confirmed that:

“ 83… HMRC have power to deregister a taxable person who takes part in transactions connected with the fraudulent evasion of VAT and knew or should have known that fact, even if they also make or intend to make supplies unconnected with fraud, provided that is a proportionate step in the circumstances…”

The right to deduct input tax

[21]The right of a taxable person to deduct input tax is contained within sections 24-29 of VATA 1994. In particular:(1) section 25 of VATA requires a taxable person to account for and pay any VAT on the supplies of goods and services which he makes and entitles him to a credit of so much of his input tax as is allowable under section 26: see section 25(2); and

(2) section 26 of VATA gives effect to Article 168 of EC Council Directive 2006/112 (the "VAT Directive") and allows the taxable person credit in each accounting period for so much of the input tax for that period as is attributable to supplies made by them in the course or furtherance of his business: see section 26(2).

[22]The evidential requirements to be satisfied by a trader wishing to exercise his right to deduct input tax are set out within the Value Added Tax Regulations 1995 (SI 1995/2518) (the “VAT Regulations”). In particular:(1) the obligation of a registered person to provide a VAT invoice is defined in Regulation 13;

(2) the requirements for the contents of a VAT invoice are defined in Regulation 14; and

(3) a trader is required to, inter alia, hold or provide the document required in Regulation 13 or such other evidence to support their claim as HMRC may direct, by Regulation 29(2).

[23]Those provisions reflect and transpose the corresponding European Community laws contained within Articles 167 and 168 of the VAT Directive.

The loss of the right to deduct input tax

[24]The right to deduct input tax will be lost where a taxable person “knew or should have known” that his transaction was connected with the fraudulent evasion of VAT. This is a test that was originally laid down by the Court of Justice of the European Communities ("CJEU") in Kittel. There the CJEU stated:

“ 56. In the same way, 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. “ 57. That is because in such a situation the taxable person aids the perpetrators of the fraud and becomes their accomplice. “ 58. In addition, such an interpretation, by making it more difficult to carry out fraudulent transactions, is apt to prevent them. “ 59. Therefore, 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'. … “ 61. By contrast, where it is ascertained, having regard to objective factors, that the supply is to a taxable person who knew or should have known that, by his purchase, he was participating in a transaction connected with fraudulent evasion of VAT.”

[25]The Kittel principle was elaborated on by Moses LJ sitting in the Court of Appeal in Mobilx Ltd v HMRC

[2010] EWCA Civ 517

;

[2010] STC 1436

("Mobilx") where he stated:

“ 43. A person who has no intention of undertaking an economic activity, but pretends to do so in order to make off with the tax he has received on making a supply, either by disappearing or hijacking a taxable person's VAT identity, does not meet the objective criteria which form the basis of those concepts which limit the scope of VAT and the right to deduct (see Halifax at [59] and Kittel at [53]). A taxable person who knows or should have known that the transaction which he is undertaking is connected with fraudulent evasion of VAT is to be regarded as a participant and, equally, fails to meet the objective criteria which determine the scope of the right to deduct. … “ 52. 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.”

[26]In Mobilx the Court of Appeal went on to sound a note of caution in relation to attempts to improve upon the principle laid down in Kittel: “ 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 have known that the only reasonable explanation for the transaction in which he was involved was that it was connected with fraud and if it turns out that the transaction was connected with fraudulent evasion of VAT then he should have known of that fact. He may properly be regarded as a participant for the reasons explained in Kittel."

[27]In relation to the phrase “the only reasonable explanation” it is important to note, as confirmed by Proudman J. sitting in the Upper Tribunal in the case of GSM Export (UK) Ltd and another v HMRC

[2014] UKUT 529 (TCC)

, that Mobilx does not purport to change the test in Kittel:

“ 19. However, Mobilx does not purport to change the test in Kittel's case. The requirement as to the taxpayer's state of mind squarely remains ‘knew or should have known’. The reference to ‘the only reasonable explanation’ is merely a way in which HMRC can demonstrate the extent of the taxpayers’ knowledge, that is to say, that he knew, or should have known, that the transaction was connected with fraud, as opposed to merely knowingly running some sort of risk that there might be such a connection.”

[28]The Court of Appeal in Mobilx (at [83]) then affirmed guidance on the treatment of circumstantial evidence in cases of VAT fraud. In doing so the Court of Appeal quoted Christopher Clarke J. in Red 12 Ltd v HMRC

[2009] EWHC 2563

;

[2010] STC 589

(“Red 12”), who had said:

“ 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.”

