Lack of scrutiny

Missing trader intra-community fraud

HMRC claimed that the taxpayer had taken part in a missing trader intra-community (MTIC) fraud. As a result it denied the company recovery of input VAT on transactions in computer processing units.

At the hearing before First-tier Tribunal the taxpayer accepted HMRC had proved there had been a fraud and that each of its transactions had been connected with the fraudulent evasion of VAT. The issue was whether it had proved that the taxpayer had known or should have known about the connection to fraud.

The First-tier Tribunal held that there was no evidence showing the taxpayer had known about the fraud. The most likely explanation therefore was that the taxpayer was an innocent party who had known nothing about it. HMRC appealed.

The Upper Tribunal said the First-tier Tribunal had given insufficient weight to HMRC’s evidence. Further it had not scrutinised the...