Lancer Scott Limited v The Commissioners for HMRC [2025] UKUT 00208 (TCC)

[2025] UKUT 00208 (TCC)Case No UT/2024/00122
UPPER TRIBUNAL
(Tax and Chancery Chamber)
Venue Rolls Building, London, EC4Hearing Heard on: 28 March 2025Date Judgment date: 26 June 2025
Value added tax – assessments and penalties – time limit in section 73(6)(b) of VATA 1994 – evidence of facts sufficient to justify making of assessment – inadequacy of reasons and challenge to fact finding of FTT – appeal dismissed.
Before
JUDGE PHYLLIS RAMSHAWJUDGE ANDREW SCOTT
Between
LANCER SCOTT LIMITEDAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentMr Brown, Counsel, instructed by the Appellant for AppellantsMr. Biggs KC and Ms Drummond, Counsel, instructed by the General Counsel and Solicitor to His Majesty’s Revenue and Customs for RespondentsDECISION

Introduction

[1]The Appellant appeals, with the permission of the First Tier Tribunal (‘FTT’), against the decision released on 17 June 2024 [TC/2018/04143] (‘the FTT decision’). The FTT dismissed the Appellant’s appeal against the Respondents’ decision of 15 April 2016 (wherein an entitlement to deduct input tax was denied) and associated assessments and penalties. The Respondents decided that the Appellant had claimed input tax in respect of invoices issued to the Appellant where no goods or services had been supplied. The Respondents considered that the Appellant’s behaviour was deliberate. The assessments amounted to £551,695 representing the input tax claimed on the basis of invoices (totalling £3,903,625) provided to the Appellant by a number of entities connected to Wilfred Folwell, an adviser to the Appellant who was convicted of money laundering offences. On 25 September 2019 penalties totalling £126,186 were imposed.[2]References in this decision to the Upper Tribunal hearing bundle are given as UTHBXX. All other hearing bundle references are to the FTT hearing bundle. The legislation discussed below refers to ‘the Commissioners’ and in that section of our decision (dealing with ground 4 of the appeal) the Respondents are referred to as the Commissioners.[3]The issues before the FTT were:(1) Was the assessment issued in time – within one year of the Commissioners having evidence of facts sufficient to justify the making of an assessment?(2) Was the input tax claimed deliberately – enabling the Respondents to assess beyond 4 years?(3) Did the supplies take place?(4) Was there a tax loss and, if so, was it fraudulent and did the Appellant know this?(5) Were the penalties issued in time – was the Appellant dishonest in claiming input tax up to 31 March 2006 and deliberate in doing so from 1 April 2006?[4]The FTT dismissed the appeal finding that the assessment was issued in time, the majority of items on the invoices were not supplied, the loss of tax was deliberate and fraudulent. The Appellant knew it was fraudulent and therefore the penalties were issued in time.

Background

[5]The FTT set out the following relevant background information: 27. The Appellant was incorporated on 31 March 1998 (company number 03537554). The nature of its business is described on Companies House as “43290 - Other construction installation”. 28. The directors during the relevant period 1 October 2005 to 1 October 2010 were:(a) Morian Cooke (Cooke) the Chief Executive Officer appointed on 31 March 1998;(b) Mark Kemery (Kemery) appointed on 31 March 1998;(c) Mark Chapman (Chapman) appointed on 1 June 2000;(d) Terence William Hosier (Hosier) appointed on 30 August 2007 and resigned on 1 February 2011;(e) Lisa Hosier né𝑒 Bagley (Bagley) appointed on 30 August 2007 and resigned on 30 September 2009;(f) Robert Griffiths (Griffiths) appointed on 30 August 2007;(g) Tim Dougherty (Dougherty) appointed on 30 August 2007; and(h) Jon Bishop (Bishop) appointed on 1 October 2010. 29. The Appellant was registered for the purposes of value added tax with effect from 1 April 1998. At the request of the Appellant, VAT registration number 681 7519 08, which, since 1 September 1996, had been allocated to the partnership, Green Building Services (comprising Mark Green, Kemery and Cooke), was reallocated to it. …The Appellant is required to submit VAT returns quarterly. 30. On its website, the Appellant describes itself as follows: “Lancer Scott is a major privately-owned Built environment construction, development and property maintenance company in the UK. Lancer Scott was formed in 1996. The company has since grown and developed in a structured manner whilst maintaining the robust foundations that have underpinned the organisation since inception. As a national company large enough to guarantee delivery with economies of scale but remain flexible enough to maintain the personal touch we are committed to the long-term future of the built environment. Our vision is to be the most trusted partner in the built environment, leaving a positive legacy for the communities in which we work and live.” 31. The Appellant’s turnover and profit for the relevant and surrounding periods, as set out in its annual accounts is as follows, together with a breakdown of purchases costs and hire costs: Period End March 2006 Sept 2007 Sept 2008 Sep 2009 Sept 2010 Sept 2011 Turnover 5,898,834 15,040,103 11,493,405 16,434,252 15,350,773 18,081,141 Cost of Sales 5,287,856 12,855,199 9,540,339 13,424,632 12,463,115 16,674,091 Purchases 1,414,845 1,742785 3,841,078 4,018,233 6,518,996 3,887,338 Hire Costs 89,758 1,310,234 388,994 279,628 248,478 379,226 32. Of the £16,121,092 total declared purchases in the account periods ending 09/07, 09/08, 09/09, 09/10 (54 months), approximately £3,351,930 (total payments of £3,903,625 minus the VAT assessment) were payments to Folwell accounts across 41 months…[6]Other relevant background in relation to Folwell set out by the FTT is that he was convicted, following a trial in 2012, of money laundering offences committed between August 2006 and December 2009. He was sentenced to 8 years’ imprisonment. The invoices to the Appellant that are in issue in this appeal formed part of the evidence in the criminal trial.

