Knowing participants

The taxpayer companies had been dealers in mobile telephones. Their turnover levels had been steady but suddenly rose dramatically in 2005.

They had started doing business with various companies some based overseas who shared common themes.

For example they had been recently formed only had one or two directors with few other employees had insignificant capital resources and had achieved turnover very quickly of millions of pounds a month.

Furthermore only two traders in the chain had a name recognisable as that of a manufacturer authorised distributor or retailer.

HMRC refused to refund the taxpayer companies’ claims for input tax so the companies appealed.

The VAT tribunal dismissed their appeals so they appealed to the High Court.
Mr Justice Floyd found that the tribunal had been justified in its decision. On the evidence the taxpayers business had...