Appropriate decision

Transactions concerned with VAT fraud

Prizeflex made 16 purchases of mobile phones from suppliers in the UK and immediately sold them to customers in other EU countries. It claimed input tax of £1 326 470 on the purchases. HMRC refused this because each deal traced back to a trader that had charged VAT but disappeared without accounting for it.

The First-tier Tribunal found for HMRC. It concluded that the taxpayer had known of the connection in 15 of the 16 transactions and it should have known of it in the remaining one.

Prizeflex appealed to the Upper Tribunal saying the First-tier Tribunal had misunderstood HMRC’s case against it and failed to appreciate that dishonesty was alleged. These errors impaired the fact-finding process and led to further mistakes.

The Upper Tribunal disagreed that the First-tier Tribunal had failed to understand HMRC’s case against the taxpayer saying it had set...