Grounds of appeal

[7]The Appellant appealed against the FTT’s decision on four grounds:• Ground 1 – the FTT did not engage with the Appellant’s case and/or failed to give reasons for the decision, encompassing all of the issues it had to decide.• Ground 2 – the FTT found purchase invoices upon which the Appellant relied to claim input tax were false based on facts or inferences from facts which were wrong, or perverse or irrational, or there was no evidence to support it, or it was made by reference to irrelevant factors or without regard to relevant factors.• Ground 3 – the FTT found that the Appellant knew it was a VAT fraud on facts or inferences from facts which were wrong, or perverse or irrational, or there was no evidence to support it, or it was made by reference to irrelevant factors or without regard to relevant factors.• Ground 4 – the FTT applied the wrong test for who should have the knowledge of facts to determine if the assessment was made in time.

Ground 4: the time-limit issue

[8]We deal with Ground 4 first. We think that it is logical to do so as, if the assessments were issued out of time, the remaining grounds of appeal will no longer be relevant.

The relevant statutory provisions and case law

[9]It is the application of the one-year time limit in s. 73(6)(b) of the Value Added Tax Act 1994 (‘VATA 1994’) that is the subject of this ground of appeal. That relevantly provides as follows: (6) An assessment under subsection (1), (2) or (3) above of an amount of VAT due for any prescribed accounting period must be made within the time limits provided for in section 77 and shall not be made after the later of the following— … (b) one year after evidence of facts, sufficient in the opinion of the Commissioners to justify the making of the assessment, comes to their knowledge,[10]The one-year time limit in s. 73(6)(b) of VATA 1994 was considered by the Supreme Court in DCM (Optical Holdings) Ltd v HMRC [2022] UKSC (‘DCM’). Lord Hodge (with whom the other judges agreed) made the following observations: 18 This submission can be addressed briefly. DCM does not dispute that the correct interpretation of section 73(6)(b) has been stated by Dyson J in Pegasus Birds Ltd v Customs & Excise Commissioners [1999] STC 95, 101-102 in which he set out five principles which are relevant to this appeal:
“1. The Commissioners’ opinion referred to in section 73(6)(b) is an opinion as to whether they have evidence of facts sufficient to justify making the assessment. Evidence is the means by which the facts are proved. 2. The evidence in question must be sufficient to justify the making of the assessment in question: C & E Commissioners v Post Office [1995] STC 749, 754G. (Emphasis added) 3. The knowledge referred to in section 73(6)(b) is actual, and not constructive knowledge: C & E Commissioners v Post Office at p755D. In this context, I understand constructive knowledge to mean knowledge of evidence which the Commissioners do not in fact have, but which they could and would have if they had taken the necessary steps to acquire it. 4. The correct approach for a Tribunal to adopt is (i) to decide what were the facts which, in the opinion of the officer making the assessment on behalf of the Commissioners, justified the making of the assessment, and (ii) to determine when the last piece of evidence of these facts of sufficient weight to justify making the assessment was communicated to the Commissioners. The period of one year runs from the date in (ii): Heyfordian Travel Ltd v C & E Commissioners [1979] VATTR 139, 151; and Classicmoor Ltd v C & E Commissioners [1995] V & DR 1, 10.1.27. (Emphasis added) 5. An officer’s decision that the evidence of which he has knowledge is insufficient to justify making an assessment, and accordingly, his failure to make an earlier assessment, can only be challenged on Wednesbury principles, or principles analogous to Wednesbury … (see Classicmoor … at 10-11,and more generally John Dee Ltd v C & E Commissioners [1995] STC 941, 952 per Neill LJ).” 19. Similarly, it was common ground that section 73(6)(b) should be construed in accordance with the observations of Aldous LJ in the Court of Appeal in Pegasus Birds Ltd v C & E Commissioners [2000] STC 91, who upheld Dyson J’s approach stating (para 11): “The relevant evidence of facts is that which was considered, in the opinion of the Commissioners, to justify the making of the assessment. The one-year time limit runs from the date when the facts constituting the evidence came to the knowledge of the Commissioners.” (Emphasis added)
He went on to state (para 15):
“An opinion as to what evidence justifies an assessment requires judgment and in that sense is subjective; but the existence of the opinion is a fact. From that it is possible to ascertain what was the evidence of facts which was thought to justify the making of the assessment. Once that evidence has been ascertained, then the date when the last piece of the puzzle fell into place can be ascertained.” 20. It is clear from these dicta, which in my view are a correct statement of the law, that section 73(6)(b) addresses the assessment which HMRC has in fact made and not a hypothetical assessment which they might have made but did not. The words of the subsection are clear: “facts, sufficient in the opinion of the Commissioners to justify the making of the assessment.” (Emphasis added).
The focus is also on the subjective opinion of the relevant HMRC official, which is a question of fact.