[29]Further, in AC (Wholesale) Ltd v HMRC

[2017] UKUT 191 (TCC)

, the Upper Tribunal considered Mobilx concluding that the “only reasonable explanation” test is simply one way of showing that a person should have known that transactions were connected to fraud. On this, the Upper Tribunal went on to state that:

“ 29. It is, to us, inconceivable that Moses LJ's example of an application of part of that test, the ‘no other reasonable explanation’, would lead to the test becoming more complicated and more difficult to apply in practice. That, in our view, would be the consequence of applying the interpretation urged upon us by Mr Brown [Counsel for the taxpayer]. In effect, HMRC would be required to devote time and resources to considering what possible reasonable explanations, other than a connection with fraud, might be put forward by an appellant and then adduce evidence and argument to counter them even where the appellant has not sought to rely on such explanations. That would be an unreasonable and unjustified evidential burden on HMRC. Accordingly, we do not consider that HMRC are required to eliminate all possible reasonable explanations other than fraud before the FTT is entitled to conclude that the appellant should have known that the transactions were connected to fraud. “ 30. Of course, we accept (as, we understand, does HMRC) that where the appellant asserts that there is an explanation (or several explanations) for the circumstances of a transaction other than a connection with fraud then it may be necessary for HMRC to show that the only reasonable explanation was fraud. As is clear from Davis & Dann, the FTT's task in such a case is to have regard to all the circumstances, both individually and cumulatively, and then decide whether HMRC have proved that the appellant should have known of the connection with fraud. In assessing the overall picture, the FTT may consider whether the only reasonable conclusion was that the purchases were connected with fraud. Whether the circumstances of the transactions can reasonably be regarded as having an explanation other than a connection with fraud or the existence of such a connection is the only reasonable explanation is a question of fact and evaluation that must be decided on the evidence in the particular case. It does not make the elimination of all possible explanations the test which remains, simply, did the person claiming the right to deduct input tax know that, by his purchase, he was participating in a transaction connected with fraudulent evasion of VAT or should he have known of such a connection.”

[30]A taxpayer does not need to know specific details of the fraud being perpetuated. In Fonecomp Ltd v HMRC

[2015] EWCA Civ 39

;

[2015] STC 2254

the Court of Appeal (Arden LJ) said:

“ 51. … 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 paras [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’. It follows that the trader does not need to know the specific details of the fraud.”

[31]It is dishonest for a person deliberately to shut their eyes to facts which they would prefer not to know. If he or she does so, they are taken to have actual knowledge of the facts to which they shut their eyes. See, for example, Beigebell Ltd (No.2) v HMRC

[2023] UKFTT 363 (TC)

and Cavendish Ships Stores v HMRC

[2020] UKFTT 257 (TC)

. Such knowledge has been described as “Nelsonian” or “blind-eye” knowledge: see judgment of Lord Scott in Manifest Shipping Company Ltd v Uni-Polaris Shipping Company Ltd and others

[2001] UKHL 1

;

[2003] 1 AC 469

“ 112. ‘Blind-eye’ knowledge approximates to knowledge. Nelson at the battle of Copenhagen made a deliberate decision to place the telescope to his blind eye in order to avoid seeing what he knew he would see if he placed it to his good eye. It is, I think, common ground – and if it is not, it should be – that an imputation of blind-eye knowledge requires an amalgam of suspicion that certain facts may exist and a decision to refrain from taking any step to confirm their existence. Lord Blackburn in Jones v Gordon (1877) 2 App. Cas. 616, 629 distinguished a person who was ‘honestly blundering and careless’ from a person who ‘refrained from asking questions, not because he was an honest blunderer or a stupid man, but because he thought in his own secret mind – I suspect there is something wrong, and if I ask questions and make farther inquiry, it will no longer be my suspecting it, but my knowing it, and then I shall not be able to recover’. Lord Blackburn added ‘I think that is dishonesty’.”

Approach to assessment of circumstantial evidence

[32]In Mobilx Moses LJ stated:

“ 81. It is plain that if HMRC wishes to assert that a trader’s state of knowledge was such that his purchase is outwith the scope of the right to deduct it must prove that assertion… “ 82. But that 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. The danger in focusing on the question of due diligence is that it may deflect a Tribunal from asking the essential question posed in Kittel, namely, whether the trader should have known that by his purchase he was taking part in a transaction connected with fraudulent evasion of VAT. The circumstances may well establish that he was.”

[33]In Mahagében kft v Nemzeti Adó- és Vámhivatal Dél-dunántúli Regionális Adó Foigazgatósága; Dávid v Nemzeti Adó- és Vámhivatal Észak-alföldi Regionális Adó Foigazgatósága (Joined cases C-80/11 and C-142/11)

[2012] STC 1934

the CJEU said the following with regard to due diligence:

“ 60. It is true that, when there are indications pointing to an infringement or fraud, a reasonable trader could, depending on the circumstances of the case, be obliged to make enquiries about another trader from whom he intends to purchase goods or services in order to ascertain the latter's trustworthiness. “ 61. However, the tax authority cannot, as a general rule, require the taxable person wishing to exercise the right to deduct VAT, first, to ensure that the issuer of the invoice relating to the goods and services in respect of which the exercise of that right to deduct is sought has the capacity of a taxable person, that he was in possession of the goods at issue and was in a position to supply them and that he has satisfied his obligations as regards declaration and payment of VAT, in order to be satisfied that there are no irregularities or fraud at the level of the traders operating at an earlier stage of the transaction or, second, to be in possession of documents in that regard. “ 62. It is, in principle, for the tax authorities to carry out the necessary inspections of taxable persons in order to detect VAT irregularities and fraud as well as to impose penalties on the taxable person who has committed those irregularities or fraud. “ 63. According to the case law of the court, member states are required to check taxable persons' returns, accounts and other relevant documents (see EC Commission v Italy (Case C-132/06) [2008] ECR I-5457, para 37, and Dyrektor Izby Skarbowej w Biaymstoku v Profaktor Kulesza, Frankowski, Jówiak, Orowski (Case C-188/09) [2010] ECR I-7639, para 21). “ 64. To that end, Directive 2006/112 imposes, in particular in art 242, an obligation on every taxable person to keep accounts in sufficient detail for VAT to be applied and its application checked by the tax authorities. In order to facilitate the performance of that task, arts 245 and 249 of that directive provide for the right of the competent authorities to access the invoices which the taxable person is obliged to store under art 244 of that directive. “ 65. It follows that, by imposing on taxable persons, in view of the risk that the right to deduct may be refused, the measures listed in para 61 of the present judgment, the tax authority would, contrary to those provisions, be transferring its own investigative tasks to taxable persons.”

[34]The case law indicates that it is necessary to guard against over-compartmentalisation of relevant factors, and to stand back and consider the totality of the evidence: see Davis & Dann Ltd v HMRC

[2016] EWCA Civ 142

[2016] STC 1236

(“Davis & Dann”) and CCA Distribution Ltd v HMRC

[2017] EWCA Civ 1899

;

[2018] STC 206

(“CCA Distribution”).

[35]In considering circumstantial evidence, the Tribunal should take care not to restrict itself to considering each piece of evidence alone and in isolation from the others. This is because circumstantial evidence is not a chain, where a break in one link breaks the chain, but is a cord: one strand of the cord might be insufficient to sustain the weight, but three strands together might be sufficient: see R v Exall (1866) 4 F&F 922, per Pollock CB, cited with approval by the Upper Tribunal CCA Distribution at [91]. Accordingly, the whole can end up stronger than the individual parts: see the decision of Judge Christopher McNall in Wholesale Distribution Ltd v HMRC

[2024] UKFTT 514 (TC)

at [49]

[36]Further, it is necessary to consider individual transactions in their context, including drawing inferences from a pattern of transactions, and 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: see Red 12 at [109] to [111]. In effect, as a facet of the guidance given in Red 12, it is necessary to guard against over-compartmentalisation of relevant factors, and to stand back and consider the totality of the evidence: Davis & Dann and CCA Distribution.

Burden and standard of proof

[37]In Blue Sphere Global Ltd v HMRC

[2009] EWHC 1150 (Ch)

(“Blue Sphere Global”), Sir Andrew Morritt C identified at [29] the four questions which the FTT must consider and answer in such cases:(a) Whether there was a VAT loss;

(b) Whether the loss resulted from a fraudulent evasion;

(c) Whether the appellant's purchases on which input tax have been denied were connected with that fraudulent evasion of VAT; and

(d) Whether the appellant knew or should have known that its purchases were connected with fraudulent evasion of VAT.

[38]In Mobilx, the Court of Appeal agreeing with the analysis of Sir Andrew Morritt C, made clear at [81] that in Kittel appeals the burden of proving all four elements of the Blue Sphere Global test rests on HMRC.

[39]As the CJEU underscored at paragraph [47] of Kittel, the right to deduct is “an integral part of the VAT scheme [which] in principle may not be limited”. Accordingly, the Tribunal must, before allowing that right to be interfered with, be satisfied that HMRC have proved each element of the Kittel test in relation to each purchase that they seek to deny input tax on.

[40]It is not enough for HMRC to prove that the appellant's purchases might have been connected with fraudulent evasion of VAT: see Hira Company Ltd v HMRC

[2011] UKFTT 450 (TC)

at [111], per Judge Poole. Rather, HMRC have to prove, on the balance of probabilities, that the appellant's purchases were connected with fraudulent evasion of VAT.

[41]Similarly, it is not enough for HMRC to prove that the appellant knew or should have known that its purchases might be connected with fraudulent evasion of VAT, were probably connected with fraud or were likely connected with fraud. Rather, HMRC have to prove, on the balance of probabilities, that the appellant knew or should have known that its purchases were connected with fraudulent evasion of VAT.

[42]The standard of proof is the civil standard of the balance of probabilities. As confirmed by Lord Hoffman in Re B [2008] UKHL; 35

[2009] 1 AC 11

“ [13] I think the time has come to say, once and for all, that there is only one civil standard of proof, and that is proof that the fact in issue more probably occurred than not. … “ [70] …[the civil standard of proof] is the simple balance of probabilities, neither more nor less. Neither the seriousness of the allegation nor the seriousness of the consequences should make any difference to the standard of proof to be applied in determining the facts. The inherent probabilities are simply something to be taken into account, where relevant, in deciding where the truth lies.”

