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Did the appellant know or should they have known that the transaction was connected to fraud?

By Andrew Needham, June 2023

Summary 

This was a rehearing of an original decision in favour of the appellant by the First-tier Tribunal (FTT) in 2019 which was appealed to the Upper Tribunal (UT), which remitted it to the FTT for rehearing. Between 1 September 2015 and 8 September 2015, the appellant made six purchases of memory cards from a single supplier and sold these on in five deals. Each of these transactions was connected to a fraudulent defaulting trader or contra trader, and therefore HM Revenue and Customs (HMRC) disallowed the input tax claim. 

Background 

HMRC argued that the appellant’s wholesale purchase of goods for export in period 10/15 inclusive had been traced through transaction chains to tax losses. HMRC stated that those tax losses were not the result of business failure or other innocent explanation but were instead fraudulent in nature. The transaction chains have been traced onwards to

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