(b) Appellant’s submissions

[11]In his submissions Mr Brown asserted that it was the collective knowledge of the Commissioners and not Officer Jackson alone that was relevant to whether the Commissioners had sufficient knowledge. He referred to [167] of the FTT decision – it is clear that the FTT was considering only Officer Jackson and not the Commissioners’ collective knowledge.[12]The FTT effectively ignored the Appellant’s contention that all the relevant facts in relation to the VAT affairs of the suppliers could only have come from the Commissioners. Mr Brown referred to specific references in the prosecution bundle as examples:• When Folwell was interviewed by Police following his arrest for the second time on 8 September 2010, it was recorded “of HMRC records[emphasis added], he said that they were “all fucking bullshit” (pg. 809; ref E755). The clear inference being that it was HMRC records being put to him.• The agreed facts in the prosecution of Folwell (hearing bundle pgs. 2198-2218 inc.) set out under the heading HMRC VAT EVIDENCE (hearing bundle page 2200-2201), the VAT history of the suppliers.• in respect of VAT: IPOD ASSOCITES and VAT: MUNSTER JOINERY, the comment was that “There are no records of [the above-named companies] in any of the HMRC systems including those relating to VAT.”• HMRC records as to Keith Brain’s declared tax position, P785 UTHB para 85• Opening note prosecution[13]Particular reference was made to page 2202 of the UTHB and the information regarding IPOD associates. Mr Brown submitted that this information came from HMRC and demonstrated that HMRC knew that the genuine company had been hijacked – the police could not have obtained the evidence from anywhere else. In addition, in the case of CH Construction Services, specific details of VAT returns had been provided (page UTHB 2202).[14]Officer Jackson based his assessment solely on the relevant VAT information contained in the prosecution bundle. As that information had come from the Commissioners, the only inference was that the Commissioners were aware of the relevant facts before 15 April 2015. The Commissioners could not disclose taxpayers’ information to the police or CPS without proper authority to do so: they must have known on what basis the information was requested.[15]Mr Brown referred to Officer Jackson’s witness statement at paragraphs 22-24 and highlighted that there was an HMRC officer embedded within the police.[16]It was also argued that the Tribunal’s reasons for finding against the Appellant on the time limit issue were not apparent. Respondents’ submissions[17]Mr Biggs in his submissions argued that the FTT had not failed to provide reasons or ignored evidence - the competing submissions on the time limit issue are summarised at [133] of the FTT decision.[18]The FTT concluded that it was when Officer Jackson received the documents within the bundle from the criminal trial that anyone within HMRC first had sufficient material to make an assessment and that time ran from then. The FTT made its assessment on the basis of the contents of the documents. It treated the state of knowledge of Officer Jackson as the state of knowledge of the Commissioners. Just because the Commissioners’ employees had provided VAT records for the purposes of the criminal trial does not lead to an inference that those people must have known the detail of the prosecution case.[19]Mr Biggs submitted that the height of Appellant’s case was that the Commissioners must have provided the information at 2202 of the UTHB that IPOD was a hijacked entity and therefore must have had sufficient evidence at that time to justify making an assessment. He argued that this was an oversimplification: there was no evidence that the Commissioners had any broader knowledge of the prosecution case. It was only later when the Commissioners saw the jury bundle that the evidence could be pieced together. That was the conclusion of the FTT at [133] of its decision. Discussion[20]At [133] of its decision, the FTT set out its conclusion on the time-limit issue in this way: Mr Brown submitted that the criminal trial of Folwell in 2012 was based on evidence which could only have come from the Respondents. Mr Brown failed to provide proof that that evidence could only have come from the Respondents. Mr Jackson, who was unable to attend the hearing for health reasons, said in his witness statement that although he came across the opening note of prosecution counsel in 2014 he did not receive the jury bundle until 24 April 2015. We were taken to some of the evidence given at Folwell’s trial but the Tribunal has accepted Mr Bigg’s submission that Mr Jackson, and therefore the Respondents, did not have sufficient evidence to raise the assessments until he received the jury bundle on 24 April 2015. As Mr Jackson issued the assessments on 15 April 2016 they were issued within the one year time limit required by the legislation.[21]We accept that the reasoning is sparse (and we deal with this further in relation to the grounds below) but we consider it is sufficient. In particular, we consider that it is clear that the FTT did not ignore the evidence in the prosecution bundle which Mr Brown referred to and which was the main basis of his attack on the FTT’s conclusion on the time-limit issue. Both the submission made by Mr Brown and the fact that the FTT was taken to some of the evidence are referred to by the FTT.[22]We also do not accept that the FTT applied the wrong test. It was aware that it was the knowledge of the Commissioners that was relevant. Although the FTT referred solely to Officer Jackson in [167] that was a summary paragraph of its decision. At [133] of its decision the FTT specifically referred to the Commissioners having sufficient evidence indicating that it was aware that it was the knowledge of the Commissioners that was in issue. The passage must be read in context: the FTT referred specifically to Mr Biggs’s submission and thereby incorporated the reasons put forward by the Commissioners.[23]Officer Jackson’s evidence in his witness statement (see the FTT decision at [74] to [76]) was that he became aware of the Folwell trial in 2014 when he was reviewing a different criminal investigation. He came across the opening note. Mr Brown’s submission to the FTT was that either Officer Jackson or the Commissioners cumulatively had sufficient evidence of facts on receipt of the opening note. The FTT rejected that submission. Officer Jackson’s evidence was that, after receiving the opening note, he tracked the relevant police officers and received the jury bundle on 24 April 2015. It was on receipt of the jury bundle that he considered he had sufficient evidence of facts sufficient to justify the making of the assessment.[24]In determining whether or not it was only when the jury bundle was received by the Commissioners that there was sufficient evidence to justify the assessment, we remind ourselves of the key legal test applicable to this issue as explained by the Supreme Court in DCM, namely the fifth principle in Pegasus Birds quoted above but repeated here: 5. An officer’s decision that the evidence of which he has knowledge is insufficient to justify making an assessment, and accordingly, his failure to make an earlier assessment, can only be challenged on Wednesbury principles, or principles analogous to Wednesbury … (see Classicmoor … at 10-11,and more generally John Dee Ltd v C & E Commissioners [1995] STC 941, 952 per Neill LJ).[25]As we explain above, we do not think there is any doubt that Officer Jackson was of the view that it was only when the prosecution bundle was received that he had sufficient evidence to make the assessment. Accordingly, we consider that the Appellant needs to establish that it was Wednesbury unreasonable for the Commissioners not to have made the assessment at an earlier time. And, in our view, the Appellant falls far short of establishing that.[26]Mr Brown took us to parts of the prosecution bundle which referred to evidence relied on in the prosecution case that clearly came from the Commissioners. We accept that there was some evidence provided by the Commissioners. However, that evidence was, in our view, very limited and certainly not of the magnitude required to amount to facts sufficient to raise the assessment in this case at an earlier time.[27]The prosecution relied on evidence from a wide variety of sources and the offences related to multiple types of fraudulent activities amounting to £14m of which the Appellant’s payments amounted to about £4m. We note that the evidence collected and relied on by the prosecution about payments into Folwell accounts was not solely concerned with the Appellant’s payments. In relation to the evidence concerning the payments made by the Appellant, the police obtained evidence and carried out extensive investigations into the invoices, the bank accounts, the use of VAT registrations, the setting up of various companies, and transfers of monies. The tracing of bank account payments, a fundamental aspect of the case, clearly did not come from the Commissioners. Neither could the details of the invoices have come from the Commissioners. The investigation involved interviewing the owners of several companies, including IPOD associates and CH Building Supplies. The information they gave concerning the use of the accounts was not provided by the Commissioners – for example, the hijacking of the POD account, which Mr Brown submitted to us must have come from the Commissioners, was a matter the prosecution appears to have asserted relying on evidence given by the owner in interview.[28]We accept Mr Biggs’s submission (which was also made to the FTT) that, at its highest, the most that could be inferred in respect of the provision of taxpayer information was that collectively HMRC staff were aware that there was a criminal trial to which a number of different taxpayers’ information was relevant. In our view, the provision of taxpayers’ information such as registration details (or lack of them), VAT return information etc in relation to not only the Appellant but a number of different taxpayers does not amount to sufficient evidence of facts to justify the making of the assessment in this case.[29]Mr Brown also referred to the fact that an officer of the Commissioners was embedded within the police service. However, no evidence was provided that this particular officer had been involved in the Folwell prosecution case or that this officer had specific knowledge of the Appellant.[30]Nor do we think it is relevant that the Commissioners need a proper lawful basis to disclose taxpayer information to the police or the CPS. That is undoubtedly true, but we fail to see the relevance of this to this ground of appeal.[31]For the reasons given above, we reject ground 4 of the Appellant’s appeal. Ground 1: failure to engage with Appellant’s case and give adequate reasons Relevant case law