Company penalty

[43]So far as is relevant, s 69C VATA 1994 specifies:

“69C Transactions connected with VAT fraud (1) A person (T) is liable to a penalty where— (a) T has entered into a transaction involving the making of a supply by or to T (‘the transaction’), and (b) conditions A to C are satisfied. (2) Condition A is that the transaction was connected with the fraudulent evasion of VAT by another person (whether occurring before or after T entered into the transaction). (3) Condition B is that T knew or should have known that the transaction was connected with the fraudulent evasion of VAT by another person. (4) Condition C is that HMRC have issued a decision (‘the denial decision’) in relation to the supply which— (a) prevents T from exercising or relying on a VAT right in relation to the supply, (b) is based on the facts which satisfy conditions A and B in relation to the transaction, and (c) applies a relevant principle of EU case law (whether or not in circumstances that are the same as the circumstances in which any relevant case was decided by the European Court of Justice). (5) In this section ‘VAT right’ includes the right to deduct input tax, the right to apply a zero rate to international supplies and any other right connected with VAT in relation to a supply. (6) The relevant principles of EU case law for the purposes of this section are the principles established by the European Court of Justice in the following cases— (a) joined Cases C-439/04 and C-440/04 Axel Kittel v Belgian State; Belgium v Recolta Recycling (denial of right to deduct input tax), and (b) … as developed or extended by that Court in any other cases relating to the denial or refusal of a VAT right in order to prevent abuses of the VAT system which were decided before the coming into force of section 42 of TCTA 2018. (7) The penalty payable under this section is 30% of the potential lost VAT. (8) The potential lost VAT is— (a) the additional VAT which becomes payable by T as a result of the denial decision, (b) the VAT which is not repaid to T as a result of that decision, or (c) in a case where as a result of that decision VAT is not repaid to T and additional VAT becomes payable by T, the aggregate of the VAT that is not repaid and the additional VAT. (9) Where T is liable to a penalty under this section the Commissioners may assess the amount of the penalty and notify it to T accordingly. (10) No assessment of a penalty under this section may be made more than two years after the denial decision is issued. (11) The assessment of a penalty under this section may be made immediately after the denial decision is made (and notice of the assessment may be given to T in the same document as the notice of the decision). …” (a) T has entered into a transaction involving the making of a supply by or to T (‘the transaction’), and (b) conditions A to C are satisfied. (2) Condition A is that the transaction was connected with the fraudulent evasion of VAT by another person (whether occurring before or after T entered into the transaction). (3) Condition B is that T knew or should have known that the transaction was connected with the fraudulent evasion of VAT by another person. (4) Condition C is that HMRC have issued a decision (‘the denial decision’) in relation to the supply which— (a) prevents T from exercising or relying on a VAT right in relation to the supply, (b) is based on the facts which satisfy conditions A and B in relation to the transaction, and (c) applies a relevant principle of EU case law (whether or not in circumstances that are the same as the circumstances in which any relevant case was decided by the European Court of Justice). (5) In this section ‘VAT right’ includes the right to deduct input tax, the right to apply a zero rate to international supplies and any other right connected with VAT in relation to a supply. (6) The relevant principles of EU case law for the purposes of this section are the principles established by the European Court of Justice in the following cases— (a) joined Cases C-439/04 and C-440/04 Axel Kittel v Belgian State; Belgium v Recolta Recycling (denial of right to deduct input tax), and (b) … as developed or extended by that Court in any other cases relating to the denial or refusal of a VAT right in order to prevent abuses of the VAT system which were decided before the coming into force of section 42 of TCTA 2018. (7) The penalty payable under this section is 30% of the potential lost VAT. (8) The potential lost VAT is— (a) the additional VAT which becomes payable by T as a result of the denial decision, (b) the VAT which is not repaid to T as a result of that decision, or (c) in a case where as a result of that decision VAT is not repaid to T and additional VAT becomes payable by T, the aggregate of the VAT that is not repaid and the additional VAT. (9) Where T is liable to a penalty under this section the Commissioners may assess the amount of the penalty and notify it to T accordingly. (10) No assessment of a penalty under this section may be made more than two years after the denial decision is issued. (11) The assessment of a penalty under this section may be made immediately after the denial decision is made (and notice of the assessment may be given to T in the same document as the notice of the decision). …”

Penalty for officer of the company

[44]So far as is relevant, s 69D VATA 1994 specifies: “69D Penalties under section 69C: officers' liability(1) Where— (a) a company is liable to a penalty under section 69C, and (b) the actions of the company which give rise to that liability were attributable to an officer of the company (‘the officer’), the officer is liable to pay such portion of the penalty (which may be equal to or less than 100%) as HMRC may specify in a notice given to the officer (a ‘decision notice’).

(2) Before giving the officer a decision notice HMRC must— (a) inform the officer that they are considering doing so, and (b) afford the officer the opportunity to make representations about whether a decision notice should be given or the portion that should be specified.

(3) A decision notice— (a) may not be given before the amount of the penalty due from the company has been assessed (but it may be given immediately after that has happened), and (b) may not be given more than two years after the denial decision relevant to that penalty was issued.

