First-tier Tribunal’s decision was not perverse

Northside carried on a business selling used cars. The First-tier Tribunal upheld HMRC’s decision to refuse Northside’s claims to recover input tax on purchases of particular vehicles. This was on the basis that the company knew or should have known that its transactions were connected with the fraudulent evasion of VAT.

Northside appealed. Broadly it said some of the First-tier Tribunal’s language in the decision indicated that it was applying the wrong legal test by considering whether Northside should have known there was a risk its transactions were connected with fraud rather than considering whether it had means of knowledge of an actual connection.

The Upper Tribunal noted that the First-tier Tribunal said that it was aware that a connection with fraud had to be the ‘only reasonable explanation for the transactions and not simply one possible explanation’. This made it clear according the Upper Tribunal that...