Ground 1: failure to engage with Appellant’s case and give adequate reasons

[32]The principles relating to the adequacy of reasons were not in dispute.[33]In Flannery v Halifax Estate Agencies Ltd [2000] 1 WLR 377 Henry LJ made at [381] the following observations in the relation to the need to give reasons in a judicial decision: The duty is a function of due process, and therefore of justice. Its rationale has two principal aspects. The first is that fairness surely requires that the parties especially the losing party should be left in no doubt why they have won or lost. This is especially so since without reasons the losing party will not know (as was said in Ex p Dave) whether the court has misdirected itself, and thus whether he may have an available appeal on the substance of the case. The second is that a requirement to give reasons concentrates the mind; if it is fulfilled, the resulting decision is much more likely to be soundly based on the evidence than if it is not.[34]In English v Emery Reinbold & Strick Ltd [2002] EWCA 605 (‘English’) at [16] the court expressed the matter simply by saying that justice will not be done if it is not apparent to the parties why one has won and the other has lost.[35]The adequacy of reasons will depend on the nature of the case. The judgment must enable the appellate court to understand why the judge reached the decision. This does not mean that every factor which weighed with the judge in the judge’s appraisal of the evidence has to be identified and explained. The issues which were vital to the judge’s conclusion should be identified and the manner in which the judge resolved them should be explained (English at [17] and [19]).[36]It is not sufficient simply to recite one party’s submissions and concur with them: see Conservatory Roofing UK Limited v. HMRC [2022] UKUT 182 (TCC) at [11], [12]. Nor is summarising submissions and evidence a substitute for the giving of reasons: see, for example, Grzegorz Sczcepaniak T/A, PHU Greg-Car v The Director of Border Revenue [2019] UKUT 295 (TCC).[37]It is, however, unrealistic for an appellate court to expect a trial judge to refer to all the points which influenced their decision. Reasons for a judgment will always be capable of having been better expressed. Reasons should be read on the assumption that the judges knew how they should perform their functions and which matters they should take into account. A decision should not be picked over or construed as though it was a piece of legislation or a contract: see Rahman v Munim [2024] EWCA Civ 123. The judgment should be read as a whole. It is acceptable for reasoning to be concise: see Proctor & Gamble UK v. HMRC [2009] EWCA Civ 407.[38]Judicial restraint should be exercised when the reasons are being examined. The appellate court should not assume too readily that the tribunal misdirected itself just because not every step in its reasoning is fully set out in it: see R (Jones) v First-tier Tribunal (Social Entitlement Chamber) [2013] UKSC 19.[39]A judgment should not be disturbed on the ground of inadequacy of reasons, unless, despite the advantage of considering the judgment with knowledge of the evidence and submissions made at the trial, the losing party is still unable to understand why it is that the judge reached their conclusion. Whilst it is always desirable that a judgment should be comprehensible for the first-time reader, that is not the test of the adequacy of the judge's reasons. The adequacy of the reasons must be tested in the context of the knowledge and understanding of those who were present at the trial: see Harris v Purfleet 2009] EWCA Civ 1645 at [21].[40]The correct approach of the appellate court was set out in English: 26. Where permission is granted to appeal on the grounds that the judgment does not contain adequate reasons, the appellate court should first review the judgment, in the context of the material evidence and submissions at the trial, in order to determine whether, when all of these are considered, it is apparent why the Judge reached the decision that he did. If satisfied that the reason is apparent and that it is a valid basis for the judgment, the appeal will be dismissed. ... If despite this exercise the reason for the decision is not apparent, then the appeal court will have to decide whether itself to proceed to a rehearing, or to direct a new trial.

Appellant’s submissions

[41]Mr Brown directed us to the part of the FTT decision where the Respondents’ case was set out in detail from paragraphs 33 to 71 inclusive under the heading ‘The Respondents’ Primary Case’. In contrast, there was no heading for the Appellant’s case and the only reference to it was at paragraph 140.[42]Mr Brown took us to various paragraphs in the FTT decision drawing our attention to alleged inadequacies arguing that the FTT essentially just repeated the Respondents’ submissions and failed to engage at all with the majority of the issues put by the Appellant. He also submitted that each of the points made by the Appellant in relation to its case was material (and they were also cumulatively material).[43]Mr Brown made seven specific criticisms of the FTT’s decision, which we consider below.