(4) Where the Commissioners have specified a portion of the penalty in a decision notice given to the officer— (a) section 70 applies to the specified portion as to a penalty under section 69C, (b) the officer must pay the specified portion before the end of the period of 30 days beginning with the day on which the notice is given, (c) section 76(9) applies as if the decision notice were an assessment notified under section 76, and (d) a further decision notice may be given in respect of a portion of any additional amount assessed in an additional assessment.

(5) HMRC may not recover more than 100% of the penalty through issuing decision notices in relation to two or more persons.

(6) A person is not liable to pay an amount by virtue of this section if the actions of the company concerned are attributable to the person by reference to conduct for which the person has been convicted of an offence. In this subsection ‘conduct’ includes omissions.

(7) In this section ‘company’ means a body corporate or unincorporated association but does not include a partnership, a local authority or a local authority association.

(8) In its application to a body corporate other than a limited liability partnership ‘officer’ means— (a) a director (including a shadow director within the meaning of section 251 of the Companies Act 2006), (b) a manager, or (c) a secretary. …” (a) a company is liable to a penalty under section 69C, and (b) the actions of the company which give rise to that liability were attributable to an officer of the company (‘the officer’), the officer is liable to pay such portion of the penalty (which may be equal to or less than 100%) as HMRC may specify in a notice given to the officer (a ‘decision notice’). (a) inform the officer that they are considering doing so, and (b) afford the officer the opportunity to make representations about whether a decision notice should be given or the portion that should be specified. (a) may not be given before the amount of the penalty due from the company has been assessed (but it may be given immediately after that has happened), and (b) may not be given more than two years after the denial decision relevant to that penalty was issued. (a) section 70 applies to the specified portion as to a penalty under section 69C, (b) the officer must pay the specified portion before the end of the period of 30 days beginning with the day on which the notice is given, (c) section 76(9) applies as if the decision notice were an assessment notified under section 76, and (d) a further decision notice may be given in respect of a portion of any additional amount assessed in an additional assessment. (a) a director (including a shadow director within the meaning of section 251 of the Companies Act 2006), (b) a manager, or (c) a secretary.

[45]The Tribunal’s task is therefore to determine attribution and quantum independently of the underlying denial decision, albeit by reference to the same factual matrix.

Evidence

[46]With the agreement of Ms Loria, we invited HMRC to present its case first, so that Ms Loria could better present her own case.

[47]For HMRC, we heard live evidence from Carmelina Mankad (“Officer Mankad”), a Fraud Investigation Service (“FIS”), Organised Crime, Civil Investigations Higher Officer at HMRC at Croydon.

[48]For her own case, Ms Loria gave evidence.

[49]We also considered the evidence contained within the electronic hearing bundle of 5,668 pages (as counted by PDF viewing software), including the index.

Assessment of the Evidence

[50]Officer Mankad dealt with the background to the case, the progress of the investigation and procedural matters. None of those matters were in dispute. The evidence was presented in a straightforward and balanced manner and was not undermined by any questioning or internal inconsistency. We accepted the evidence presented by HMRC as both reliable and credible.

[51]Ms Loria was the only witness in her own case. Her evidence was critical to the most important matters of fact for the Tribunal to decide.

[52]Throughout her evidence, Ms Loria was asked to describe what AAMRL actually did in relation to wholesale supplies of games consoles and similar products. A consistent feature of her evidence on all such issues was vagueness. We take for an example her answer to what research she did to transition the business into the wholesale trade of games consoles etc. Consistently, her answers amounted to no more than “you know, researching how to do wholesale business”.

[53]Ms Loria was asked what searches she made on the internet to understand a new area of business. She was not able to answer save in only the vaguest of terms.

[54]Ms Loria was asked how, as a new player in the field, AAMRL was able to secure substantial deals with suppliers and purchasers. Her answers were entirely vague.

[55]Ms Loria was asked how the business conducted due diligence and her answers about that were equally vague.

[56]We observed that when taken to more difficult areas or even simply when asked to provide detail, Ms Loria defaulted to a number of apparently safe positions:(a) She was an honest trader who had done nothing wrong;

(b) She had done what people do in business (“you know, business”);

(d) She did not understand why HMRC were pursuing her, an innocent businessperson, who had been taken advantage of by sophisticated fraudsters;

(e) She did not have sufficient expertise in the matters being asked about to be a fraudster;

(f) She (or AAMRL) had not profited very much from the fraud; and

(g) She did not understand why she was appearing before the Tribunal.

[57]We concluded that Ms Loria was able to answer matters about the wholesale business in only the broadest or vaguest of terms. Taking the content of her answers, we concluded that she was an unreliable and incredible witness and we concluded that we simply could not give any weight to her evidence, save on two matters alone, to which we now turn.

[58]We did not conclude that Ms Loria’s evasion or vagueness was in any way sophisticated. We were satisfied that Ms Loria was out of her depth. The first point on which we found her credible and reliable was that she did not understand the case against her.

[59]The second point on which we found her credible and reliable was that she is now in receipt of benefits which we accepted on the basis that it was a matter within her knowledge and experience and which was not challenged or contradicted.

