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Should have known

06 February 2015
Issue: 4488 / Categories: Tax cases , MTIC fraud , VAT

Fonecomp Ltd v CRC, Court of Appeal

The taxpayer company bought mobile phones in July 2006 and claimed a refund of input tax. HMRC refused on the basis the purchases were connected with missing trader intra-community (MTIC) fraud and the taxpayer knew or should have known.

The First-tier Tribunal and the Upper Tribunal both accepted that the business may not have known it was part of a MTIC scheme but ruled it should have known its purchases were connected with fraud. The taxpayer appealed.

The Court of Appeal said it was for the national court to determine if there was a connection on the facts – which had to be determined on the objective evidence and without reference to the trader’s knowledge.

It was not necessary to show knowledge of the details of the fraud or the connection between its purchases and the fraudulent evasion of VAT. The trader had just to know – or have...

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