Respondents’ submissions

[44]Mr Biggs argued that there was neither a failure to engage with the Appellant’s case nor a failure to give reasons. He noted that it was appropriate for the FTT to set out the basis advanced by the Respondents for the assertion that there had been knowing participation in fraud. This was central to the issues in the case, including the issue as to the time limit for assessment, and it was the Respondents who bore the burden of proof.[45]The next section of the FTT decision was a summary of the evidence, which included extensive cross- examination of witnesses. He noted that, as is often the case in the course of that kind of summary of evidence, the FTT provided some indication of the weight given to different parts of the evidence and the extent to which it considered points put in cross-examination had merit.[46]The judgment must be considered as a whole because the sections interrelate.[47]He submitted that the FTT decision was more comprehensive in its recitation of the evidence than was required, but the findings were clear as was the rationale for those findings. The Respondents’ primary case was that no supplies were made – many witnesses were called by the prosecution to prove that assertion in the Folwell trial. Thirteen witnesses were called by the Appellant before the FTT on the basis that they would undermine the prosecution evidence – in fact, their evidence largely supported the Respondents’ case.

Discussion

[48]In our view, despite the submissions made by Mr Biggs, the way in which the FTT structured its decision was far from ideal. There is considerable detail, particularly regarding the Respondents’ evidence, set out by the FTT. We accept that the Appellant’s submissions have not been set out with the same level of detail. However, this is not particularly surprising because, as Mr Biggs noted, the burden was on the Respondents to prove that the assessment was valid, was made to best judgement and issued in time and that the inaccuracies in the returns were deliberate.[49]The structure of the decision has also made it at times difficult to follow all of the FTT’s reasoning. There are many findings of facts but there is no section that sets out those findings. It may not always be necessary to have a specific section in a judgment setting out findings of fact, and, in some cases, the findings might be more logically grouped within other sections. However, we do think that, in this particular case, it has made it harder for us to identify why the FTT reached the decision that it did.[50]Nonetheless, we consider that the reasons given by the FTT are sufficient. As was made clear in English, the role of this Tribunal in this appeal is to review the FTT’s decision in the context of the material evidence and the submissions made at the trial. The Appellant and its representatives were present throughout the hearing and heard all the evidence and submissions made. They had an insight into the proceedings that casts light on the decision.[51]As the authorities make clear, the FTT’s decision must be read as a whole. In this case, the FTT, when setting out the evidence, has incorporated findings or conclusions. It has also adopted submissions made by the Respondents. In so doing, we consider that it has incorporated the reasoning contained in the submissions but the FTT did not always refer to that reasoning with the result that the reader has to refer back to earlier parts of the decision. Nonetheless, this lack of clarity does not mean that the Appellant can reasonably claim that it does not know why it lost.[52]We consider below the seven specific points that Mr Brown says were not engaged with by the FTT in circumstances where it was obliged to do so. In so doing, we remind ourselves that, in accordance with the case law authorities:(1) not every factor which weighed with the judge in the judge’s appraisal of the evidence has to be identified and explained;(2) the judge is not required to deal with every point raised in argument however peripheral, or with every part of the evidence; and(3) the judgment should not be picked over or construed as though it was a piece of legislation or a contract.[53]We now turn to the seven particular criticisms relied on by the Appellant.[54]The first was that the FTT did not engage with the Appellant’s case that the funds paid to Folwell by the Appellant as part of a money laundering scheme makes no sense: ‘clean’ money goes in but ‘dirty’ money comes out. No reasons were given by the FTT in relation to this. The Respondents’ case was that it was a money laundering scheme. They relied on the evidence from the prosecution at a money laundering trial. There was no independent investigation by the Respondents. There was no evidence that the directors of the Appellant received other benefits in addition to its being able to claim input tax for VAT and a corporation tax deduction for the payments.[55]Mr Biggs argued that the role of ‘clean’ money in a money laundering scheme was dealt with by the FTT when it considered the rival submissions on this point. He submitted that the fact of the money laundering conviction was only one of the factors relied on by the Respondents. An example was given by the prosecution of the part clean money plays in money laundering. There was ample evidence of financial connections in both directions.[56]We note that, at [139], the FTT dealt with the Appellant’s submission that the scheme did not make sense: It is a necessary part of any money laundering scheme of this type to have a source or sources of bank transfers which present as legitimate; funds within the banking system which can be provided to criminals in exchange for cash paid to the launderer by those criminals. Simultaneously, this false invoice trail provides a basis for claims for input tax and suppresses profits for the purposes of corporation tax. There must be some additional reward (beyond the substantial tax advantage) for the accomplices within the companies. In this case there were bank transfers totalling £983,000 said by witnesses to relate to loan repayments but without any paperwork to support that contention; assertions as to interests in real property; and substantial withdrawals of cash. On balance it is probable that directors of the Appellant and Micra were rewarded and/or that they were promised future reward.[57]The FTT also dealt with the assertion that there was no evidence that the directors of the Appellant received other benefits. We have considered the prosecution opening note at page 808 paragraph 230 referred to by Mr Brown where it is recorded that Folwell said Hosier had lent him £100,000. The FTT recorded Hosier’s assertion to this effect at [112]. We have also noted Mr Brown’s point that Hosier went to the police station voluntarily. We note the evidence from the prosecution bundle relied on by the Respondents and set out by the FTT at [63] and [68] to [70] concerning substantial payments made to Hosier, the timing of the payments and the attempts to transfer Folwell properties to Hosier and others. The FTT also dealt with the Appellant’s argument that the VAT and corporation tax deductions do not make sense in the context of the making of payments of £4million.[58]We consider that, when reading the decision as a whole and in light of the evidence set out by the FTT and the evidence in the prosecution bundle, the reasons in [139] above are adequate. The finding of fact that it was probable that directors were rewarded or promised future reward was one that, on the evidence, was open to the FTT.[59]The FTT was not required to explain how money laundering works. The fact that Folwell was convicted of money laundering and that the Appellant’s payments to his accounts were part of the money laundering scheme needs no further explanation. Nor was it suggested by Mr Brown that the FTT could go behind the criminal conviction.