[60]For similar reasons, we also concluded that Ms Loria was not proved to have responsibility for every apparent action of AAMRL. For example, HMRC relied on AAMRL’s business plan. Having regard to Ms Loria’s evidence and, in particular, her inability to answer questions with any particularity or in any way that demonstrated knowledge of her own business, we concluded that it had not been established that she had produced that document herself.

[61]We concluded that HMRC had not established that Ms Loria was the guiding force of AAMRL’s wholesale activities.

[62]We also considered the extent to which we were satisfied that HMRC had established that Ms Loria knew what was going on and what her business was being used to achieve. We found Ms Loria to be unsophisticated and lacking any material knowledge about the wholesale business of AAMRL. That conclusion was supported by the evidence of HMRC visits to the business in which HMRC were told by Mr Abbasi that he, Mr Abbasi, was responsible for the wholesale side of the business.

Our Approach to the Issues

[63]In the light of the conclusions we reached about the evidence of Ms Loria, we gave most weight to the documentary evidence. We took into account Ms Loria’s evidence as relevant only to the question of her level of involvement. We concluded that her ability to answer questions (whether truthfully or not or reliably or not) was relevant to our determination about the level of her involvement in or connection to or knowledge of the underlying VAT fraud.

[64]On behalf of HMRC, Miss Udom argued that we should consider the evidence holistically and we agreed with that approach.

[65]In that sense, HMRC relied on (among other things):(a) The volume of transactions;

(b) The sudden increase in turnover;

(d) The simplicity of the transactions (in the sense that customers required exactly the same amount of product offered by suppliers – there was never an oversupply or undersupply, there being only one supplier and one customer much of the time and that there was no delay in transactions and that no transactions encountered problems). We accepted that those features of the evidence were relevant on the matters we had to determine.

[66]It is for HMRC to establish matters of fact on which the assessments and penalty decisions are based. The standard of proof is the balance of probabilities and there is no “sliding scale” – the standard is the same regardless of value or seriousness.

[67]We considered the Blue Sphere Global questions:(a) Whether there was a VAT loss;

(b) Whether the loss resulted from a fraudulent evasion;

(c) Whether the appellant’s purchases on which input tax have been denied were connected with that fraudulent evasion of VAT; and

(d) Whether the appellant knew or should have known that its purchases were connected with fraudulent evasion of VAT.

[68]In respect of the first three questions, there was no material challenge. Nevertheless, we considered all of the evidence in the round. In the round, it was clear from the evidence that the material transactions were fraudulent in the broadest sense and connected with the transactions of the Appellants.

[69]Our decision required us to consider what AAMRL knew or should have known and what Ms Loria knew or should have known.

Appeal One

[70]On the facts of this case, the knowledge of AAMRL includes the knowledge of Ms Loria. HMRC did not seek to establish that any other person contributed to AAMRL’s knowledge as a legal entity. It was clear that Mr Abbasi was involved in the day-to-day functioning of the business of AAMRL but neither party asked him to give evidence. We concluded that we could only safely conclude that AAMRL’s knowledge was the same as Ms Loria’s knowledge.

[71]Did AAMRL know or should it have known that the transactions in question were connected to VAT fraud. As we have said, we relied on two parts of the evidence, being the firm ground of the documentary evidence (considered holistically) and Ms Loria’s lack of sophistication or apparent knowledge.

[72]Ms Loria was trading in cosmetics on a small or retail scale. She had sufficient knowledge and ability to do that (noting that doing so would have been facilitated by the technology of the online platform involved which largely automates much of the processes involved, including connecting buyers to sellers).

[73]Ms Loria had no experience of wholesale trading. Ms Loria had no contacts in wholesale trading. AAMRL’s wholesale activity went from nothing to multi-million pounds per annum in materially no time at all and with no, or close to no, research or marketing.

[74]We had regard to the statutory duties of a company director.

Pre-28 July 2022

[75]We considered whether HMRC had established that a reasonable trader in Ms Loria’s position and with her knowledge should have known that AAMRL was facilitating a VAT fraud.

[76]A principal element of HMRC’s case is that the transactions in question simply make no commercial sense. We agree. AAMRL added no commercial value. On every occasion, it happened upon a customer requiring a set amount of product and a supplier offering exactly that. The customer could as easily have transacted with the supplier as it did with AAMRL. AAMRL and Ms Loria presented no credible evidence of commercial effort to establish itself as a procurer of goods that a customer might wish to secure and the pattern of transactions did not support that, indeed, quite the opposite.

[77]We could find no credible way in which Ms Loria could have arranged the transactions in question unless someone had presented them to her as an already complete package. No other scenario was credible.

[78]In the face of such a transaction being advanced with no groundwork having been done, we conclude that any reasonable person in Ms Loria’s position (at the very least) should have known that the transaction was fraudulent in some way or connected to fraud in some way.

[79]However, we had regard to our finding of fact that Ms Loria was clearly unsophisticated. We do not conclude that Ms Loria knew or should have known in what way the transaction was fraudulent or connected to fraud but the fact that it was in some way fraudulent or connected to fraud would or should have been apparent to anyone in her shoes.

