Lower tribunal had failed to engage with HMRC on any issues

HMRC refused the taxpayer’s claim for input VAT on the basis that the taxpayer knew or should have known that the transactions were connected with the fraudulent evasion of VAT – missing trader intra-community fraud. The taxpayer appealed but HMRC applied to have the appeal struck out saying it had no reasonable prospect of success. The First-tier Tribunal held that the appeal would not be struck out so HMRC appealed to the Upper Tribunal.

It was common ground that to succeed HMRC would have to prove there was a tax loss that had been brought about by fraud that the taxpayer’s transactions were connected to that fraudulent tax loss and that it knew or should have know the transactions were so connected.

The Upper Tribunal said the First-tier Tribunal had refused to consider HMRC's case instead insisting that such an appeal needed a full hearing without...