[60]We deal with the second and third points together. The Appellant asserts that of the 49 jobs verified by the police, 12 witnesses were unable to identify if the supplies were made or not. Of the remaining 29 invoices, there were very few where the customers were able to say that none of the invoiced goods were not used on their sites. He referred to the Prosecution Opening Note pages 2204 and 2205 and closing submissions at paragraph 21. What was put to the witnesses in the police investigation in 2012 were the Appellant’s suppliers’ invoices. Also, those witnesses were not asked about other jobs on which materials were used – closing submissions paragraphs 20 and 23.[61]The Respondents submit that the limitations of the exercise conducted by the police in respect of the invoices is incorporated by the FTT: see [136], [143] and [171] of the FTT decision.[62]Whilst not directly addressing the Appellant’s argument, it is clear, in our view, that this was in the mind of the FTT. At [136] the FTT referred to it directly by saying some of the supplies referred to in the invoices may have been genuine and at [143] where it found that it was not credible that so many of the sample of invoices taken by the police would have been innocently assigned to jobs in error (as suggested by Hosier). Although the Appellant criticises the police investigation because only the Appellant’s suppliers’ invoices were put to witnesses and witnesses were not asked if the supplies could have been used on other jobs, we were not directed to any evidence that the Appellant or its witnesses had provided to the FTT to rebut the evidence from the police investigation. In our view it was an argument without consequence in light of the evidence overall. Having considered the evidence set out by the FTT, including both the parts of the prosecution evidence relied on by the Respondents and the evidence of the Appellant’s witnesses, the evidence that the supplies identified in the invoices were not made or that the items on the invoices were grossly over-exaggerated was overwhelming. In our view, the FTT did not need to explain any further why it had rejected the Appellant’s argument.[63]The fourth point relied on by Mr Brown was that two of the four suppliers had declared taxable supplies of over £560,000 on VAT returns during the relevant period (see HMRC printout page 811 and 812). The FTT simply stated, without any explanation, that it preferred HMRC’s submission that they cannot have related to supplies to the Appellant. Mr Brown referred to the closing submissions at 26 and 27 and transcript day 5 page 36 lines 9 to 20.[64]Mr Biggs argued that the FTT accepted the explanation given by the Respondents as to the reason for concluding that it was unlikely that VAT declarations made by two of the purported suppliers related to supplies to the Appellant. By setting out that explanation and in concluding that was correct its reasons were incorporated by reference to the submission.[65]The prosecution evidence was that net credits to CH Construction between August 2007 and October 2009 totalled over £2.5m of which over £1.5m came from the Appellant. Clearly, there were other sources of credits during the relevant period. The VAT declaration of £437,146 taxable supplies and payment of VAT in the amount of £20,282 obviously bore no relation to the credits actually received by the company or the VAT (around £500k) that ought to have been accounted for. The position is similar for Smart Services. In response to the argument that the Respondents had not demonstrated a connection to tax loss for the full amount because the two companies had declared taxable supplies on VAT returns, the Respondents’ submission was that it was improbable that the sums on the VAT returns related to the Appellant’s payments because it was improbable that Folwell would make a partial declaration and that there were other credits in the two bank accounts. The Respondents had set out in a table (UTHB 2566 and 2567) payments into both accounts. In relation to CH Construction, if the payments from the Appellant and Micra were excluded, the payments from the other companies totalled £435,056, which the Respondents submitted was extremely close to the £437,146 figure declared. The result was similar for Smart Services. At [166] the FTT summarised the Respondents’ submission and said it preferred it to the Appellant’s submission. In our view, in so doing, this constitutes sufficient reasoning and addressed the Appellant’s argument. We recognise that the FTT could have said more but, as we explain above, we think that this was sufficient for the Appellant to understand why, in the context of the evidence given, and submissions made at the hearing, it had lost.[66]The fifth point was simply an assertion: how credible was it that over 900 invoices were false? We do not consider that the FTT specifically addressed this argument. But that is just the sort of example of peripheral arguments that the FTT need not refer to in its decision. In our view, there was before the FTT a significant volume of evidence referred to by the FTT in its decision that the invoices were false.[67]The sixth point is the argument that the Appellant could not undertake its work without the Folwell supplies. The reason given by the FTT was the total amount for supplies paid over the period was much higher than the amount paid to the Folwell companies (see [140]). There was no explanation as to what this meant.[68]At [31] the FTT set out a table of the Appellant’s turnover and profit, noting in [32] that of £16,121,092 of purchases £3,351,930 were payments to Folwell accounts. The FTT also noted that the invoices purported to show that he was a significant supplier but by no means the sole supplier. At [140] the FTT set out the Appellant’s argument and rejected it. The explanation was that the total amount paid for supplies (more than 75%) over the period was much higher than the amount paid to the Folwell companies. We do not consider further explanation was needed.[69]The seventh point is that the Appellant relied on the evidence of Mr. Cook, a forensic accountant, in respect of the Appellant’s financial statements, which were said to reflect the fact that the goods must have been supplied (transcript day 5 pg. 32 line 2 to page 33 line 1). There is no mention of Mr. Cook’s evidence in the discussion part of the FTT decision.[70]The Respondents submitted, among other things, that the evidence of Mr Cook actually assisted the Respondents’ case: this could be seen from [130], [131] and [158] of the FTT’s decision.[71]We do not consider that it is correct to say that there was no mention of Mr Cook’s evidence in the discussion part of the FTT decision. At [158] reference is made to the submissions made by the Respondents in relation to Mr Cook’s evidence. We have considered the transcript referred to by Mr Brown and the cross-examination of Mr Cook. The FTT noted the submission that Mr Cook had confirmed that the sudden appearance of figures for closing stock might be consistent with difficulties in allocating stock and purchase invoices following the departure of Folwell. Whilst the FTT has not dealt with the Appellant’s argument directly, we are of the view that Mr Cook’s evidence was undermined in cross-examination (as noted by the FTT) and that his evidence was insufficient to counterbalance other evidence that the supplies were not made. In our view, the FTT was not required to say more than it did. Again, we note, and rely on, the case law referred to above, which makes it clear that the FTT need not deal with every point in reaching its decision. Read as a whole and in the light of the proceedings before it (including the cross-examination of Mr Cook), we consider that it is sufficiently clear why the FTT reached its decision in this respect.[72]As we noted above, there were shortcomings in the FTT decision. On a number of occasions, we have had to consider the underlying material in order to identify the FTT’s reasoning. However, it is of relevance that the Appellant was clearly aware of that material and, once we were directed to it, we have been able to identify sufficient reasons for the FTT’s conclusions.[73]We are, therefore, of the clear view that the conclusion the FTT reached was open to it on the evidence and that the Appellant and its representative can be in little real doubt as to why it came to that conclusion. We find that the decision was adequately reasoned. Ground 2: error in relying on purchase invoices Case law authorities