[80]We were satisfied that a reasonable person would have been suspicious and to the extent that not scrutinising the transaction(s) as Ms Loria (on her own evidence) did not, the most favourable and plausible explanation was the wilful decision not to ask uncomfortable questions.

[81]Having regard to our findings about Ms Loria’s evidence and her evident lack of sophistication, we concluded that HMRC had only been able to establish that Ms Loria (and therefore AAMRL) should have known that AAMRL was facilitating fraud of some kind and that she had knowledge that the transactions were in some way illegitimate. We were not satisfied that she knew or should have known how the transactions were illegitimate, but we were satisfied that she was deliberately blind to the fact. She did not ask questions that she, as a company director, should have asked.

[82]The test set out in Kittel does not require us to be satisfied that a person needs to understand the mechanics or precise features of a fraud in order to satisfy the Kittel test, the required state of knowledge remains knowledge (actual or constructive) of a connection with VAT fraud. The authorities do not support the proposition that general suspicion of wrongdoing, dishonesty, or illegitimacy in a transaction chain is sufficient of itself. Nor do they impose on a trader who harbours such suspicions a duty to identify the legal nature of the fraud at their peril. The question remains whether, on the balance of probabilities, the trader knew or should have known that the transactions were connected with the fraudulent evasion of VAT. For the reasons we have expressed already, we found that HMRC had failed to establish that.

[83]In reaching this conclusion, we are not suggesting that VAT fraud was inherently unknowable before 28 July 2022, but that HMRC bore the burden of proving that it was more likely than not that Ms Loria should have known of the VAT dimension of the fraud, and on the evidence before us that burden was not discharged.

Post-28 July 2022

[84]Matters changed materially during the assurance visit of HMRC Officers Nigel Pounds and Lawrence Smith. During that visit, the role of the FIS in the prevention of VAT fraud was expressed in clear terms. From that moment on, Ms Loria (and therefore AAMRL) should have known that the transactions in question related to VAT fraud specifically.

Proportionality

[85]We have concluded that AAMRL should have known that the transactions in question were related to VAT for only the period following 28 July 2022. HMRC must also establish that the step of deregistration is proportionate.

[86]We note that the extent of the transactions following 28 July 2022 remained substantial. Further, those transactions occurred after an assurance visit after which AAMRL did not materially change any of its processes.

[87]We are satisfied that the step of deregistration was proportionate and appeal one is dismissed.

Appeal Two

[88]The outcome of this appeal rests on the same question; did AAMRL (and on our findings of fact, Ms Loria) know or should have known that AAMRL had entered into transactions connected with the fraudulent evasion of VAT.

[89]The purpose of the test is clear: to deny input tax is onerous and can only be justified with a certain level of knowledge.

[90]For the reasons expressed already, we are satisfied that AAMRL should have known that it had entered into transactions connected with the fraudulent evasion of VAT but only for the period following 28 July 2022. For transactions up to that date, we are not satisfied that AAMRL should have known that the transactions in question related to VAT fraud.

[91]Appeal two is allowed in relation to transactions up to 28 July 2022. Appeal two is dismissed in relation to transactions after 28 July 2022.

[92]HMRC must recalculate the amount of input VAT denied to AAMRL.

Appeal Three

[93]All transactions relating to appeal three were after 28 July 2022. For the reasons expressed already, appeal three is dismissed and on the same basis.

Appeal Four

[94]This appeal turns on the same point: what did AAMRL know or should have known about its involvement in transactions and their relation to VAT fraud.

[95]For the reasons already expressed, appeal four is allowed in relation to transactions up to 28 July 2022. Appeal four is dismissed in relation to transactions after 28 July 2022.

[96]We note that the decision letter of 4 July 2024, HMRC assessed the S69C penalty at 30% of the input tax denied. We find no reason to interfere with that percentage. HMRC must therefore recalculate the penalty on the basis of 30% of the input tax denied for transactions following 28 July 2022.

Appeal Five

[97]This appeal introduces a further element that is not present for appeals one to four: whether “… the actions of the company which gave rise to th[e VAT] liability were attributable to [Ms Loria]…”

[98]For the purpose of appeals one through to four, it was sufficient for us to ask what AAMRL (and therefore, Ms Loria) knew or should have known that the transactions related to fraud and specifically, VAT fraud. We found that the question presented to us for appeal five was more difficult.

[99]HMRC presented evidence that Mr Abbasi accepted full responsibility for the wholesale side of AAMRL’s business. Mr Abbasi was not a witness (though he was present throughout the hearing) and HMRC could not have challenged him on the point. HMRC could have elected to present a case against Mr Abbasi but did not do so. We do not seek to look behind that decision.

[100]Likewise, Ms Loria could have called Mr Abassi as a witness. She did not and we do not seek to look behind her decision to not to call him. We decide the case on the evidence that we have, drawing appropriate inferences and avoiding speculation.

[101]In the absence of denial by Ms Loria, we accept the hearsay evidence of the statement made by Mr Abbasi that it was he who was materially in control of the side of the business that gives rise to this appeal. In effect, it was a statement against his own interests and so a hearsay statement to which we felt able to give some weight.

