MTIC fraud

The taxpayer had lost an appeal to the First-tier Tribunal over the right to deduct input tax of some £1.7 million relating to purchases of computer processor chips in May and June 2006.

The transactions were connected with missing trader intra-community (MTIC) fraud where one company in a ring of purchasers and sellers fails to pay VAT even though it is reclaimed from HMRC by the last company in the group on the export of the goods.

On the key question of whether the taxpayer had known that the transactions were connected to fraud the tribunal directed itself as follows:

the test to be applied was not a negligence based test of failing to do certain things it rests on the Revenue to show dishonesty or recklessness;

the Revenue had to present an answerable case;

at which point the burden of proof shifted to the...