Ground 2: error in relying on purchase invoices

[74]Under this ground of appeal, the Appellant, in effect, seeks to challenge factual findings made by the FTT.[75]In a challenge of that kind the following principles set out in Volpi & Anor v Volpi [2022] EWCA Civ 464 are relevant: 2. The appeal is therefore an appeal on a pure question of fact. The approach of an appeal court to that kind of appeal is a well-trodden path. It is unnecessary to refer in detail to the many cases that have discussed it; but the following principles are well-settled:(i) An appeal court should not interfere with the trial judge’s conclusions on primary facts unless it is satisfied that he was plainly wrong.(ii) The adverb “plainly” does not refer to the degree of confidence felt by the appeal court that it would not have reached the same conclusion as the trial judge. It does not matter, with whatever degree of certainty, that the appeal court considers that it would have reached a different conclusion. What matters is whether the decision under appeal is one that no reasonable judge could have reached.(iii) An appeal court is bound, unless there is compelling reason to the contrary, to assume that the trial judge has taken the whole of the evidence into his consideration. The mere fact that a judge does not mention a specific piece of evidence does not mean that he overlooked it.(iv) The validity of the findings of fact made by a trial judge is not aptly tested by considering whether the judgment presents a balanced account of the evidence. The trial judge must of course consider all the material evidence (although it need not all be discussed in his judgment). The weight which he gives to it is however pre-eminently a matter for him.(v) An appeal court can therefore set aside a judgment on the basis that the judge failed to give the evidence a balanced consideration only if the judge’s conclusion was rationally insupportable.(vi) Reasons for judgment will always be capable of having been better expressed. An appeal court should not subject a judgment to narrow textual analysis. Nor should it be picked over or construed as though it was a piece of legislation or a contract.[76]In Georgiou (trading as Mario’s Chippy) v Customs and Excise Commissioners [1996] STC 463 (“Georgiou”), Evans LJ said the following at [476e-g]: It is right, in my judgment, to strike two cautionary notes at this stage. There is a well-recognised need for caution in permitting challenges to findings of fact on the ground that they raise this kind of question of law. This is well seen in arbitration cases and in many others. It is all too easy for a so-called question of law to become no more than a disguised attack on findings of fact which must be accepted by the courts. As this case demonstrates, it is all too easy for the appeals procedure to the High Court to be misused in this way. Secondly, the nature of the factual inquiry which an appellate court can and does undertake in a proper case is essentially different from the decision making process which is undertaken by the tribunal of fact. The question is not, has the party upon whom rests the burden of proof established on the balance of probabilities the facts upon which he relies, but, was there evidence before the tribunal which was sufficient to support the finding which it made? In other words, was the finding one which the tribunal was entitled to make? Clearly, if there was no evidence, or the evidence was to the contrary effect, the tribunal was not so entitled.[77]Evans LJ then went on to explain at [476h-j] what an appellant needed to establish: It follows, in my judgment, that for a question of law to arise in the circumstances, the appellant must first identify the finding which is challenged; secondly, show that it is significant in relation to the conclusion; thirdly identify the evidence, if any, which was relevant to that finding; and, fourthly, show that that finding, on the basis of that evidence, was one which the tribunal was not entitled to make.[78]He ended this part of his judgment in a well-known passage by saying what was not permitted: What is not permitted, in my view, is a roving selection of evidence coupled with a general assertion that the tribunal’s conclusion was against the weight of the evidence and was therefore wrong. A failure to appreciate what is the correct approach accounts for much of the time and expense that was occasioned by this appeal to the High Court.