[102]Our conclusion does not absolve Ms Loria. She has statutory duties as a director of a limited company.

[103]The approach we took was to ask what was the minimum involvement and knowledge that HMRC could prove on the balance of probabilities.

[104]In addressing appeals one, two, three and four, we have already set out our findings of fact as they relate to what Ms Loria knew or should have known. After 28 July 2022, Ms Loria should have known that the transactions in question related to VAT fraud.

[105]Given that we accept that Mr Abassi was materially in control of the transactions in question we find as a fact on the balance of probabilities that after 28 July 2022, Ms Loria allowed her company to be used for those transactions when she should have known that they were connected to some form of VAT fraud.

[106]We noted the difference in language adopted by Parliament between sections 69C and 69D and we asked Miss Udom to help us navigate that difference. She referred us to the dictionary definition of “attributable”. The online Merriam Webster dictionary includes the definition of the word “attribute” (as a verb) as “to explain (something) by indicating a cause”.

[107]Further, we had regard to the purpose of the legislation. The purpose of the section is clearly to allow a personal penalty to apply to an officer of a company if they bear some material responsibility for the VAT loss.

[108]Taking the dictionary definition of the word, together with the purpose of the legislation and the statutory responsibilities of a director of a limited company, we concluded that the meaning of “attributable to” must include turning a blind eye or permitting the use of the company when one should have known of the connection to VAT fraud. To that extent and to no more than that extent, we find that the transactions in question were attributable to Ms Loria personally.

[109]We do not treat ‘should have known’ as sufficient of itself to establish attribution. What renders the company’s actions attributable to Ms Loria is her continuing authorisation of the company’s use for those transactions after the point at which she should have known of the VAT fraud risk, in circumstances where she retained legal control as director.

[110]Appeal five is dismissed. However, we are able to consider the amount of the penalty and in the light of the limited findings of fact, we do so.

Quantum of section 69D penalty

[111]Section 83(nb) VATA grants to the Tribunal power to review the amount of the penalty attributable to an officer of a company in pursuance of section 69D.

[112]We have concluded that Ms Loria is far from a sophisticated businessperson. We accept that HMRC have proved that she was a person who owned a business and allowed that business to be used for transactions she should have known were related to VAT fraud. We have concluded that it has not been proved that she knew what those fraudulent purposes or methods were. We conclude that HMRC have established the lowest level of knowledge to meet the test but no higher.

[113]In terms of benefit, there was no evidence that AAMRL (or Ms Loria) benefitted from the underlying VAT frauds other than from the slender margins allowed for AAMRL’s involvement.

[114]Attribution of a section 69D penalty involves an element of discretion. We conclude that a 100% attribution would be appropriate for a guiding mind behind the underlying VAT fraud. The evidence has not allowed us to find facts to that extent.

[115]Having regard to our findings of Ms Loria’s marked lack of sophistication, together with Mr Abassi’s material control over the transactions in question and further in the light of very limited benefit, we accept that Ms Loria and her company were used by others with far more sophistication than hers. As we have said, we accepted Ms Loria’s confusion about the reason for her being before the Tribunal.

[116]Of course, a lack of commercial sophistication does not absolve a director of responsibility, but we conclude that it is relevant to the extent of culpability and the proper scope of attribution and discretion regarding penalty.

[117]We started at a notional penalty of £1. We concluded that such a penalty would have no deterrent effect on people in Ms Loria’s position (and that is a clear purpose of the personal penalty regime). Further, a penalty at such a notional level has the effect (intended or otherwise) of criticism of the imposition of the penalty itself. Company directorship is an important undertaking and society expects and requires company directors to act with probity and vigilance. Ms Loria fell short of those standards and so a notional penalty would not have been proportionate. In other words, we agreed with HMRC that the imposition of a personal penalty met the purposes of the section and was appropriately imposed.

[118]We next considered what percentage of the company penalty (as must be recalculated) appropriately met the purpose of the penalty regime. We had regard to our finding that Ms Loria is unsophisticated, was taken advantage of by others who were more sophisticated but also that she had important statutory duties as an officer of a limited company.

[119]We regarded a penalty of 10% of the company penalty as being the lowest amount that reasonably meets the purpose of section 69D.

[120]In all of the circumstances, we conclude on appeal five that the penalty should be upheld but reduced to 10% of the company penalty, as recalculated. Summary

[121]We made the following decisions:(a) Appeal one is dismissed;

(b) Appeal two is allowed in relation to transactions done on dates up to and including 28 July 2022 and dismissed as it relates to later transactions and HMRC must recalculate the input tax denied accordingly;

(d) Appeal four is allowed in relation to transactions done on dates up to and including 28 July 2022 and dismissed as it relates to later transactions, the imposition of a penalty of 30% of the input tax denied is upheld and HMRC must recalculate the amount of the penalty accordingly; and

(e) Appeal five is dismissed but we substitute for the penalty imposed directly on Ms Loria a penalty equating to 10% of the S69C penalty and HMRC must recalculate the amount of the penalty accordingly.

Right to apply for permission to appeal

[122]This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. Release date:14 April 2026

Cited in 1 later judgment

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