“… the objective criteria which form the basis of concepts used in the Sixth Directive form the basis of the concepts which limit the scope of VAT and the right to deduct under ss 1, 4 and 24 of the 1994 Act. Applying the principle in Kittel, the objective criteria are not met where a taxable person knew or should have known that by his purchase he was participating in a transaction connected with fraudulent evasion of VAT. That principle merely requires consideration of whether the objective criteria relevant to those provisions of the VATA 1994 are met. It does not require the introduction of any further domestic legislation.”
“The denial of the right to deduct in this case stems from principles which apply throughout the Community in respect of what is said to be reliance on Community law for fraudulent ends. It can be no objection to that approach to Community law that in purely domestic circumstances a trader might not be regarded as an accessory to fraud. In a sense, the dichotomy between domestic and Community law, in the circumstances of these appeals, is false. In relation to the right to deduct input tax, Community and domestic law are one and the same.”
“The principle of legal certainty … precludes resorting to a Community directive in order to extend the definition of an offence, to the 7 disadvantage of the accused, to situations different from those which strictly match the definition of the punishable acts given by national criminal law.”
“While that process of [conforming] interpretation cannot, of itself and independently of a national law implementing the directive, have the effect of determining or aggravating criminal liability, it may well lead to the imposition upon an individual of civil liability or a civil obligation which would not otherwise have existed.”
“A penalty is proportionate where it is appropriate (that is to say, in particular, effective and dissuasive) for attaining the legitimate objectives pursued by it, and also necessary. Where there is a choice between 8 several (equally) appropriate penalties, recourse must be had to the least onerous. Moreover, the effects of the penalty on the person concerned must be proportionate to the aims pursued.”
“The right to deduct input VAT of a taxable person who carries out such transactions cannot be affected by the fact that in the chain of supply of which those transactions form part another prior or subsequent transaction is vitiated by VAT fraud, without that taxable person knowing or having any means of knowing.”
“A person who knows that a transaction in which he participates is connected with fraudulent tax evasion is a participant in that fraud. That person has a dishonest state of mind.”
“Having considered all of the evidence before us, we concluded that the Appellant had actual knowledge that the transactions of Waterfire were connected to the fraudulent evasion of VAT. Our conclusion was therefore that by entering into those transactions, acting as a contra-trader and making VAT returns which included those artificially contrived transactions, we were satisfied that Waterfire had done an act for the purpose of evading VAT. We were also satisfied that Waterfire did so in circumstances where it was not entitled to the sum claimed as it had no right to deduct, that right having been lost as the transactions fell outwith the scope of VAT by their fraudulent nature and Waterfire’s actual knowledge of that fraud.”
“As we understood it, the Appellant (as indicated by the submission quoted below) appeared to suggest that although the civil standard of the balance of probabilities applies a heightened standard is required as the 13 appeal involves an allegation of dishonesty. We did not accept that any heightened standard applies in this case and we cannot add anything useful to the words of Lord Hoffman in Re B[2009] 1 AC 11 : ‘I think the time has come to say once and for all that there is only one civil standard of proof and that that is proof that the fact in issue more probably occurred than not.’”
“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.”
“365. As regards the evidence of Ms Sharkey, we were satisfied that the sampling was fair and reasonable. We concluded that the large number of money flows traced by Ms Sharkey provided an extensive and accurate overview from which we could reasonable [sic] draw conclusions. It must also be noted that the Appellant did not challenge the accuracy of 14 Ms Sharkey’s tracing exercise. The Appellant’s argument that Waterfire always featured in the chains sampled because Ms Sharkey started with the company reflects the fact that this appeal is concerned with Waterfire’s trading during the relevant period and the wider circumstances of that trading; we are not concerned with the transactions of other traders. We found Ms Sharkey’s evidence of circularity in money flows, similar patterns of traders, shared IP addresses and third party payments compelling evidence that Waterfire’s transactions were part orchestrated and part of an overall scheme to defraud. However we found that this was the limit of Ms Sharkey’s evidence, which did not assist us in determining the issue of whether the Appellant knew that Waterfire’s transactions were connected with fraud.”
“We concluded that although most of the features of trading identified by Mr Fletcher went to the existence of a fraud rather than the Appellant’s knowledge in it, others, such as the implausibility of the market share traded by the Appellant, raised questions in respect of which we were left with no answers.”
“As will become apparent, the Appellant sought to rely on a number of the grounds raised in support of its application for summary judgment against HMRC. It should be made clear that the arguments were heard and considered afresh by this Tribunal and considered in the context of the evidence that was presented (which had not formed part of the application for summary judgment, which was determined on legal submissions only).”
“[T]he Appellant’s application for summary judgment was premised on the basis of legal argument without any evidence being called or considered. The legal test to apply was entirely different to that applicable to this appeal; as recognised by the Upper Tribunal the issues were not pre-judged or determined but rather the test applied was whether Judge Blewitt was satisfied that HMRC’s case, or part of it, had no reasonable prospect of succeeding such that it should be barred from taking part in proceedings. In contrast, this appeal has been decided on findings of fact from the evidence heard together with our determination of the legal arguments of the parties. The decision was reached by this Tribunal without regard to the test applied in the application for summary judgment.”
“The question is whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased.”
“But the ordinary case is far from those instances. It is of the kind that has happened here: the judge in question has not himself had to resolve the case’s factual merits, and has not expressed himself incontinently. All he has done is to conclude on the material before him that the result arrived at in the court below was correct. And he has done so in the 17 knowledge that, at the option of the applicant, his view may be reconsidered at an oral hearing. In such a case is there a reasonable basis for supposing that he may not bring an open mind to bear on the substantive appeal if, after permission granted by another judge, he is a member of the court constituted to deal with it?”