Discussion

[79]We consider that this ground of appeal as pursued by the Appellant brings us very much into the territory of a “roving” selection of evidence and a general plea by the Appellant that the tribunal should have come to a different decision. There is, in our view, very little attempt by the Appellant to engage with the totality of the evidence before the FTT. Rather, this ground is, on analysis, largely a series of complaints that the FTT could have reached a different decision. However, the mere fact that it might have been possible for the FTT to have reached a different decision is not sufficient for us to interfere with the FTT’s decision. The enquiry required of us is whether, on the basis of the evidence overall, the FTT was entitled to make the decision it did. In our view, it was.[80]The Appellant made five separate points under this ground of appeal each of which we now consider.[81]The first point was that the FTT erred when it found that the invoices were false. It found them false but only to the extent that the “majority of the items listed …. were not in fact supplied” (at paras. 136 and 171 of the Decision). Therefore, an unspecified amount was genuine: this was said to undermine the finding that the invoices were fraudulent in their totality. If some were genuine, input tax should have been allowed. It was for the FTT to find the correct amount of tax.[82]Mr Biggs submitted that the finding of the FTT was not a positive finding that some of the items were supplied. If a witness confirmed that X and Y were definitely not used but, for example, a generic item such as a packet of screws might have been used on another job all that amounts to is a possibility that cannot be ruled out. If an invoice has fraudulent items on it, then the taxpayer has not done enough to make out its claim – how is an officer of HMRC making a best judgement assessment to work out what is correct?[83]We accept that submission. We consider that this is a matter for the Appellant to show. The Appellant did not, of course, accept that the majority of the supplies were not made. It was, therefore, of no real surprise that it did not provide an alternative basis by reference to which it could have identified a proportion of legitimate supplies. The burden is on the Appellant to prove that the amount of VAT assessed is incorrect and to prove the extent of any overcharge.[84]The FTT found at [136] and [171]: 136. While some of the supplies referred to in the invoices may have been genuine, it was clear from the evidence that the vast majority of the invoices referred to items which were not in fact supplied. 171. The Tribunal finds that the evidence before it shows that the majority of items listed in the fraudulent invoices were not in fact supplied.[85]We agree with the Respondents that these findings of the FTT are not positive findings that some of the supplies were genuine.[86]The Appellant did not challenge the assessment on the basis that it was not made to best judgment. It has not put forward any evidence to prove the extent to which VAT has been overcharged.[87]The second point was that Mr Brown argued that the finding in respect of the fraudulent nature of the invoices was coloured by the fact that the FTT had not engaged with the Appellant’s submission that this could not have been part of a money laundering operation. We have already considered this above and found that the FTT did engage with that submission.[88]The third point relied on by Mr Brown is that the finding that the invoices were false was based on findings, or drew inferences from findings that were wrong, or perverse or irrational, or there was no evidence to support the finding, or it was made by reference to irrelevant factors or without regard to relevant factors.[89]In particular, the Appellant challenged the following findings of fact or failure to make findings.[90]Firstly, the Appellant challenged the finding that the only two building companies that paid money into the Folwell accounts were the Appellant and Micra [139]. Even in HMRC’s closing submissions it set out a table at paragraph 37 that six other such companies had made payments to Folwell, namely Micra Servicing (which had no connection to Micra itself), Elite Electrics, Elite Electrical, M&C Maintenance, Korbuild Limited and GM Construction (see also transcript day 5 pg. 35 lines 5 to 14).[91]We accept that the finding by the FTT that the only two construction companies that paid money into the Folwell accounts were the Appellant and Micra is not strictly accurate. However, in the context of the evidence as a whole, these were the only two companies that paid significant amounts. The evidence of the payments into the associated Folwell accounts was summarised in the prosecution opening. The point made by the prosecution was that only £85k was spent by the Folwell companies for building supplies in the relevant period, some supplies were needed for Folwell properties, and some work was done on Folwell properties. As can be seen from the table set out by the Respondents summarising the relevant prosecution evidence, it can be inferred that Korbuild Limited and GM Construction did receive supplies from Folwell, and it is likely that the payments made by them were included in the taxable turnover declared. Elite Electrical was a company used by Folwell. M&C Maintenance was listed as an associated Folwell account. It is not clear to us that Micra Servicing and Elite electrical are construction companies. In light of the above the identified error is not significant.[92]Secondly, the Appellant challenged the finding that there was no legitimate reason why an individual could have “invoiced” for supplies made by four different suppliers ([165] of the FTT’s decision).[93]We obviously accept that there may well be legitimate reasons for acting in this way but the relevant issue was that, in the circumstances of this case, no reason could be given as to why one supplier invoiced in different names for building supplies. There was no evidence of differentiation in terms of the type of supplies. Moreover, when asked, none of the witnesses had questioned this. In our view it was reasonable for the FTT to infer from this (together with all the other evidence) that it was apparent that this was a VAT fraud.[94]Thirdly, the Appellant challenged the fact that the FTT had failed to accept that there was evidence consistent with their being no VAT fraud. At [163] it found as evidence that Folwell had withdrawn £2.8 million in cash, that Mr. Hosier had “cash hoards” (not quantified) and had bet large amounts of cash through bookmakers despite there being no evidence of Mr. Hosier receiving cash from Folwell. HMRC accepted that the COP9 investigations into Messrs. Hosier and Cooke resulted in no additional tax to pay (pg. 2302 HB) and Officer Jackson confirmed Mr. Hosier had explained that the payment made to him (Rob Griffiths) was made by Wilf Folwell in respect of loans made to the “directors of Micra”. Officer Jackson accepted in a letter dated 24 October 2016 that it was possible that the various payments made from the bank accounts controlled by Wilf Folwell were repayments made on behalf of the directors of Micra to Terry Hosier and Rob Griffiths, via bank accounts controlled by Wilf Folwell (pgs. 1550-1551 HB).[95]As was made clear in Georgiou, the issue is this:
“was the finding one which the tribunal was entitled to make?”
We consider that, in the circumstances of this case, there was ample evidence justifying the decision that the FTT did reach. It did not need to deal directly with every aspect of the evidence relied on by the Appellant and its failure to do so in connection with these matters is not, in our view, sufficient to justify us interfering with the FTT’s overall decision. We have already found, at [58] above, that the finding that it was probable that the directors were rewarded or promised future reward was open to the FTT.[96]Fourthly, it is asserted by the Appellant that it was Mr. Hosier who reported Mr. Folwell to the police in 2010, saying that he owed him money. Mr. Hosier gave a witness statement to the police to that effect (see Appellant’s closing submissions para. 29).[97]Again, as with the third attack on a factual finding, this seems to us to be no more than a complaint by the Appellant that this aspect of the Appellant’s case was not accepted by the FTT as sufficient to alter its assessment of evidence in favour of the Respondents’ case.[98]Fifthly, it was said that the “contemporaneous notes” (pgs. 1573-1576) of Officer Jackson should not be preferred to Mr. Hosier’s denial that the police found a cannabis factory at a property owned by him ([164] of the FTT decision). Once again, like the fourth issue, this seems to us to be no more than a complaint by the Appellant that this aspect of the Appellant’s case was not accepted by the FTT.[99]In short, we consider that the Appellant has undertaken an “island-hopping” exercise, alighting on a series of relatively minor points that it had hoped the FTT would accept. In our view this aspect of this ground of appeal is exactly the roving selection of evidence that has been cautioned against. There was no sustained attempt by the Appellant to engage with the significant evidence referred to by the FTT that did justify its conclusion. Viewed as a whole, we consider that, despite the points made under this ground of appeal, there was sufficient evidence before the FTT to justify reaching the decision it did.

Ground 3: whether the Appellant knew of the VAT fraud

[100]Under this ground of appeal, Mr Brown argued that, if the FTT was wrong in concluding that the payments to Folwell were part of a money laundering scheme and that the invoices were false, then it clearly erred in finding that the Appellant knew of the fraud. This would mean that the assessments were not valid: if the Appellant did not know of the VAT fraud, then the Respondents would be out of time to assess.[101]In light of our dismissal of the above grounds of appeal, it follows that this ground of appeal must also fail.

Disposition

[102]There was no error of law in the FTT’s decision. The appeal is therefore dismissed. JUDGE Phyllis Ramshaw JUDGE Andrew Scott Release date: 27 June 2025